# JITENDRA NATH SINGH v. THE OFFICIAL LIQUIDATOR & ORS - **Citation:** [2012] 13 S.C.R. 339 - **Court:** Supreme Court of India - **Decided:** 2012-09-21 - **Case number:** Civil Appeal No. 6755 of 2012 - **Bench:** S.H. Kapadia, A.K. Patnaik, Swatanter Kumar - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/jitendra-nath-singh-v-the-official-liquidator-ors-28141 - **Pages:** 63 ## Headnote A B Companies Act, 1956 - s. 529 Proviso and s. 529A - Company under liquidation - Right of secured creditors - Over C the unsecured assets - Held: The secured creditors of a company under liquidation have a right only over the secured assets and not over all the assets - However, they will have preferential claim even on the unsecured assets, on pari passu basis with the workmen in respect of dues which could D not be realized because of statutory charge created in favour of workmen in the first limb of proviso to s. 529(1) and required to be paid alongwith workmen's dues in priority to all other debts u/s.529-A. Words and Phrases: 'Creditor' and 'Secured Creditor' - Meaning of, in the context of Companies Act, 1956. E The property and assets of the company under F liquidation was sold by the Official Liquidator. The secured and the unsecured assets were sold separately and separate accounts were maintained for both. The sale proceeds from the secured creditors was distributed among the secured creditors and the workmen as per s. G 529 of the Companies Act, 1956. As regards the sale proceeds of unsecured assets, the claim of the workmen was that their entire remaining claim should be satisfied in preference to all other claimants in terms of s. 529A of 339 H 340 SUPREME COURT REPORTS [2012] 13 S.C.R. A the Companies Act. C>n the other hand the secured creditors contended that they had pari passu charge even on the sale proceeds of the unsecured assets in terms of the statutory provision and also in view of the fact that they had given up their security in favour of the B workmen. The claim of the workmen was rejected by the Company Court. The appeal against the order was dismissed by the High Court. Hence the present appeal. c D Allowing the appeal and remitting the matter to Company Court, the Cc1urt HELD: PER MAJORITY: [By A.K. Patnaik, J. (For himself and S.H. Kapadia, CJI)] 1. A plain reading of clause (c) of sub-section (1) of Section 529 of Companies Act, 1956 makes it clear that in the winding up of an insolvent company, the same rules shall prevail and be observed with regard to the respective rights of secured and unsecured creditors as E are in force for the time being under the law of insolvency with respect to the estates of persons adjudged insolvent. This would mean that the respective rights of secured and unsecur1ed creditors of an insolvent company, which is being wound up, will be the same as F the respective rights of secured and unsecured creditors with respect to the estate!S of persons adjudged insolvent as are in force under thEt law of insolvency. In the State of Jharkhand, the Provincial Insolvency Act, 1920 is in force and accordingly the respective rights of secured G and unsecured creditors with respect to the assets of the insolvent company being wound up will be the same as in the Insolvency Act. Companies Act does not define a ~creditor' and a 'secured creditor'. Section 2(1)(a) and Section 2(1 )(e) of the Insolvency Act define the words H 'creditor' and 'secured creditor'. A secured creditor JITENDRA NATH SINGH v. OFFICIAL LIQUIDATOR & 341 ORS. means a person holding a mortgage, charge or lien on A the property of the debtor or any part thereof as a security for a debt due to him from the debtor. The result is that the expression 'secured creditor' in Section 529(1)(c) would mean a person who holds a mortgage, charge or lien on the property of the company or any part thereof B as a security for a debt due to him from the company. Where, therefore, a creditor, such as the bank or the financial institution in this case, does not hold a mortgage, charge or lien on the property of the company or any part thereof as a security for a debt due to it from c the company, it is not a secured creditor for the purposes of Sections 529 and 529A of the Companies Act. [Para 5] [390-D-H; C-F] 2. An unsecured creditor is entitled under Section 45 of the Insolvency Act to receive dividends equally with D the ot ## Text _Characters 0–38,638 of 123,380. This is a partial read: ask again with offset=38638 for what follows._ [2012] 13 S.C.R. 339 JITENDRA NATH SINGH v. THE OFFICIAL LIQUIDATOR & ORS. (Civil Appeal No. 6755 of 2012) SEPTEMBER 21, 2012 [S.H. KAPADIA, CJI., A.K. PATNAIK AND SWATANTER KUMAR, JJ.] A B Companies Act, 1956 - s. 529 Proviso and s. 529A - Company under liquidation - Right of secured creditors - Over C the unsecured assets - Held: The secured creditors of a company under liquidation have a right only over the secured assets and not over all the assets - However, they will have preferential