The main legal point established in the judgment is the priority of claims and the treatment of interest on outstanding dues in the context of liquidation proceedings, as governed by the provisions of the Companies Act, 1956, and the Companies (Court) Rules, 1959.

Satish Kumar Mittal, J.

1. The Haryana Financial Corporation (hereinafter referred to us the Corporation), a secured creditor, has filed this appeal under Rule 164 of the Companies (Court) Rules, 1959 , against the order dated 20.2.2006 (Annexure A-4) passed by the Official Liquidator, respondent No. 1 herein, adjudicating the claim of the appellant as secured creditor, while holding that put of the sale proceeds of the assets of the company in liquidation, the appellant Corporation is entitled to Rs. 7,47,622/- and another secured creditor i.e. State Bank of India is entitled to Rs. 70,52,897/- and the remaining amount of the sale proceeds i.e. Rs. 4,44,032/- will be distributed to other claimants as per the provisions of Section 530 of the Companies Act, 1956 (hereinafter referred to as the Act).

2. The brief facts of the case are that vide order dated 2.11.1995 passed by this Court in C.P. No. 9 of 1994, M/s Malook Chand Agro Oils Limited, Sirsa was ordered to be wound up by this Court on account of non-payment of debts by it. The assets of the company in liquidation were sold by the Official Liquidator for Rs. 1,03,54,149/- to Parkash Aggarwal, Ex. Director, respondent No. 4 herein. The said sale was confirmed by the this Court vide order dated 17.12.2004, passed in C.A. No. 719 of 2004.

3. In the year 1987, the appellant Corporation advanced a loan of Rs. 34.11 lacs to the company in liquidation. To secure the loan, a mortgage deed dated 24.4.1987 was executed between the company in liquidation and the appellant Corporation. The company in liquidation committed default in the repayment of loan to the appellant Corporation. Consequently, on 20.7.1993, the loan was re-called by the Corporation in exercise of the powers conferred by Section 29 of the State Financial Corporation Act, 1951 (hereinafter referred to as the SFC Act). The Corporation also took possession of the unit of the company in liquidation under Section 29 of the S.F.C. Act on 21.11.1995. Prior to that, the company was ordered to be wound up by this Court on 2.11.1995. Therefore, possession of the unit of the company in liquidation was handed over by the appellant Corporation to the Official Liquidator on 25.12.1995. Vide order dated 17.8.2001, the appellant Corporation was permitted to sell the land, building and machinery of the company in liquidation in association with the Official Liquidator and other secured creditors. It was ordered that the sale proceeds shall be deposited with the Official Liquidator after deducting the auction expenses. Subsequently, the appellant Corporation moved an application before the Company Court for re-calling the order dated 17.8.2001 and for permission to settle the account of the company under the one time settlement scheme of the appellant Corporation. The said application was disposed of by this Court vide order dated 11.7.2003 and the Official Liquidator was permitted to sell the assets of the company in liquidation, as the Corporation was settling its accounts with Ex-Managing Director of the company. The expenses of the sale were also ordered to be incurred by the secured creditors. Subsequently, a compromise was arrived at between the appellant Corporation and the company in liquidation for a sum of Rs. 28,32,720/-. In pursuance of the said compromise, an amount of Rs. 17,72,123/- was paid by the Ex-Managing Director to the appellant Corporation. Subsequently the said compromise was not materialized. Thereafter, in terms of the order passed by this Court, the Official Liquidator sold the assets of the company for a sum of Rs. 1,03,54,149/-, which was confirmed on 17.12.2004.

4. As per the records of the Register of Companies, the appellant Corporation is first charge holder on land/building and plant/machinery, but second charge holder on current assets. The another secured creditor i.e. State Bank of India is the first charge holder on the current assets and the second charge holder on fixed assets of the