1962 (3) TMI 48

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.... up proceedings. The State Government had advanced a loan of Rs. 5,000 to the company in March, 1955, under the State Aid to Industries Act (5 of 1935). The loan was advanced in order to enable the company to manufacture butter and cream and the advance was against the security of the company's assets including book-debts, stock, stores, machinery equipment, etc. The advance was evidenced by a deed of mortgage, a certified copy of which has been placed on the record as exhibit P.W. 1/1. It is stated that nothing at all has been refunded to the Government. As required by sections 23 and 24 of the State Aid to Industries Act, 1915, a notice was sent to the company and it was followed by a declaration duly published in the official Gazette. N....

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....nner as he would have been entitled to realise or deal with it if section 28 had not been passed, remains unaffected by the order of adjudication or by insolvency proceedings. He has also drawn my attention to a similar statement of Indian law as noticed in Palmer's Company Precedents, Part II, page 316. It is stated there that a secured creditor is prima facie entitled to proceed, his security not being part of the estate and effects of the company, and this being so it would not be proper for the court to refuse liberty to proceed, and so compel the secured creditor to allow the assets to be realised in the winding up, and thus to forgo his just rights. Finally, Mr. Kawatra drew my attention to my decision in Excise and Taxation Officer v....

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....er section 530. The contention of the learned counsel is that, such a scheme having been excluded from the list of debts payable in priority, it should be treated like any other debt of the company regardless of the fact that the State happens to be a creditor in a particular case. He has drawn my attention to a decision of the Federal Court in Governor-General in Council v. Shiromani Suger Mills Ltd. (In liquidation) [1946] 16 Comp Cas 71;[1946] 14 ITR 248; AIR 1946 FC 16. Spens C.J. observed that the Crown was bound by the provisions of the Companies Act and was bound, in regard to the provisions relating to the liquidation of companies, to a statutory scheme of administration wherein the prerogative right of the Crown to priority no long....