claim even on the unsecured assets, on pari passu basis with the workmen in respect of dues which could D not be realized because of statutory charge created in favour of workmen in the first limb of proviso to s. 529(1) and required to be paid alongwith workmen's dues in priority to all other debts u/s.529-A. Words and Phrases: 'Creditor' and 'Secured Creditor' - Meaning of, in the context of Companies Act, 1956. E The property and assets of the company under F liquidation was sold by the Official Liquidator. The secured and the unsecured assets were sold separately and separate accounts were maintained for both. The sale proceeds from the secured creditors was distributed among the secured creditors and the workmen as per s. G 529 of the Companies Act, 1956. As regards the sale proceeds of unsecured assets, the claim of the workmen was that their entire remaining claim should be satisfied in preference to all other claimants in terms of s. 529A of 339 H 340 SUPREME COURT REPORTS [2012] 13 S.C.R. A the Companies Act. C>n the other hand the secured creditors contended that they had pari passu charge even on the sale proceeds of the unsecured assets in terms of the statutory provision and also in view of the fact that they had given up their security in favour of the B workmen. The claim of the workmen was rejected by the Company Court. The appeal against the order was dismissed by the High Court. Hence the present appeal. c D Allowing the appeal and remitting the matter to Company Court, the Cc1urt HELD: PER MAJORITY: [By A.K. Patnaik, J. (For himself and S.H. Kapadia, CJI)] 1. A plain reading of clause (c) of sub-section (1) of Section 529 of Companies Act, 1956 makes it clear that in the winding up of an insolvent company, the same rules shall prevail and be observed with regard to the respective rights of secured and unsecured creditors as E are in force for the time being under the law of insolvency with respect to the estates of persons adjudged insolvent. This would mean that the respective rights of secured and unsecur1ed creditors of an insolvent company, which is being wound up, will be the same as F the respective rights of secured and unsecured creditors with respect to the estate!S of persons adjudged insolvent as are in force under thEt law of insolvency. In the State of Jharkhand, the Provincial Insolvency Act, 1920 is in force and accordingly the respective rights of secured G and unsecured creditors with respect to the assets of the insolvent company being wound up will be the same as in the Insolvency Act. Companies Act does not define a ~creditor' and a 'secured creditor'. Section 2(1)(a) and Section 2(1 )(e) of the Insolvency Act define the words H 'creditor' and 'secured creditor'. A secured creditor JITENDRA NATH SINGH v. OFFICIAL LIQUIDATOR & 341 ORS. means a person holding a mortgage, charge or lien on A the property of the debtor or any part thereof as a security for a debt due to him from the debtor. The result is that the expression 'secured creditor' in Section 529(1)(c) would mean a person who holds a mortgage, charge or lien on the property of the company or any part thereof B as a security for a debt due to him from the company. Where, therefore, a creditor, such as the bank or the financial institution in this case, does not hold a mortgage, charge or lien on the property of the company or any part thereof as a security for a debt due to it from c the company, it is not a secured creditor for the purposes of Sections 529 and 529A of the Companies Act. [Para 5] [390-D-H; C-F] 2. An unsecured creditor is entitled under Section 45 of the Insolvency Act to receive dividends equally with D the other creditors, whereas the secured creditor has the right under Section 47 of the Insolvency Act to realize the security and to prove for the balance due to him in case on realization of such security he is not able to recover the entire amount due to him. If, however, the secured E creditor does not opt to realize his security but relinquishes it for the general benefit of the creditors, then he may prove for his whole debt. Under the Insolvency Act, therefore, the secured creditor has only a right over the particular property offered to him as F security and all the creditors have equal rights over the other properties comprising the estate of the person adjudged insolvent. [Para 6] [392-G-H; 393-A-B] 3. The first limb of the proviso to clause (c) of subG section (1) of Section 529 of the Companies Act creates a statutory charge over the security of every secured creditor to the extent of the workmen's portion. In other words, every property or asset of an insolvent company, which is being wound up and which has been offered as H 342 SUPREME COURT REPORTS [2012] 13 S.C.R. A a security to a secured c:reditor is subject statutorily to a pari passu charge in favour of the workmen to the extent of the workmen's portion by virtue of the proviso to subsection (1) of Section 529 of the Companies