Workmen's pari passu charge in insolvency is limited to secured assets, not all company property.

In the winding up of an insolvent company, the pari passu charge in favour of workmen under Sections 529 and 529A of the Companies Act is confined to the secured asset and to the workmen's portion in that security. A secured creditor's right does not extend to assets not mortgaged to it, and unsecured assets remain available to unsecured creditors and the winding up estate. The overriding preference under Section 529A applies only to workmen's dues and the secured creditor's debt to the extent it ranks pari passu with those dues. The contrary view was rejected, and the matter was remanded for fresh decision.

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Issues: Whether, in the winding up of an insolvent company, the pari passu charge in favour of workmen under Sections 529 and 529A of the Companies Act, 1956 extends to all assets of the company or only to the particular security offered to a secured creditor, and whether a secured creditor can claim pari passu treatment in respect of assets not mortgaged to it.

Analysis: Sections 529 and 529A were read together with the Provincial Insolvency Act, 1920. The security of every secured creditor is deemed to be subject to a pari passu charge in favour of workmen only to the extent of the workmen's portion in that security. The secured creditor's right is confined to the particular property or asset offered as security, while unsecured assets remain available to unsecured creditors and the balance of the winding up estate. The overriding preference under Section 529A applies only to workmen's dues and to the secured creditor's debt to the extent it ranks pari passu with workmen's dues under clause (c) of the proviso to Section 529(1). Mere existence of a secured debt does not create a pari passu charge over all assets of the company.

Conclusion: The pari passu charge is limited to the secured asset and the workmen's portion therein; it does not extend to all assets of the company. The High Court's contrary view was incorrect, and the appeal was allowed with remand for fresh decision in accordance with law.

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