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TMI Blog2007 (8) TMI 445X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 work men's dues ; and (c)so much of the debts due to such secured creditor as could not be realised by him by virtue of the foregoing provisions of this proviso or the amount of the workmen's portion in his security, whichever is less, shall rank pari passu with the workmen's dues for the purposes of section 529A. (2) All persons who in any such case would be entitled to prove for and receive dividends out of the assets of the company, may come in under the winding up, and make such claims against the company as they respectively ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company ; (c)'workmen's portion', in relation to the security of any secured creditor of a company, means the amount which bears to the value of the security the same proportion as the amount of the work men's dues bears to the aggregate of- (i)the amount of workmen's dues ; and (ii)the amounts of the debts due to the secured creditors. 529A. Overriding preferential payments.-(1) Notwithstanding anything contained in any other provision of this Act or any other law for the time being in force, in the winding up of a company- (a)workmen's dues ; and (b)debts due to secured creditors to the extent such debts rank under clause (c) of the proviso to sub-section (1) of section 529 pari passu with such dues. shall be paid in priority to all other debts. (2) The debts payable under clause (a) and clause (b) of sub-section (1) shall be paid in full, unless the assets are insufficient to meet them, in which case they shall abate in equal proportions. 530. Preferential payments.-(1) In a winding up, subject to the provisions of section 529A, there shall be paid in priority to all other debts- (a)all revenues, taxes, cesses and rates due from the company to the Central or a State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use (e) of sub-section (1), be taken to be the amount of the lump sum for which the weekly payment could, if redeemable, be redeemed if the employer made an application for that purpose under the said Act. (4) Where any payment has been made to any employee of a company,- (i)on account of wages or salary ; or (ii)to him, or in the case of his death, to any other person in his right, on account of accrued holiday remuneration, out of money advanced by some person for that purpose, the person by whom the money was advanced shall, in a winding up, have a right of priority in respect of the money so advanced and paid, up to the amount by which the sum in respect of which the employee or other person in his right, would have been entitled to priority in the winding up has been diminished by reason of the payment having been made. (5) The foregoing debts shall- (a)rank equally among themselves and be paid in full, unless the assets are insufficient to meet them, in which case they shall abate in equal proportions ; and (b)so far as the assets of the company available for payment of general creditors are insufficient to meet them, have priority over the claims of holders of debentur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng up where the date referred to in sub-section (5) of section 230 of the Indian Companies Act, 1913 (7 of 1913), occurred before the commencement of this Act, and in such a case, the provisions relating to preferential payments which would have applied if this Act had not been passed, shall be deemed to remain in full force." The proviso to section 529(1) of the Act, the definitions of "workmen" and "workmen's dues" in clauses (a) and (b) of section 529(3), sub-clause (iv) of section 529(3)(b) and what amounts to the workmen's portion under section 529(3)(c) of the Act are relevant. On a combined reading of such provisions, it would appear that provident fund dues of workmen of a company in liquidation are part of workmen's dues and would, thus, stand at par with the dues of the secured creditors of a company in liquidation so far as the security covers such dues. Some of the provisions found in the Industrial Disputes Act, 1947, and the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, have also to be taken into consideration. Section 2(s) of the Industrial Disputes Act, 1947, defines workman thus : "2(s). 'workman' means any person (including an apprentice) e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riate Government under any provision of this Act or under any of the conditions specified under section 17, shall, where the liability therefor has accrued before the order of adjudication or winding up is made be deemed to be included among the debts which under section 49 of the Presidency-towns Insolvency Act, 1909 (3 of 1909), or under section 61 of the Provincial Insolvency Act, 1920 (5 of 1920), or under section 530 of the Companies Act, 1956 (1 of 1956), are to be paid in priority to all other debts in the distribution of the property of the insolvent or the assets of the company being wound up as the case may be. Explanation.