Act. Therefore, the first limb of the proviso to sub-section (1) of Section B 529 does not create an)r pari passu charge in favour of secured creditor over p1roperty or asset of the company which has not been give~n as security by the company to the secured creditor. [Para 8] [393-G-H; 394-C] 4. The second limb of the proviso to sub-section (1) C of Section 529 of the Companies Act states the consequences which follow where a secured creditor, instead of relinquishing his security and proving his debt, opts to realize his security. These are: (a) the liquidator 1shall be entitled to repr1esent the workmen and enforce D such charge; (b) any amount realized by the liquidator by way of enforcement of such charge shall be applied rateably for the discharge of workmen's dues; and (c) so much of the debt due to such secured creditor as could not be realized by him by virtue of the foregoing E provisions of this provisc1 or the amount of the workmen's portion in his security, whichever is less, shall rank pari · passu with the workmen's dues for the purposes of Section 529A of the Companies Act. Thus, clause (c) of this proviso does not create a pari passu charge over F properties or assets of the company which have not been offered to the secured <:reditor as security, but to the extent of the loss of security suffered by a particular $ecured creditor because· of the statutory charge created in favour of the workmen, the secured creditor is ranked G pari passu with the workmen for overriding preferential payment under Section 529A of the Companies Act. [Para 9] [394-D-F, H; 395-A-B] 5. Section 529A of the Companies Act states that notwithstanding anything contained in any other H JITENDRA NATH SINGH v. OFFICIAL LIQUIDATOR & 343 ORS. provision of the Companies Act or any other law for the A time being in force, in the winding up of a company - (a) workmen's dues; and (b) debts due to secured creditors to the extent such debts rank under clause (c) of the proviso to sub-section (1) of Section 529 of the Companies Act pari passu with such dues, shall be paid B in priority to all other debts. The entire object of Section 529A of the Companies Act is to ensure overriding preferential payment of (1) the workmen's dues and (2) debts due to secured creditors to the extent such debts rank under clause (c) of the proviso to sub-section (1) of c Section 529 pari passu with the workmen's dues. The effect of the non-obstante clause in the opening part of Section 529A of the Companies Act, therefore, is that notwithstanding anything in the Companies Act and any other law including the Insolvency Act, workmen's dues 0 and dues of the secured creditor which could not be realized because of the pari passu charge in favour of the workmen under the proviso to sub-section (1) of Section 529 and only to the extent such dues rank pari passu with the dues of the workmen under clause (c) of the said proviso are paid in priority over all other dues. Only where E under the second limb of the proviso to clause (c) of subsection (1) of Section 529 the secured creditor opts to realize the security and is unable to realize a portion of his dues because of the pari passu charge created in favour of the workmen under the first limb of the proviso, F he has pari passu charge to the extent indicated in clause (c) of the proviso to sub-section (1) of Section 529 and only such debts due to the secured creditor which rank pari passu with dues of the workmen under clause (c) of the proviso to sub-section (1) of Section 529 have to be G paid in priority over all other debts of the company. The High Court has clearly fallen in error by holding that all debts due to secured creditors will rank pari passu with the workmen's dues and have to be paid along with the H 344 SUPREME COURT REPORTS [2012] 13 S.C.R. A workmen's dues in priority to all other debts of the company. [Paras 10 and 15) [395-B-G; 401-C-E] 6. The application filed by the appellant-workman before Company Court praying for satisfaction of their 8 remaining claim from the sale proceeds of unsecured assets of the Company, in preference to all other claimants, including th•~ secured creditors, is set aslde and the matter is remitted to Company Court to decide the Application in accordance with the law laid down in C the present judgment. [Para 16] [401-F-G] Allahabad Bank v. Canara Bank and Anr. (2000) 4 SCC 406: 2000(2) SCR 1102 ; Andhra Bank v. Official Liquidator and Anr. (2005) 5SCC 75: 2005 (2) SCR 776 - referred to D PER MINORITY: [By Swatanter Kumar, J.) E 1.1 In the present case, the judgment of the High Court, to the extent it takes the view that the charges of the workmen and secured creditors have to rank pari passu, cannot be faulte~d with. [Para 32] [383-G] 1.2 By way of the Companies (Amendment) Act, 1985, Section 529A, as well as the proviso to Section 529(1) of the Companies Act, 19~56 were inserted. The purpose of these provisions appears to be that the dues of the F workmen may be made