Priority for liquidation expenses applies where a reconstruction scheme mandates payment and liquidator determination is final.

A loan advanced specifically to meet costs and expenses of winding up is treated as a preferential claim where a reconstruction scheme mandates payment of liquidation costs in the first instance, and a scheme clause vesting final determination in the liquidator renders that award determinative; accordingly the plaintiff's advance is preferential. Separately, a contractual claim for remuneration was rejected because quantum meruit was neither pleaded nor pursued and the factual finding denied any authority or contract to pay; therefore the remuneration claim fails and is disallowed.

---

---

Issues: (i) Whether the sum of Rs. 1,750 advanced by the plaintiff to meet liquidation expenses amounted to a preferential claim under section 230 and the sanctioned reconstruction schemes; (ii) Whether the plaintiff was entitled to Rs. 1,800 as remuneration for services (claim for remuneration / quantum meruit).

Issue (i): Whether Rs. 1,750 is a preferential claim.

Analysis: Section 230 provides that sums necessary for costs and expenses of winding up are to be paid in priority. The first reconstruction scheme expressly required payment of Rs. 7,000 for liquidation costs and liquidator's remuneration in the first instance. Money advanced by the plaintiff and another director was used to meet that shortfall; one director was paid in full while the plaintiff's outstanding advance remained. Clause (14) of the second scheme vested final determination in the liquidator. Construing both schemes together, a loan advanced for meeting liquidation costs falls within the priority established by section 230 and the first scheme's terms; the liquidator's award under clause (14) is final on the point.

Conclusion: The sum of Rs. 1,750 is a preferential claim in favour of the plaintiff.

Issue (ii): Whether Rs. 1,800 is payable as remuneration.

Analysis: The plaintiff's claim for remuneration was pleaded as a contractual claim; quantum meruit was not pleaded or pursued in the cross-objection. The appellate finding of fact rejected entitlement to remuneration and no valid board resolution or implied contract authorising the payment was established. Given the absence of pleaded alternative grounds and the factual finding against the plaintiff, no entitlement arises.

Conclusion: The claim for Rs. 1,800 as remuneration is not allowable and is dismissed.

Final Conclusion: The appeal is dismissed and the concurrent decisions below are affirmed insofar as they recognise the Rs. 1,750 advance as a preferential claim and reject the Rs. 1,800 remuneration claim.

Ratio Decidendi: A loan advanced specifically to meet costs and expenses of winding up falls within the priority conferred by section 230 where a reconstruction scheme requires payment of such costs in the first instance, and an arbitrator's decision under a scheme clause conferring finality is determinative of the claim's character.

---