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2013 (5) TMI 269 - SUPREME COURTWinding up proceedings - Claims of the workmen who claimed to be entitled to payment pari passu - whether be considered by the official liquidator or be adjudicated upon by the Debts Recovery Tribunal - Held that:- A cumulative reading of Sections 529A and 529(1)(c) proviso leads to an irresistible conclusion that where a company is in liquidation, a statutory charge is created in favour of workmen in respect of their dues over the security of every secured creditor and this charge is pari passu with that of the secured creditor. Such statutory charge is to the extent of workmen’s portion in relation to the security held by the secured creditor of the company. The workmen of the company in winding up acquire the standing of secured creditors on and from the date of the winding up order (or where provisional liquidator has been appointed, from the date of such appointment) and they become entitled to distribution of sale proceeds in the ratio as explained in the illustration appended to Section 529(3)(c) of the Companies Act. If the debtor company is not in liquidation nor any provisional liquidator has been appointed and merely winding up proceedings are pending, there is no question of distribution of sale proceeds among secured creditors in the manner prescribed in Section 19(19) of the 1993 Act. Where a company is in liquidation, a statutory charge is created in favour of workmen in respect of their dues over the security of every secured creditor and this charge is pari passu with that of the secured creditor. Such statutory charge is to the extent of workmen’s portion in relation to the security held by the secured creditor of the debtor company. The above position is equally applicable where the assets of the debtor company have been sold in execution of the recovery certificate obtained by the bank or financial institution against the debtor company when it was not in liquidation but before the proceeds realized from such sale could be fully and finally disbursed, the company had gone into liquidation. The relevant date for arriving at the ratio at which the sale proceeds are to be distributed amongst workmen and secured creditors of the debtor company is the date of the winding up order and not the date of sale. However, before full and final disbursement of sale proceeds, if the debtor company has gone into liquidation and a liquidator is appointed, disbursement of undisbursed proceeds by DRT can only be done after notice to the liquidator and after hearing him. In that situation if there is claim of workmen’s dues, the DRT has two options available with it. One, the bank or financial institution which made an application before DRT for recovery of debt from the debtor company may be paid the undisbursed amount against due debt as per the recovery certificate after securing an indemnity bond of restitution The other, DRT may set apart tentatively portion of the undisbursed amount towards workmen’s dues in the ratio as per the illustration following Section 529(3)(c) and disburse the balance amount to the applicant bank or financial institution subject to an undertaking to restitute the amount to the extent workmen’s dues as may be finally determined by the liquidator Section 19(19) of the 1993 Act does not clothe DRT with jurisdiction to determine the workmen’s claim against the debtor company. The adjudication of workmen’s dues against the debtor company in liquidation has to be made by the liquidator. Section 19 (19) is attracted only where a debtor company is in winding up or a provisional liquidator has been appointed in respect of such company. If the debtor company is not in liquidation or if in respect of such company no order of appointment of provisional liquidator has been made and merely winding up proceedings are pending, the question of distribution of sale proceeds among secured creditors in the manner prescribed in Section19(19) of the 1993 Act does not arise. Thus it must be held, that the claims of the workmen who claim to be entitled to payment pari passu have to be considered and adjudicated by the liquidator of the debtor company and not by the DRT. The impugned judgment is set aside. The Debt Recovery Tribunal, Mumbai III and the official liquidator of the Company shall proceed further now concerning workmen’s dues as indicated in this judgment. The appeals are allowed with no order as to costs.
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