to rank pari passu with those of the secured creditors and even above the dues of the Government, in the event of winding up of the company. The legislative intent appears to be that the dues of the secured creditors and workmen should be paid in G preference to others, however, would remain pari passu to each other. It was not the intention of the framers of law to take away or deprive a secured creditor of its dues or charge of the workmen, unless, it was specifically given up by the secure~d creditor. [Para 9) [358-D-F] H JITENDRA NATH SINGH v. OFFICIAL LIQUIDATOR & 345 ORS. 1.3 The proviso to Section 529 of the Act creates a A deeming fiction in law and makes it clear that the security of every secured creditor shall be deemed to be subject to a pari passu charge in favour of the workmen, to the extent of the workman's portion thereunder. This fiction is intended to give the workmen a preferential right to B recover their dues. The expression 'workmen's portion' appearing in the proviso to Section 529(1) is explained under clause (c) of Section 529(3) of the Act. The workmen's portion in relation to the security of any secured creditor of a company means the amount which c bears to the value of the security the same proportion as the amount of the workmen's dues bears to the aggregate of the amount of the workmen's dues and the amount of the debts due to the secured creditors. The workmen's portion is to be computed in terms thereof 0 with the aid of the illustration given in that provision. Thus, the security of every secured creditor, by fiction of law, is subject to a pari passu charge in favour of the workmen to the extent of the workmen's portion and where the secured creditor, instead of relinquishing his security and proving his debt, opts to realize his security, E in that event, so much of the debt due to such secured creditor as could not be realized by him by virtue of the pari passu charge in favour of the workmen or the amount of the workmen's portion in his security, whichever is less, shall rank pari passu with the workmen's dues for the purposes of Section 529A. Section 529A of the Act opens with non-obstante clause, giving the workmen's dues and secured creditors' dues, F as defined under the proviso to Section 529(1 ), an overriding effect over the other provisions of the Act as well G as any other law in the matter of priority of payment of dues. Application of Section 529A of the Act is not dependent upon any other provision of the Act including Section 529 except to the extent specified in Section 529, proviso (c). So, it is not dependent upon the limitation H 346 SUPREME COUl~T REPORTS [2012] 13 S.G.~. A imposed by any other llaw for the time being in force, including Section 47 of the Insolvency Act. The nonobstante opening words of Section 529A are intended to give precedence to the 'overriding preferential payments' in contrast to the 'preferential payments' as contemplated B u/s. 530 of the Act. [Paras 12 and 13] (367-F-H; 368-A-F] 1.4 Once the contents of proviso to Section 529 and its clauses (a) to (c) are satisfied, then the secured creditor would be entitled to invoke the provisions and C receive the benefits of Section 529A(i), subject to pari passu charge and in terms of the priority stated therein. The workmens' dues, hc>wever, have not been singularly placed in the preferential clause. The expression used in Section 529A is 'and' meaning thereby that the dues stated under clauses (a) and (b) of the Section would D remain pari passu. But it is not the entire dues of the secured creditors that will get preference over other dues and remain pari passu with the charges payable to the workmen. Their dueis are limited only to the extent of the debts which are due to the secured creditors under E clause (c) of the proviso to sub-Section (1) of Section 529 which are pari passu with such dues. The term 'such dues' here refers to the dues of the workmen. [Para 14] [368-H; 369-B-D] F 1.5 On a plain reading of the language of Sections 529 and 529A, it is clear that it is not the entire or unrealised amount owed to secur1ed creditors which is protected under the provisions of Section 529A and stands pari passu with the workm,en's charges, but it is only the G portion or amount relinquished under proviso to Section 529(1 ), whichever is less, that is protected. There is a direct link in the application of both these provisions. In a situation of the present kind, these provisions would have to be applied collectively and that too, upon the H correct appreciation of the legislative intent. [Para 14] [369-E-F, G] JITENDRA NATH SINGH v. OFFICIAL LIQUIDATOR & 347 ORS. 1.6 From a cumulative reading of the relevant A provisions under the Act as well as under the Insolvency Act, it is clear that neither the legislature intended nor can it be comprehended that where an act is done in complete adherence to the relevant statutory provisions, it can lead to two different results merely because such