Winding up law and workmen's dues: operative cut-off date depends on statutory scheme and case facts, not a rigid deeming rule.

Workmen's dues in winding up are governed by the statutory scheme giving them pari passu and overriding preferential status against secured creditors. The deeming effect of notice of discharge under winding up law is not an inflexible rule fixing one universal cut-off date for calculation of dues; the operative date depends on the facts and circumstances of each case, and an earlier cessation date may be relevant if properly established. Applying that approach, the winding up order date was treated as the relevant date for calculating workmen's dues because it best advanced the protective object of the legislation, and the contrary contention based on the provisional liquidator's appointment or earlier cessation was rejected.

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Issues: Whether the workmen's dues in adjudication before the Official Liquidator are to be computed from the date of the winding up order, from the date of appointment of the Provisional Liquidator, or from some earlier cessation date depending on the facts of the case.

Analysis: The statutory scheme under sections 529, 529A and 530 of the Companies Act, 1956 gives workmen a pari passu and overriding preferential status with secured creditors. Section 445(3) creates a deeming consequence as to notice of discharge, but the deeming provision was held not to be an inflexible rule fixing the only possible cut-off date in every case. The Court held that the proper date must be determined on the facts and circumstances of each case, and that an earlier date may be relevant where cessation of work is otherwise established. On the facts before it, the Court found that the date of the actual winding up order should be treated as the relevant date for calculation of workmen's dues, because that approach best advanced the legislative object of protecting workmen.

Conclusion: The workmen's dues were to be calculated from the date of the winding up order in the present case, and the contrary contention based on the Provisional Liquidator's appointment or earlier cessation was rejected.

Final Conclusion: The appeals failed, and the order treating the winding up date as the operative date for workmen's dues was upheld.

Ratio Decidendi: A deeming provision in winding up law does not necessarily fix the only cut-off date for workmen's dues in every case; the operative date must be determined with reference to the statutory scheme and the facts, and may be the date of the winding up order where that best effectuates the protective object of the legislation.

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