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TMI Blog2006 (5) TMI 565X X X X Extracts X X X X X X X X Extracts X X X X ..... s recommended full payment of Rs. 1,07,01,546/- to the workmen and Rs. 22,83,000/- to IFCI (including Rs. 7,50,000/- already paid). 5. The Committee held that the payment of Rs. 2,92,50,000/- has already been made to Indian Bank against the total claim of Rs. 8,96,21,880/- (Rs.1,74,84,486 first charge and Rs. 7,17,88,954/- second charge) and Therefore no further amount is payable to Indian Bank against the first charge. 6. inspire of recommending full payment of Rs. 1,07,01,546/- to workmen, on the question whether only first charge or both first charge and second charge in favor of Indian Bank should be taken into consideration while calculating amount payable to workmen under Sections 529 and 529A of the Companies Act,1956 (hereinafter referred to as the Act), the committee opined that the matter be placed before the court for appropriate orders. 7. Indian bank has filed objections to the report stating that the Committee has misconstrued and misinterpreted Section 529A of the Act and has erred in holding that Indian Bank though a secured creditor is not entitled to pro rata share of the money available for distribution as it has second charge on Rs. 1,95,00,000/-. Indian Bank ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Section 529-A. 11. The aforesaid provision Therefore provides that the insolvency rules shall equally apply when a company is being wound up in respect of Clauses (a), (b) and (c) of Sub-section (1). Under the proviso, a secured creditor has been given liberty to realize his security but the amount so realized is subject to pari passu charge to the extent of 'workmen's portion' and has to be proportionately applied for payment of the 'workmen's portion'. This charge in favor of the 'workmen portion' is created by the operation of the law from the date of the winding up order. The liquidator is entitled to represent the workmen and enforce the charge and amount realized has to be applied rateably for discharge of the workmen's dues. 12. The expression 'workmen's portion' has been defined in Section 529(3) of the Act. The said provision is as under: (3) For the purposes of this Section, Section 529-A and Section 530,' (a)-(b) * * * (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charge in favor of the workmen also. Pari passu' means with equal steps, equally, without preference' (Jowitt's Dictionary, volume II, 1959 edition 1294). Black's Law Dictionary, sixth edition, page 115 defines it as `by an equal progress ... used especially of creditors who, in marshalling assets, are entitled to receive out of the same fund without any precedence over each other'. It is also defined as `with equal steps, that is to say, proceeding side by side at the same place' (Prem's Judicial Dictionary, volume III, 1964 edition, page 1217). 15. The rights of the pari passu charge in favor of the workmen would run equally, temporally and potently, with the rights of the secured creditors. The official liquidator, as the representative of the workmen, to enforce such pari passu charge has the right of representing the workmen equally with the rights of the secured creditors. Where the secured creditor, instead of relinquishing his mortgage and proving his debt, opts to stand outside the winding up proceedings and realise his security, the official liquidator is entitled to represent the workmen and enforce such charge and any amount realised by enfo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin the meaning of Sections 529(3) and 529A of the Act because dues of the secured creditors having first charge have to be paid before payment is made to a secured creditor having a second charge. Secured creditors are treated as one group and the amount payable to the workmen under Section 529(3)(c) of the Act i.e. workmen's portion is accordingly ascertained. 17. Section 529A does not provide for and specify how payment is to be made between the secured creditors having the first charge and/or the second charge. For that one has to refer to Section 48 of the Transfer of Property Act, 1882. The said Section determines the priority between the secured creditors, as this aspect is not determined by Section 529A. Section 529A does not at all deal with how the amount is to be apportioned between the secured creditors having the first charge and the second charge. The said distribution takes place in accordance with the principles of general law i.e. Section 48 of the Transfer of Property Act. The workers dues along with the dues of the secured creditors have to be paid in priority to other debts. The workers dues rank pari passu with secured creditors. Merely because Indian Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39; as contained in proviso to (c) of Sub-section (3) of Section 529 in relation to the security of any secured creditor means the amount which bears to the value of the security the same proportion as the amount of the workmen's dues bears to the aggregate of (a) workmen's due, and (b) the amount of the debts due to all the (six secured) creditors. The submission of Mr. Gupta is that in a situation of this nature, what was necessary to be considered by the learned Single Judge was to find out the amount in relation whereto the appellant was raising its claim as a secured creditor, namely, Rs. 135 lakhs vis-a-vis the aggregate of the amount of the workmen's dues of Rs. 19 crores and the claim of any other secured creditor was not required to be taken into consideration. We cannot accept the said contention. The Illustration appended to Clause (c) of Sub-section (3) of Section 529 is a clear pointer to the effect that the amount of debts due to the secured creditors should be taken into consideration for the purpose of ascertaining the workmen's portion of security. 19. In the case of UCO Bank v. the Official Liquidator, High Court, Bombay reported in (1994) 5 SCC 1, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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