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Issues: Whether a secured creditor, who has not relinquished its security, is entitled to contractual interest for the post-winding-up period when the sale proceeds are sufficient to satisfy the workmen's dues and the secured debt in full.
Analysis: Sections 529, 529A and 530 of the Companies Act, 1956 create a self-contained scheme for distribution of the assets of a company in liquidation and give priority to workmen's dues and the secured creditors' pari passu share. The ceiling on interest under rule 179 of the Companies (Court) Rules, 1959, and the corresponding insolvency provisions, operate in relation to debts that are proved as unsecured or balance claims. A secured creditor who remains outside the winding up proceedings to the extent of its security is not governed by those interest restrictions so long as the security is sufficient to cover the debt, including contractual interest, after meeting the workmen's dues. Where surplus remains after satisfying those claims, denying contractual interest would be inconsistent with the statutory scheme and the nature of the secured creditor's rights.
Conclusion: The secured creditor was entitled to contractual interest for the post-winding-up period, and the restriction under rule 179 did not apply on the facts.
Ratio Decidendi: A secured creditor who retains its security and whose secured assets are sufficient to discharge the workmen's dues and the secured debt in full is entitled to contractual interest until realisation, and the statutory ceiling on subsequent interest applies only to proved balance or unsecured claims.
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