B act is done before different forums/courts. That is to say that if a secured creditor realises his security before a forum other than the Company Court strictly in compliance to the provisions of Section 529 of the Act, then favourable consequences of Section 529A would c follow but if he acts in identical terms before the Company Court and without prejudice to his remedy outside the winding up and without putting his sale proceeds in the common hotch potch in the winding up proceedings, he would not be entitled to the benefits of 0 Section 529A. It is more so since even the sale of a security by a secured creditor before such other forum cannot be completed without approval of the Company Court. The Company Court has even been vested with the jurisdiction to transfer such proceedings in exercise E of its powers under Section 446 of the Act. Mere pendency of proceeding before a Tribunal would not deprive the secured creditor of the statutory benefits. Of course, the situation will be entirely different where the secured creditor does not follow the scheme of the provisions of Section 47(1) of the Insolvency Act read in F conjunction with Sections 529 and 529A of the Act but puts the sale proceeds in the winding up proceedings in a common hotch-potch or even relinquishes the security for general benefit of the creditors at large, then the creditor would not be entitled to the benefit of Section G 529A and would stand in line with the unsecured creditors of the company. Further, Where the secured creditor has been unable to fully realize his dues owing to the taking of share from his security towards workmen's portion in terms of the proviso to Section 529(1 ), then to the extent H 348 SUPREME COURT REPORTS (2012] 13 S.C.R. A specified, the secured creditor is entitled to a charge pari passu with the workmirn's dues for the purposes of Section 529A. [Para 15] [370-C-G; 371-A-D] 1.7 Proviso to Sectio,n 529(1) has two contents which B have to be read conjunctively. First, that creates a pari passu charge by legal fiction on the security of a secured creditor in favour of the workmen and, second, where the secured creditor instead of relinquishing his security and proving his debts opts to realize his security. The expression 'and' used in the proviso has to be read and C construed conjunctively and not disjunctively. The word 'and' specifies two specific conditions for the proviso and sub-clauses (a) to (c) to become enforceable. Clauses (a) and (b) to the proviso give right of representation to the liquidator for enforcing the statutory right in favour of the D workmen to the extent of the portion of the workmen's dues. Clause (c) of proviso to Section 529(1) provides the mode for recouping the shortfall in the amount which the secured creditor loses upon sale of security and creation of pari passu charge. Such recovery is again pari passu E and limited to the extent of the amount of workmen's dues. The realization of the security may be in the proceedings outside th1e winding up, i.e., before a special forum or otherwise or it may be in the winding up but not for the benefit of the general creditors but strictly in F compliance with the provisions of the proviso to Section 529(1) of the Act. In both such situations, the secured creditor would be entitled to the protection and right of preferential payment contemplated under Section 529A(1) of the Act. [Para 16] [371-E-H; 372-A-C] G H 1.8 As per the scheme and the relevant provisions of the Act, it is clear that a secured creditor can relinquish his security, participate in winding up proceedings and file his claim before the official liquidator, as and when invited. The dues of the secured creditors and of the JITENDRA NATH SINGH v. OFFICIAL LIQUIDATOR & 349 ORS. workmen would rank pari passu as regards the order of A preference of their discharge. This is subject to satisfying the conditions as stated in Sections 529 and 529A of the Act. The proviso to sub-section (1) of Section 529, by a deemed fiction, makes the dues of the workmen pari passu with that of the secured creditors and creates a B charge, in favour of the workmen upon the amounts realized from the enforcement of such security, to the extent of the workmen's portion therein. The 'workmen's portion' has been explained under sub-section (3)(c) of Section 529 which requires that in relation to the security c of any secured creditor of the company, workmen's portion would mean 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 the amount of workmen's dues and the amounts of the debts due to the 0 secured creditors. The illustration to this sub-section provides the mode in which the workmen's portion is to be calculated. Once the workmen's portion is computed, then in terms of Section 529A, again it has to be treated as a charge pari passu to the debts of the secured E creditor. In the case of the latter, the charge will be limited to the extent such debt ranks under clause (c) of the proviso to sub-section (1) of Section 529 pari passu with such dues for preferential payment. The dues payable to · the workmen and the secured creditors have to be paid in priority to all other debts. But the dues payable to the F secured creditor will not be more than the amount that remains unsatisfied after the security is relinquished in favour of the workmen under Section 529 of the Act. [Para 23) [378-A-G] G 1.9 The relinquishment of security by a secured creditor certainly requires some conscious act on his part more than the mere filing of a claim in response to a public notice issued by the official liquidator. Once the secured creditor takes such further actions like sale of the secured H 350 SUPREME COURT REPORTS [2012] 13 S.C.R. A assets through the liquidator and subject to the control of the Company Court in that event, he would be part of the scheme of payment as rationalized under Section 529 and 529A of the Act. (Para 24] [378-H; 379-A-B] 8 1.10 A secured creditor who has a charge over the assets of a company in winding up, merely by instituting an application before the ORT or any other special forum without effectively pursuing that remedy and taking effective steps to realize his security would not stand outside the winding up proceedings. If the sale of C secured assets is effected by the Official Liquidator subject to control of the Company Court and such amounts are utilized for discharging the debts of the secured creditor as well as statutory charge of the workmen created under Sections 529 and 529A, then, in D effect, the secured creditor would be deemed to have participated in the winding up proceedings and not stood outside the same. It is for the reason that a secured creditor has to take stE!ps by filing petition before any other forum just to prot,ect his legal right and to prevent E the claim from getting barred by time. On the contrary, if he realizes his security within the four corners of the company law, i.e., befo1re the Official Liquidator and the Company Court, in that event it would not be possible to hold that such secured creditor has given up his option F to participate in the winding up proceedings. However, the matter would be quite different where the secured creditor elects not only to institute a petition before the specialized forum but also takes effective steps to realize his security and pursues the proceedings effectively, in G which event, the conclusion has to be that such secured creditor has stood 'outside the winding up' proceedings. [Para 27] (379-H; 380-A-E] 1.11 A secured creditor who, after institution of a H claim but without pursuing the remedy outside the JITENDRA NATH SINGH v. OFFICIAL LIQUIDATOR & 351 ORS. provisions of this Act, files claim before the official A liquidator, relinquishes his security and agrees to the distribution of the sale proceeds through the official liquidator, subject to jurisdiction of the Company Court, could always be said to be not 'standing outside the winding up' proceedings. However, where he institutes B a petition, proceeds with it and seeks realisation of security before a forum outside the Company Court, then he obviously pursues the remedy beyond mere filing of a claim and would be a person 'standing outside the winding up' proceedings and shall be subject to the c rights enforced by the official liquida.tor in terms of the proviso to Section 529 of the Act. The secured creditor has to take some positive steps to participate in the winding up petition. [Para 28] (380-E-H; 381-A] 1.12 Once the twin requirements stated in the proviso D to Section 529(1) are satisfied, the scheme contemplated under clause (c) of the proviso to Section 529 read with Section 529A of the Act would come into play. The Court cannot overlook the reality that intention of the framers of law could not have been that the public funds, for E instance, the money of secured creditor (like banks), should be completely ignored for the benefit of the creditors in general, despite there being a definite protection in law, more so, when the security may be sufficient for recovery of dues of such secured creditors F to a limited extent, if not in entirety. The scheme of these provisions, thus, has to be understood to make it practicable and in consonance with the accepted commercial principles. The workmen's charges as well as that of the secured creditors have to be paid in G preference to all others, but with inter se pari passu charge on the amounts realized from the sale of the security or otherwise. (Para 30] [381-H; 382-A-D] H 352 SUPREME COURT REPORTS [2012] 13 S.C.R. A /CIC/ Bank Ltd. V. Sidco Leathers Ltd. and Ors. (2006) B 10 SCC452: 2006 (1) Suppl. SCR 528 • relied on. Allahabad Bank v. Canara Bank and Anr. (2000) 4 SCC 406: 2000 (2) SCR 1102 • held inapplicable. 