Company liquidation priority turns on statutory preferential dues and registered charges; an unregistered mortgage cannot secure priority for State recovery.
In company winding up, the State's loan claim could not be recovered as arrears of land revenue in priority to other creditors because the distribution of assets was governed by the Companies Act, 1956. Section 530 did not create a general priority for all State debts; only statutory preferential dues ranked ahead in liquidation, and this claim did not fall within that class. The alleged mortgage also could not confer secured status because the charge had not been registered as required under company law. For these reasons, the State was not entitled to preferential recovery, and its claim failed.
Issues: Whether the State could recover its loan claim as arrears of land revenue in priority to other debts of the company in liquidation, and whether the alleged mortgage security could be relied upon despite non-registration under company law.
Analysis: The claim was founded on Section 35 of the State Aid to Industries Act, 1935, but the company was in liquidation and the distribution of its assets was governed by the scheme of the Companies Act, 1956. Section 530 did not confer priority on every debt due to the State, and the claim in question was not one of the statutory preferential dues specified there. The Court also accepted that the benefit of a secured position could not be claimed where the mortgage had not been registered as required by the company law provisions governing registration of charges. In light of the binding statutory scheme and the absence of effective registration, the State could not obtain the priority it sought.
Conclusion: The State was not entitled to recover the loan amount as arrears of land revenue in priority to other creditors, and the application was rejected.
Final Conclusion: The claim of the State failed because the liquidation rules under company law prevailed, and the unregistered mortgage could not be used to secure priority over other debts.
Ratio Decidendi: In winding up, priority for payment is confined to the priorities created by the governing company law scheme, and an unregistered mortgage or charge cannot be asserted against the liquidator to obtain secured status or preferential recovery.
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