Winding-up priority disputes over an admitted debt must be decided by the company court under section 446(2), not on a limited appeal.

In winding-up proceedings, a dispute over whether an admitted debt is secured or preferential cannot be finally determined on a limited appeal under rule 164 of the Companies (Court) Rules, 1959 when the existing record is inadequate. Questions of priority arising in liquidation fall within the company court's jurisdiction under section 446(2) of the Companies Act, 1956. The claim's quantified amount remained proved before the official liquidator, but its ranking was left open. The creditor was granted liberty to approach the company court under section 446(2) for determination of preferential status, subject to any resulting alteration of priority.

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Issues: (i) Whether the nature of the creditor's claim as secured and preferential could be finally determined in an appeal under rule 164 of the Companies (Court) Rules, 1959 on the existing record; (ii) whether the appellant should be permitted to move the company court under section 446(2) of the Companies Act, 1956 for determination of the claim's preferential character.

Issue (i): Whether the nature of the creditor's claim as secured and preferential could be finally determined in an appeal under rule 164 of the Companies (Court) Rules, 1959 on the existing record.

Analysis: The dispute related not to the admitted quantum of the debt but to its character and priority in relation to other creditors. The scheme of the Companies Act contemplates proof of debts before the official liquidator, but questions of priority and other questions of law or fact arising in winding up fall within the winding-up court's jurisdiction under section 446(2). The record before the official liquidator was considered inadequate for a proper adjudication of such a substantial question of priority.

Conclusion: The claim's preferential character was not finally decided in the appeal and was held to require adjudication by the company court under section 446(2).

Issue (ii): Whether the appellant should be permitted to move the company court under section 446(2) of the Companies Act, 1956 for determination of the claim's preferential character.

Analysis: Since the amount of the debt was admitted, the remaining controversy concerned only whether the debt should rank as preferential. The court treated this as a matter properly to be brought before the winding-up court, and granted liberty to the appellant to apply under section 446(2). The debt as quantified by the official liquidator was to stand as proved, subject to any successful application on priority.

Conclusion: Leave was granted to the appellant to move the company court under section 446(2) for determination of preferential status.

Final Conclusion: The appeal was disposed of by leaving the parties to seek determination of the priority question before the winding-up court, while the admitted debt stood proved as an ordinary debt unless altered by that court.

Ratio Decidendi: In winding-up matters, a dispute concerning the nature or priority of an admitted debt is to be determined by the company court under section 446(2), and not finally on a limited appeal against the official liquidator's decision on the present record.

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