Preservation and maintenance charges in liquidation are winding-up expenses, not secured debts under company law.

Electricity, maintenance and allied charges incurred to preserve company assets during liquidation were treated as winding-up expenses, not as secured debts. Section 476 of the Companies Act, 1956, read with Rule 338 of the Companies (Court) Rules, 1959, creates a separate priority for costs and expenses incurred in winding up, and charges necessary for upkeep, protection and good repair of the assets fall within that category. Section 529A, which governs preferential payments and secured creditors' dues, does not convert such preservation expenses into secured debts. The official liquidator must examine and determine these charges in accordance with law.

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Issues: Whether electricity, maintenance and allied charges incurred for preserving and keeping the company's premises and assets in proper condition during liquidation could be treated as secured debts under section 529A of the Companies Act, 1956, or were costs and expenses payable in winding up under section 476.

Analysis: The disputed period related to the time after possession had been continued with the purchaser as receiver, and the question was whether the charges for electricity and related services used for upkeep and preservation of the unit were to be borne as liquidation expenses. Section 476 of the Companies Act, 1956 and Rule 338 of the Companies (Court) Rules, 1959 create a distinct order of priority for costs, charges and expenses incurred in the winding up. Section 529A deals with preferential payments and secured creditors' dues, but does not convert expenses necessary for preservation, maintenance or protection of the assets into secured debts. Charges incurred to keep the assets in good repair and to protect them fall within winding up expenses and are to be dealt with separately by the official liquidator.

Conclusion: The electricity and allied charges for the disputed period were not secured debts under section 529A but were expenses within section 476, to be examined and determined by the official liquidator in accordance with law.

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