TMI Blog1957 (4) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... al sum of Rs. 6,976-2-11 as the amount due to them by way of salary for the unavailed privilege leave period to their credit. The employees have based their claim on regulations 19 and 24 of the staff regulations of the bank and on section 25 of the Madras Shops and Establishments Act, 1947. The claim of the employee for preferential payment is opposed by a secured creditor having a first charge over the properties of the bank which was ordered in Application No. 26 of 1954. In the counter affidavit filed by him, he stated that the employees are not entitled to payment either in full or in part, in prefence to his claim as he has a first charge on all the assets of the company in liquidation. Regulations 19 and 24 read thus : "19. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y him the amount payable under this Act in respect of the holidays." The effect of the above provisions is that the employee is entitled to accumulated leave up to a maximum of four months and the bank is under a statutory liability to pay the money equivalent of the accumulated leave. The question for consideration is whether the employees are entitled to preferential payment in respect of these amounts under section 230 of the Indian Companies Act. Section 230(1)( b ), which is the material provision reads as follows : "(1) In a winding up there shall be paid in priority to all other debts ( b ) all wages or salary of any clerk or servant in respect of services rendered to the company within the two months next before the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d was established by a bank for the benefit of its employees and it was clear from the rules relating to the fund that it was held by the bank for a specific purpose, i.e., for payment to its employees or their legal representatives on the termination of their services and a separate ledger was opened for each employee and the amount to which each member was entitled was credited to that account, the bank being not entitled to operate on it except in the manner and on conditions laid down by the rules. Venkataramana Rao J. held that the relation between the bank and the employees in respect of the amount standing to the credit of the latter, was in the nature of a trust and was not one of debtor and creditor ; and that the bank held the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e employees maintained by the company." It is common ground that no such fund, as is contemplated by clause (1)( e ) of section 230 of the Companies Act has been maintained by the company. Therefore, the said provision has no application. Under the Companies Act (1 of 1956) there is a provision for preferential payment of all accrued holiday remuneration. Section 530(1)( c ) provides : " Preferential payments. (1) In a winding up, there shall be paid in priority to all other debts ( c ) all accrued holiday remuneration becoming payable to any employee, or in the case of his death to any other person in his right, on the termination of his employment before, or by the effect of, the winding up order or resolution." The absence of s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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