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Issues Involved:
1. Binding nature of Supreme Court judgments. 2. Character of the amount standing to the credit of workers under the Employees State Insurance Act. 3. Priority of claims over mortgaged/earmarked assets of a company in liquidation. Issue-wise Detailed Analysis: 1. Binding Nature of Supreme Court Judgments: The court examined whether the judgment in *State Bank of Bikaner & Jaipur v. National Iron & Steel Rolling Corpn.*, 1995 AIR SCW 214, or *Dena Bank v. Bhikhabhai Prabhudas Parekh & Co.*, 2000 (4) Supreme Today 5000/104 Comp. Cas. 157, was binding. The court noted that these cases dealt with the priority of government dues in the context of the Sales Tax Act. However, the present case involved the Companies Act, which provides a comprehensive scheme for the distribution of a company's assets during liquidation. The court concluded that the specific provisions of the Companies Act, particularly sections 529(A) and 530, govern the distribution process, rendering the question of which Supreme Court judgment to follow irrelevant in this context. 2. Character of the Amount Standing to the Credit of Workers: The court analyzed whether the amount credited to workers under the Employees State Insurance Act (E.S.I. Act) forms part of the company's assets in liquidation. Section 40 of the E.S.I. Act obliges the principal employer to deduct the employee's contribution from wages and remit it along with the employer's contribution to the E.S.I. Corporation. The court emphasized that any sum deducted is deemed to have been entrusted to the principal employer for this specific purpose. However, if the employer fails to remit the contributions, the E.S.I. Corporation can take legal action, including criminal proceedings. The court highlighted that the E.S.I. Corporation did not act for 14 years and only sought recovery after the company entered liquidation. Section 94 of the E.S.I. Act stipulates that contributions due to the Corporation have priority over other debts. However, this priority is subject to section 530 of the Companies Act, which subordinates to section 529(A). Section 529(A) provides that workmen's dues and secured creditors' debts rank pari passu and have priority over all other debts. Therefore, the E.S.I. Corporation's dues would only be considered after satisfying the claims under section 529(A). 3. Priority of Claims Over Mortgaged/Earmarked Assets: The court addressed whether the E.S.I. Corporation has priority over secured creditors regarding mortgaged or earmarked assets of a company in liquidation. Section 529(A) of the Companies Act, introduced in 1985, overrides other laws, including the E.S.I. Act. It mandates that workmen's dues and secured creditors' debts are paid in priority. The court noted that the E.S.I. Corporation must prove that the amount due falls within section 530(A) of the Companies Act. Furthermore, if the deducted amount was kept in a separate account and transferred to the Official Liquidator, it would be treated as a trust and paid in priority. However, if no such amount is transferred, the distribution follows the procedure under sections 529(A) and 530. The court concluded that the E.S.I. Corporation does not have priority over secured creditors if the assets are insufficient to meet the liabilities under section 529(A). The question of equity does not arise as section 530 only applies after discharging liabilities under section 529(A). Therefore, the E.S.I. Corporation's claim for priority over secured creditors is not maintainable under the current legal framework. Conclusion: The court answered the reference by emphasizing the primacy of section 529(A) in the distribution of assets during liquidation. The matters were referred back to the learned Single Judge for further proceedings consistent with this interpretation.
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