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2011 (11) TMI 533 - SUPREME COURT
Winding up - whether priority given to the dues payable by an employer under Section 11 of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 is subject to Section 529A of the Companies Act, 1956 in terms of which the workmen's dues and debts due to secured creditors are required to be paid in priority to all other debts – Held that:-
Section 11 was renumbered as Section 11(1) and a new sub-section was added as Section 11(2) and it was declared that any amount due from an employer in respect of the employees' contribution shall be deemed to be the first charge on the assets of the establishment and shall be paid in priority to all other debts.
By inserting proviso in Section 529(1), Parliament ensured protection of the interest of the workmen in winding up proceedings. The object of this amendment is to place the legitimate dues of workers at par with those of secured creditors.
Effect of the amendment made in the Companies Act in 1985 is only to expand the scope of the dues of workmen and place them at par with the debts due to secured creditors and there is no reason to interpret this amendment as giving priority to the debts due to secured creditor over the dues of provident fund payable by an employer.
Priority given to the dues payable by an employer under Section 11 of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 is not subject to Section 529A of the Companies Act, 1956 in terms of which the workmen's dues and debts due to secured creditors are required to be paid in priority to all other debts