Companies Act priority overrides State tax claims in winding up, leaving tax dues subordinate to secured creditors and workmen's dues.

In winding up, Section 529A of the Companies Act, 1956 gives overriding preferential payment to workmen's dues and secured creditors, and that priority prevails over inconsistent State tax recovery provisions. Although the State tax claims were supported by first-charge language under the relevant tax enactments, those provisions were expressly made subject to Section 530 of the Companies Act, and Section 530 in turn yields to Section 529A. Tax dues falling within Section 530 therefore cannot rank pari passu with secured creditors or displace the statutory priority created by the Companies Act.

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Issues: Whether the State tax dues claimed by the appellant could rank pari passu with secured creditors or obtain priority over them in the winding up of the company, in view of the first charge provisions under the State tax enactments and the overriding effect of the Companies Act.

Analysis: Section 529A of the Companies Act, 1956 contains a non obstante clause and grants overriding preferential payment to workmen's dues and secured creditors to the extent specified therein, in priority to all other debts. The appellant's claim for tax dues, though traceable to the State sales tax and commercial tax enactments, was expressly subject under Section 53 of the M.P. Commercial Tax Act, 1994 and Section 33 of the Madhya Pradesh Value Added Tax Act, 2002 to the provisions of Section 530 of the Companies Act, 1956. Section 530 itself yields to Section 529A. The Court held that tax dues falling within Section 530 cannot override the statutory priority created by Section 529A, and the Central legislation prevails over any inconsistent State legislation.

Conclusion: The appellant's tax dues could not be treated as secured debts or placed pari passu with secured creditors; they remained subject to the overriding priority under Section 529A of the Companies Act, 1956.

Final Conclusion: The claim of the revenue authority was held to be subordinate to the preferential regime under the Companies Act, and the appeal failed.

Ratio Decidendi: In winding up, Section 529A of the Companies Act, 1956 overrides inconsistent State tax priority provisions, and tax dues otherwise falling under Section 530 cannot displace the statutory priority of workmen's dues and secured creditors.

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