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Issues:
1. Entitlement of State Government as a secured creditor outside winding-up proceedings. 2. Priority of payment to workmen under section 230 of the Indian Companies Act, 1913. Analysis: 1. The appeal before the High Court of Kerala involved the State Government challenging the lower court's decision regarding the disposal of sale proceeds in a liquidation case of a company named "Sitharam Spinning and Weaving Mills Ltd." The State Government contended that it should be treated as a secured creditor standing outside the winding-up proceedings due to a mortgage executed in its favor by the liquidator. However, the High Court upheld the lower court's finding that the State Government cannot be considered a secured creditor as the mortgage was executed during the winding-up proceedings, thus rejecting the State Government's contention. 2. The High Court addressed the issue of priority of payment to the workmen under section 230 of the Indian Companies Act, 1913. The workmen had claimed preferential payment from the sale proceeds deposited by the State Government based on amounts admitted to proof by the liquidator. The court clarified that priority under section 230 is limited to specific categories, such as wages, salaries, provident fund, pension, and gratuity. The court noted that leave allowances and notice pay would fall under the category of "wages" for priority payment, subject to the two-month period before the winding-up date. The High Court directed the lower court to reevaluate which amounts claimed by the workmen align with the provisions of section 230 and make appropriate orders accordingly. In conclusion, the High Court allowed the appeal, set aside the lower court's order, and remanded the matter for fresh disposal, emphasizing a reexamination of the workmen's claims in light of the provisions of section 230 of the Indian Companies Act, 1913.
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