Clarification on Secured Creditors' Priority in Liquidation: Government Revenues Take Precedence Under Companies Act, 1956.

The circular addresses the recovery of dues from M/s Punjstar Standard Electronics, Mohali, in relation to Central Excise-PME/PMP cases. The Ministry of Finance, after consulting the Ministry of Law, clarifies that under the Companies Act, 1956, secured creditors do not have priority over government revenues and taxes during a company's liquidation process. However, if no liquidation proceedings are pending, secured creditors have priority over unsecured creditors. The circular advises taking appropriate actions to protect government revenue based on this legal interpretation.