Workers' dues and secured debt priority turn on statute first, but a sale contract can override default distribution rules.

Priority under Section 529A of the Companies Act does not extend to a co-operative society governed by the Maharashtra Co-operative Societies Act, so workers' liquidation priority cannot override the special co-operative regime. Employee dues recoverable as arrears of land revenue do not, by that label alone, create a paramount charge over a secured creditor's claim; absent an express statutory first charge, they rank only ahead of unsecured claims. The SARFAESI distribution rule under Section 13(7) applies in the absence of a contrary arrangement, but a sale letter and sale certificate may form a binding contract that allocates liability differently. On that basis, the bank's contractual undertaking to pay employees' dues was treated as enforceable.

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Issues: (i) Whether workers' priority under Section 529A of the Companies Act, 1956 could be applied to a co-operative society governed by the Maharashtra Co-operative Societies Act, 1960. (ii) Whether employees' dues recoverable as arrears of land revenue under the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act, 1971 acquired a paramount charge over the secured creditor's claim under the Maharashtra Land Revenue Code, 1966. (iii) Whether the secured creditor had a first charge over the sale proceeds of secured assets under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. (iv) Whether the sale letter and sale certificate created a contract overriding the statutory distribution under Section 13(7) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and obligating the bank to pay employees' dues.

Issue (i): Whether workers' priority under Section 529A of the Companies Act, 1956 could be applied to a co-operative society governed by the Maharashtra Co-operative Societies Act, 1960.

Analysis: The statute governing co-operative societies expressly excludes the application of the Companies Act, 1956. The borrower was a co-operative society, not a company in liquidation under the Companies Act regime. Therefore, the workers' priority provision in Section 529A could not be imported to displace the rights governed by the co-operative society legislation.

Conclusion: The issue is answered against the employees and in favour of the appellant.

Issue (ii): Whether employees' dues recoverable as arrears of land revenue under the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act, 1971 acquired a paramount charge over the secured creditor's claim under the Maharashtra Land Revenue Code, 1966.

Analysis: A recovery certificate making dues recoverable as arrears of land revenue does not itself convert the dues into arrears of land revenue due on account of land. The Land Revenue Code distinguishes between claims that are a paramount charge and claims merely recoverable as revenue demands. Such employee dues fall within the latter category and get priority only over unsecured claims, not over a secured creditor's claim, absent an express statutory first charge.

Conclusion: The issue is answered against the employees and in favour of the appellant.

Issue (iii): Whether the secured creditor had a first charge over the sale proceeds of secured assets under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

Analysis: The secured creditor's right under Section 13(7) governs distribution of sale proceeds in the absence of any contract to the contrary. The Act does not create a first charge in favour of the secured creditor against a separately created statutory first charge. On the facts, the statutory scheme did not by itself confer a paramount charge on the bank over the sale proceeds.

Conclusion: The issue is answered against the appellant.

Issue (iv): Whether the sale letter and sale certificate created a contract overriding the statutory distribution under Section 13(7) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and obligating the bank to pay employees' dues.

Analysis: The sale letter and sale certificate were read together and formed a binding contract. The purchaser accepted the encumbrances on the property, while the bank specifically undertook responsibility for employees' dues. That agreement displaced the default distribution rule under Section 13(7) to that extent and fixed liability for employees' dues on the bank, while other liabilities, including statutory dues of employees, were to be borne by the purchaser.

Conclusion: The issue is answered in favour of the employees and against the appellant to the extent of the undertaking contained in the sale documents.

Final Conclusion: The appeal succeeds only in part on the questions of statutory priority, but the bank remains bound by its contractual undertaking to satisfy employees' dues from the sale proceeds, while other liabilities are to be borne by the purchaser.

Ratio Decidendi: Recovery of dues as arrears of land revenue does not by itself create a paramount charge, and in the absence of an express statutory first charge, priority over secured creditors must rest on a clear statutory provision or a binding contract overriding the default distribution rule.

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