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2015 (6) TMI 650 - HC - Companies LawEntitlement of contractual rate of interest by secured creditor for the post winding up period - Surplus amount available before such amount is distributed among the unsecured creditors - Held that:- Under provisions of sections 529, 529A and 530 of the Act , the dues of the secured creditor and the dues of the workmen of the company in liquidation are made to stand on par with each other. As per sub-section (2) of section 529A, the debts payable to these categories shall be paid in full. The phrase "paid in full" undoubtedly pre-supposes that in case of secured creditors, the debts must include principal and interest payable under the contract and in case of workmen, wages payable to them under the contract of employment, or the statutory provisions in force, as the case may be. Thus, unless the assets of the company in liquidation are insufficient to meet the dues payable to these two categories, they shall be paid in full. In case the amount realised by sale of the charged property is insufficient to satisfy the debts of the secured creditors and the workmen's dues, such balance amounts, not exceeding workmen's portion in the secured debtor's security shall be treated as priority debts under sub-section (1) of section 529A and in such case, these debts shall be paid before considering the claims of other creditors. It is only after making payment of these debts in full, if any further amounts remain, that the creditors included under section 530 shall have preference for payment. If any further amount still remains, the unsecured creditors who include the secured creditors are entitled to, to the extent of the portions of their unsecured debt, payment of dividends subject to proof of their debt by applying the provisions of the Insolvency Act. While the claim for payment of interest at the contractual rate for the post winding up period is supported by the statutory provisions discussed above, even in equity also a secured creditor is entitled to claim interest at the contractual rate where the amounts realised from the sale of assets are sufficient to discharge the debt of the secured creditors and the workmen's dues. It is not merely iniquitous but also wholly illogical that a secured creditor is denied the contractual rate of interest, for, many of the secured creditors are public institutions which lend tax payers' money. Denial of interest at contractual rate to these public institutions, which are instrumental in establishment of companies, seriously affects public interest as they will not be in a position to plough back the substantial monies disbursed by way of loans into their capital, resulting in crippling of their activities. In the long run, these financial institutions may become a great burden to the State as further State funds need to be pumped in to nurture them. From the report of the official liquidator, it is quite evident that the amount claimed by the appellant at the contractual rate of interest is less than the surplus amount available with him even after allowing all the admissible claims of the workmen and other creditors. Therefore, the official liquidator is directed to pay to the appellant interest at the contractual rate, i.e., 9.50 per cent per annum, on the principal amount adjudicated by him from April 22, 1988, i.e., the date on which the company was ordered to be wound up till date within one month from the date of receipt of this order. - Decided in favour of appellant.
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