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TMI Blog2002 (9) TMI 563X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings as per order dated 17-2-1984 in C.A. No. 37 of 1984. Employees Association representing the workers also got impleaded in C.A. No. 46 of 1984 on 1-3-1984. Federal Bank filed statement on 13-3-1984 informing the Company Court that the Bank would keep outside the winding up proceedings. On 7-6-1985 Bank filed another statement stating that if the Company was ordered to be wound up, necessary direction might be given to safeguard the rights of the Bank to proceed against the assets of the Company for realisation of the amount due to the Bank. Bank also filed C.A. No. 291 of 1984 under section 446 of the Companies Act for sanction to institute a civil suit to enforce their security. The Company Court granted the prayer by order dated 11-2-1985. 3. The Company Court later ordered winding up of the Company by order dated 10-6-1985. Federal Bank after obtaining leave of the court instituted O.S. No. 3 of 1986 before the Sub-Court, Ernakulam against the Company. The Company as well as the Official Liquidator were arrayed as defendants in the suit. Suit was compromised and the Sub-Court passed a decree in terms of the compromise on 30-1-1988 allowing the plaintiff Bank to re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers and those of other creditors. Counsel also referred to another ruling of the Madras High Court in China Venkataraju v. Pulavarthi Lakshmanaswami AIR 1931 Mad. 729. It is a case arising under the Provincial Insolvency Act. Counsel submitted that the court permitted to realise interest at the contract rate. Counsel also made reference to the decision of the Karnataka High Court in State Bank of Mysore v. Official Liquidator 58 Comp. Cas. 609 . 6. Learned counsel appearing for the Liquidator submitted that the various decisions cited by the counsel appearing for Federal Bank were rendered prior to the introduction of section 529A of the Companies Act which says that dues of the workmen and debts due to secured creditors are to be treated pari passu and have to be treated in priority to other dues. We may in this connection examine the scope of the said section as well. Section 529A relates to overriding preferential payments. Sub-section (1) states that 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision, section 529A read with rule 179 could not be applied to those secured creditors who stood outside the winding up proceedings envisaged under section 446 of the Companies Act. In other words, as far as those workmen and other secured creditors who are covered by section 529A they are legally obliged to get only 4 per cent interest per annum in the event of their being surplus after adjudicating their claims. 7. The question to be examined is whether a secured creditor who was granted leave under section 446 and obtained a civil court decree with interest, at the rate of 10 per cent is still entitled to get only 4 per cent just like secured creditors, workmen etc. whose claims were to be settled in the winding up proceeding. We are of the view, as far as persons who are covered by section 529A read with rule 179 of the Companies (Court) Rules are concerned they are bound by those rules. Granting of interest at rate exceeding 4% as per a Court decree does not mean tampering the claim of secured creditors covered by section 529A who are not entitled to interest contrary to rule 179 of the Companies (Court) Rules. Secured creditors who had obtained a decree from a Civil C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of section 48 of the 1920 Act and in the case of a company in liquidation by rules 156 and 179 of the Companies (Court) Rules, 1959. It was further held that the wages of workmen as on the date of winding up shall rank pari passu with the claims of secured creditors, as their claims stand on the date of winding up and future inte-rest could be paid in terms of any decree held by the secured creditor in case any surplus is available for distribution after meeting the claims of workers for their wages and those of other creditors. The court held that it would be the only just and equitable way of dealing with the issue which is in consonance with the legislative intent. In this connection it is also profi-table to refer to the decision of the Apex Court in Indian Bank v. Official Liquidator, Chemmeens Exports (P.) Ltd. AIR 1998 SC 2111 wherein the Apex Court was dealing with the provisions of the Companies Act. The Court held as follows : "From this what follows is when a suit is instituted in the Court of competent jurisdiction with the leave of the Court under Sub-section (1) and a decree is passed by that court whether on the basis of mortgage or otherwise, it would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inding up proceedings had obtained decree in excess of 4 per cent interest per annum . ( vi )Secured creditor who stood outside the winding up proceedings and obtained decree can enforce the decree as against the assets and the ceiling with regard to payment of interest under rule 179 would not apply in the case of those secured creditors and they are entitled to get interest as decreed by the Civil Court. In a case where there is no surplus after payment in full of all the claims admitted of proof, the creditors who stood outside the winding up proceedings as well as the secured creditors who fall under section 529A would be treated alike to the extent of granting interest at the rate of 4 per cent under rule 179 of the Companies (Court) Rules. In a case where there is surplus amount after satisfying the decree of secured creditors, including secured creditors who stood outside the winding up as well as those who covered under section 529A read with rule 179, secured creditors who obtained decree with interest at a rate more than 4 per cent would be entitled to realise the said interest from the surplus amount. In such an event, even though there is surplus amount secured credi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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