2005 (11) TMI 262 - HC - Companies Law

Summary

Issues:
1. Priority of payment of dues in a winding-up proceeding.
2. Jurisdiction of Debts Recovery Tribunal over Company Court.
3. Rights of secured creditors and workmen in recovery proceedings.

Analysis:

Issue 1: Priority of payment of dues in a winding-up proceeding
The applicant sought direction to ensure statutory dues of a company are paid before disbursement of sale proceeds from its assets. The contention was that under sections 529A/530 of the Companies Act, taxes, revenue, and rent payable by the company to the State Government should have priority. However, the court held that dues of workmen and secured creditors take precedence as per section 529A, indicating that the payment of government dues is subject to this provision.

Issue 2: Jurisdiction of Debts Recovery Tribunal over Company Court
The respondent, a secured creditor, argued that the Debts Recovery Tribunal has exclusive jurisdiction over recovery proceedings even if a winding-up petition is pending. The court referred to the case of Allahabad Bank v. Canara Bank and clarified that the Company Court's jurisdiction may be ousted in such cases. It emphasized that priorities among creditors are to be decided by the Debts Recovery Tribunal in accordance with relevant laws.

Issue 3: Rights of secured creditors and workmen in recovery proceedings
The court highlighted the importance of following the prescribed procedures under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, and the Companies Act. It stated that after satisfying the debts of secured creditors and workmen, any remaining amount can be used to pay dues of the State Government or other entities. The judgment directed the applicant to lodge its claim before the Debts Recovery Tribunal for adjudication.

In conclusion, the court disposed of the case, emphasizing that the Debts Recovery Tribunal must follow the prescribed procedures and prioritize payments to secured creditors and workmen before government dues. It also directed mining authorities not to disrupt the mining operation and allowed them to participate in the liquidation proceedings to lodge their claims at the appropriate time.