The rights of secured creditors under the SFC Act are affected by the provisions of Section 529 and Section 529-A of the Companies Act in a winding-up proceeding, emphasizing the priority of workmen's dues and debts due to secured creditors.

Judgment :

P.K. BALASUBRAMANYAN, J.- Appellant 1 Rajasthan State Financ Corporation, is a corporation constituted under Section 3 of the S Financial Corporations Act, 1951 (hereinafter referred to as "the SFC Act Appellant 2 Rajasthan State Industrial Development and Invest Corporation Limited, is a deemed financial institution by virtue of exercise power by the Central Government under Section 46 of the SFC Act. appellants are the secured creditors of MIs Vikas Woollen Mills (hereinafter referred to as "the company-in-liquidation"). By an order da 14-6-1994, the Company Judge of the High Court of Bombay Qrdered. company-in-liquidation to be wound up. The Official Liquidator was direc to take charge of the assets of the company-in-liquidation. On 18-4-1995, the Official Liquidator applied for directions to the Company Court. He sought permission to get the property valued by a valuer from the panel of value the Official Liquidator, and to sell the properties by public auction. He sought the issue of a direction to the appellants, the secured creditors, to adv Rs 25,000 each to the Official Liquidator to meet the expenses for selling, assets of the company-in-liquidation on condition that the amounts would reimbursed to the appellants on priority basis from the sale proceeds. information about the filing of this application was conveyed- by the Official Liquidator to the appellants by communication dated 21-4-1995. Apparently the appellants had no notice of the proceedings in liquidation and they, secured creditors, now say that they want to stand outside the winding u their reply to the Official Liquidator, the appellants indicated that proposed to pursue the remedies available to them under Section 29 of SFC Act. The appellants had obtained a valuation of the properties of company-in-liquidation and according to the valuers, the value of the came to Rs 92,56,000. In addition to opposing the report of the 0 Liquidator, the appellants also filed an application praying that as see creditors standing outside the winding up, they may be permitted to the securities and apportion the net sale proceeds between them and B Baroda, another secured creditor, which was also entitled to payment passu with them. They undertook to pay over the dues of the workmen on same being adjudicated by the Official Liquidator to the extent of availability of the funds out of the net sale proceeds of the properties of theCompany in accordance with Section 529-A of the Companies Act. The Company Court rejected the application of the appellants. The Company Court took the view that the right available under Section 29 of the SFC Act had to be exercised consistently with the right of the workmen represented by the Official Liquidator, who was a charge-holder and ranked pari passu with the secured creditors, even if they stood outside the winding up. TheCompany Court held that in view of a valuation report already available, it was not necessary to have a fresh valuation. The Court permitted Rajasthan State Financial Corporation, Appellant 1, to invite offers for sale of the properties and directed it to finalise the same in consultation with the Official Liquidator. It was directed that the reserve price would be fixed by the Company Judge on the report of the Official Liquidator. The sale proceedswere to be retained by the Official Liquidator until further orders. The Official Liquidator, in the meantime, was to invite the claims of the workmen and was to assess the extent of the claim of the workmen under Section 529 of the Companies Act. Challenging this order, the appellants filed an appeal before the Division Bench of the High Court of Bombay. The High Court dismissed the appeal preferring to follow the earlier decision of that Court inMaharashtra State Financial Corpn. v. Official Liquidator!. It is feeling aggrieved by the dismissal of their appeal by the Division Bench, that the appellants have filed this appeal by special leave before this Court.