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TMI Blog2023 (11) TMI 1345X X X X Extracts X X X X X X X X Extracts X X X X ..... ct set out the priority for the payment of debts. The proviso to Clause (c) of Section 529(1) of the Act provides that the security of every secured creditor shall be deemed to be subject to a pari passu charge in favour of the workmen. Section 529A(1) of the Act expressly provides that the workmen s dues and debts due to secured creditor, to the extent that such debts rank pari passu with the workmen s dues by virtue of proviso to Clause (c) of Section 529(1) of the Act, shall be paid in priority to other debts. Section 530 of the Act also contains provisions regarding preferential payments and sets out the order in which the payments are required to be made. However, as stated above, the order of preference as set out in Sections 529, 529A and 530 of the Act relate to the order in which funds of a company in liquidation are to be disbursed. However, the funds available for distribution are funds that would be available on liquidation of the assets. In IISCO Ujjain Pipe and Foundry Company Limited. v. Ujjain Nagar Palika Nigam Ors [ 2023 (5) TMI 257 - SUPREME COURT ], the Supreme Court held that Sections 529A and 530 of the Act would have no relevance in the context of a claim of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19,41,853.61/- had been transferred as Government Commission (fee paid to the Central Government) and a sum of ₹28,94,972/- had been transferred towards "Estt. Account". The appellant claimed that the said amounts, which had been disbursed, were required to be recovered and disbursed to the workmen. The appellant claimed that the transfer of amounts as Government Commission and to the Establishment Account were unjustified and contrary to the order of priority as set out in Section 529A of the Act. 4. The aforesaid application was dismissed by the learned Company Court by the impugned order. During the course of the proceedings before the learned Company Court, the appellant did not press any objection regarding payment of sums transferred to the Establishment Account. He confined the application to the payment of commission to the Government. The learned Company Court held that the Government Commission (Official Liquidator's fees) as contemplated under Section 451(2) of the Act was not a "debt obligation" of the company in liquidation, to be disbursed in the order of priority under Section 529A of the Act. The payment of such fees is triggered only after the winding up pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to pay its debts. The expenses for sale of such a property, such as fees payable to the Court Commissioner, expenses for conducting the auction etc., would necessarily have to be incurred for realising the value of that asset. It is the only the net value, which is realised that can be disbursed in the order of preference. 10. Sections 529A and 530 of the Act set out the priority for the payment of debts. The proviso to Clause (c) of Section 529(1) of the Act provides that the security of every secured creditor shall be deemed to be subject to a pari passu charge in favour of the workmen. Section 529A(1) of the Act expressly provides that the workmen's dues and debts due to secured creditor, to the extent that such debts rank pari passu with the workmen's dues by virtue of proviso to Clause (c) of Section 529(1) of the Act, shall be paid in priority to other debts. Section 530 of the Act also contains provisions regarding preferential payments and sets out the order in which the payments are required to be made. However, as stated above, the order of preference as set out in Sections 529, 529A and 530 of the Act relate to the order in which funds of a company in liquidation are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in the sale notice and then, in view of the operation of Rule 338 of the 1959 Rules. 72. Put in different words, as regards the operation of the said Rule 338 of the 1959 Rules, we are inclined to accept the reasoning of the High Court that on the facts and in the circumstances of the present case, arrears of property tax and water tax until the date of confirmation of sale i.e. 4-7-2003, would qualify as the expenses for "preserving, realising or getting in" the assets of the company and thus, shall have to be paid in priority by the appellant OL." [emphasis added] 13. It is also relevant to refer to Rule 338 of the Rules, which reads as under: "338. Cost and expenses payable out of the assets in a winding up by the Court.-(1) The assets of a company in a winding-up by the Court remaining after payment of the fees and expenses properly incurred in preserving, realising or getting in the assets including, where the company has previously commenced to be wound-up voluntarily, such remuneration, cost and expenses as the Court may allow to the liquidator in such voluntary winding-up, shall, subject to any order of the Court and to the rights of secured creditors if any, be l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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