Provident fund priority in winding up is preserved, but late proof of claim limits recovery to undistributed assets only.

Provident fund dues carry statutory first charge under section 11(2) of the Employees Provident Fund and Miscellaneous Provisions Act, 1952, giving them priority over other debts in winding up, including secured claims. However, where a creditor did not prove its claim within the time invited by the Official Liquidator, section 474 of the Companies Act, 1956 and Rule 178 of the Companies (Court) Rules, 1959 restrict recovery to assets still remaining with the liquidator and prevent reopening dividends already declared and paid. As the claim procedure under Rule 151 was not followed when claims were invited, earlier distributions could not be disturbed; recovery was confined to the balance in the Official Liquidator's hands.

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Issues: Whether provident fund dues had priority in winding up and whether the applicant, having not proved its claim within the time invited by the Official Liquidator, could recover only the balance amount still available without disturbing earlier distributions.

Analysis: Section 11(2) of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 gives provident fund dues a statutory first charge and priority over other debts, including secured debts. At the same time, Section 474 of the Companies Act, 1956 and Rule 178 of the Companies (Court) Rules, 1959 permit a creditor who has not proved a debt in time to participate only in assets remaining with the liquidator and prohibit disturbance of dividends already declared and paid. The claim procedure under Rule 151 of the Companies (Court) Rules, 1959 had not been followed by the applicant when claims were invited, and the prior distributions made in 2005 could not be reopened. The settled legal position therefore confined the applicant to the funds still in the hands of the Official Liquidator.

Conclusion: The applicant was entitled only to the amount remaining with the Official Liquidator and could not disturb the earlier distributions.

Final Conclusion: The application succeeded to the limited extent that the entire balance available with the Official Liquidator was directed to be paid to the applicant, while the prior dividend distributions remained undisturbed.

Ratio Decidendi: Provident fund dues enjoy statutory priority in winding up, but a creditor who fails to prove its claim within the time fixed by the Court may recover only from undistributed assets in the liquidator's hands and cannot reopen dividends already paid.

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