-In this sub-section and in section 17 'insurance fund' means any fund established by an employer under any Scheme for providing benefits in the nature of life insurance to employees whether linked to their deposits in provident fund or not without payment by the employees of any separate contribution or premium in that behalf. (2) Without prejudice to the provisions of sub-section (1) if any amount is due from an employer whether in respect of the employee's contribution (deducted from the wages of the employee) or the employer's contribution the amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provident fund authorities that the Employees' Provident Funds and Miscellaneous Provisions Act is a beneficial legislation and makes no distinction between workmen and other employees. It is urged that contributions on account of provident fund are made up of the employee's share and the employer's share and they form part of the monthly package of the employee. It is suggested that by virtue of section 11 of the 1952 Act, particularly sub-section (2) thereof, all of the claim on account of provident fund dues where liability had accrued before the order of winding up is made, had to be provided for before disbursement to any other creditor of a company in liquidation could be made. It would appear upon reacting section 11(2) of the 1952 Act in isolation, that such a view as suggested by the provident fund authorities would be plausible. But counsel for the official liquidator cautions that sub-section (2) of section 11 cannot either derogate from provisions contained in section 11(1) nor can be read to be in conflict or at variance with the earlier sub-section. Counsel for the official liquidator suggests that even without the words of reservation at the beginning of sub-sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (2) and subject to it. It was found that the assessee was liable to pay a higher rate of interest despite the amendment having been effected after the Income-tax Officer's order was passed. In such context the Supreme Court reasoned as follows (page 462 of 101 ITR) : "5. It was suggested before the High Court that the order of the Income-tax Officer amounted to an irrevocable agreement which could not be varied merely because the rate of interest contained in sub-section (2) of section 220 of the Act was enhanced. Mr. S. Chowdhury, learned counsel for the respondent, however, has fairly conceded that there was no question of an agreement or settlement because section 220(3) does not empower the Income-tax Officer to enter into agreement or settlement in order to bind the Revenue. We find ourselves in complete agreement with this view. Section 220(3) merely empowers the Income-tax Officer to extend the time for payment or allow payment by instalments on such conditions as he may impose. In the instant case the Income-tax Officer merely exercised his powers under sub-section (3) of section 220 by imposing the condition that the assessee shall be allowed to pay the arrear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecial statute would hold a sway over a non-obstante clause contained in a provision found in a general statute. It is equally possible that a non-obstante clause in a special statute falls foul of a non-obstante clause in another special statute. By and large, the dates of the two apparently conflicting provisions are looked into to ascertain which should yield to the other. But that is not a conclusive test. The purpose of one set of rules found in a special statute has then to be tested against the purpose of another set of rules found in the other special statute. The discussion is necessary not in the context of the opening words of section 11(2) of the 1952 Act, but on the influence that the non-obstante clause found later in the provision, wields. If section 11(2) did not have the opening words noticed above and only contained the non-obstante clause that it does, it could be argued that the provisions in the Companies Act would always yield to it. That is because section 11(2) is contained in a special statute governing provident fund dues and the Companies Act is, in comparison, a more general statute. But section 11(2) of the 1952 Act makes it subservient to section 11(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2001] 2 LLJ 89 ; [2002] 108 Comp. Cas. 268 , has been relied upon for the proposition mat section 11 of the 1952 Act does not override the provisions of section 529A of the Companies Act. The question that arose in that case is whether, by virtue of section 11(2) of the 1952 Act, the provident fund dues of workmen ranked higher in priority than the debts of the secured creditors of a company in liquidation to the extent such debts were covered by the securities. The question was answered in paragraphs 4 and 5 of the Kerala judgment as follows (page 272) : "4. The present provisions of section 11 of the Employees' Provident Funds and Miscellaneous Provisions Act were enacted on November 1, 1973. Section 529 of the Companies Act was enacted only in 1985. Section 529A(1) specifically states that 'notwithstanding anything contained in any other provision of this Act or any other law for the time being . . . 'Therefore, I am of the opinion that the applicant's claim will come only under section 529A and section 11 of the Employees' Provident Funds and Miscellaneous Provisions Act will not override the provisions of section 529A The official liquidator had already included the workers' ..... X X X X Extracts X X X X X X X X Extracts X X X X
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