1994 (7) TMI 229

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....sion of the assets of the company. The appellant UCO Bank was a secured creditor of the company. It chose to stand outside the winding up proceedings and obtained a decree on 22-4-1976 to recover its debt. In pursuance of the decree obtained by the appellant, the High Court's Commissioner for Taking Accounts was directed to sell certain movables of the company. In the meantime, the Act was amended by the Companies (Amendment) Act, 1985 ('the Amending Act') with effect from 24-5-1985 by which sections 529 and 530 of the principal Act were amended and section 529A was inserted therein. One of the effects of the amendment, as mentioned in the statement of objects and reasons of the Amending Act, is as under: "2. Another announcement made by....

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....d (c)the respective rights of secured and unsecured creditors; as are in force for the time being under the law of insolvency with respect to the estates of persons adjudged insolvent: *[Provided that the security of every secured creditor shall be deemed to be subject to a pari passu charge in favour of the workmen to the extent of the workmen's portion therein, and, where a secured creditor, instead of relinquishing his security and proving his debts, opts to realise his security,- (a)the liquidator shall be entitled to represent the workmen and enforce such charge; (b)any amount realised by the liquidator by way of enforcement of such charge shall be applied rateably for the discharge of workmen's dues; and (c)so much o....

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....tion of insolvency rules in winding up of insolvent company', section 529A with 'Overriding preferential payments', and section 530 with 'Preferential payments'. It is obvious that these provisions, as they exist, apply to a winding up proceeding. 5. The proviso to sub-section (1) of section 529 inserted by the Amending Act clearly provides that 'the security of every secured creditor shall be deemed to be subject to a pari passu charge in favour of the workmen'. The effect of the proviso is to create, by statute, a charge pari passu in favour of the workmen on every security available to the secured creditors of the employer company for recovery of their debts at the time when the amendment came into force. This expression is wide enoug....