2.1 The High Court has fallen in error of law in respect of the computation and adjustment of the shares between the workmen, on the one hand and the secured creditors; on the other. Particularly, the Single Judge of the High Court directed the amounts recovered from the C secured creditors to be distributed between the workmen and the secured creditors in equal proportion of 50 per cent of their respective admitted claims. This order and calculation is opposed to the very scheme of the above provisions, particularly with respect to determination of D the workmen's portion~ Another error in the calculation that appears from the record is that though the total sale proceeds from the secured assets were Rs.108.90 crore, the Court directed the payment of only Rs.101 crore which is the aggregate of the amount directed to be paid E to the workmen and to the secured creditors. Thus, there has been an error of law in applying the statutory provisions in this regard. The High Court erred in not noticing that the Company Court has not made calculation and computation in accordance with law. The F Company Court as well as the Appellate Court should have considered the workmen's portion in terms of ,proviso to Section 529(1) and Section 529(3)(c) along with the illustration appended thereto and thereafter, its overriding preferential payment vis-a-vis all other unsecured G ,creditors in terms of Section 529A and 530 of the Act. The amounts, thus, are required to be recalculated in terms of t"e above provisions and the law stated herein. [Para 32] [383-H; 384-A·E] 2.2 In the present case, the secured creditor has H realized !ts security but without putting the security or the JITENDRA NATH SINGH v. OFFICIAL LIQUIDATOR & 353 ORS. receipts thereof in the common hotch potch of the A winding up proceedings for the general benefit of the creditors. Thus, in terms of Section 47(1) of the Insolvency Act, the secured creditor in the present case is entitled to the balance due to it, deducting the net amounts realized. If the secured creditor would have participated in the B winding up proceedings in its entirety with the security being realised and/or relinquished for the general benefit of the creditors and not restricted to the compliance of Section 529 of the Act, it would not be entitled to the benefit of Section 529A of the Act. The amounts, by the C consent of the parties, have already been disbursed and utilized by the workmen as well as the secured creditors in terms of Section 529 of the Act which are subject to adjustment as per the orders of the Court. [Para 33] (384F-H; 385-A-B] D 2.3 The High Court should re-compute the amounts payable pari passu between the secured creditors and the workmen in accordance with the principles stated above. Therefore, the matter is remitted to the Company Court to apply the above-stated principles and calculate the E amount payable to the respective parties afresh and in accordance with law. [Paras 33 and 34] (385-C-D] 3. To satisfy the essentials of a binding precedent, the Court should directly be concern~d with such issue. F There should be an issue which should be concluded by appropriate reasoning to give it colour of a binding precedent. [Para 18] [374-D] Andhra Bank v. Official Liquidator (2005) 5 SCC 75 : 2005 (2) SCR 776 - relied on. G UCO Bank v. Official Liquidator, High Court, Bombay and Anr. (1994) 5 SCC 1: 1994 (1) Suppl. SCR 294 A.P. Financial Corporation v. Official liquidator (2000) 7 SCC 291: 2000 (2) Suppl. SCR 288 - referred to. H A B c D 354 SUPREME COURT REPORTS [2012] 13 S.C.R. Case Law Reference: In the Judgment of A.K. Patnaik, J: 2000 (2) SCR 1102 Referred to Para 13 2005 (2) SCR 776 Referred to Para 14 In the Judgment of Swatanter Kumar, J: 2005 (2) SCR 776 Relied on Para 14, 15, 19 2000 (2) SCR 1102 Held inapplicable Para 17 1994 (1) Suppl. SCR 294 Referred to Para 22 2000 (2) Suppl. SCR 288 Referred to Para 22 2006 (1) Suppl. SCR 52a Relied on Para 28 CIVIL APPELLATE JURISDICTION : Civil Appeal No. 6755 of 2012. From the Judgment andl Order dated 30.09.2010 of the , E High Court of Jharkhand at Ranchi in Company Appeal No. 10 of 2008. Shyam Divan, Harish N. Salve, Parag P. Tripathi, Ramji Srinivasan Braj Kishore Mishra, V.K. Jha, Rajiv Goyal, Vikram Patralekh, Siddharth Arya, Aparna Jha, Unwal K. Jha, Sweety F Sqod, P.K. Verma, :Jyotika Kalra, Amit Anand Tiwari, Amit Wadhwa, Vivek Paul, Sanjay Bhatt, Rabin Majumdar, Annwesha Deb, Vivek Singh, Ashutosh Jha, Deepak Avasthi, Anuj Bhandari for the Appearing Parties. G The Judgments of the Court was delivered by SWATANTER KUMAR, J. 1. Leave granted. H 2. An important question 1of law as to the ambit, scope and the legislative scheme of Sections 529, 529A and 530 of the JITENDRA NATH SINGH v. OFFICIAL LIQUIDATOR & 355 ORS. [SWATANTER KUMAR, J.] Companies Act, 1956 (for short; 'the Act') arises in the present A case. 3. According to the appellant, on the true construction of these provisions, workmen have a preferential claim over all others including the secured creditors, in the matter of payment B of dues out of the funds realized from sale of assets of the company in liquidation. It will particularly hold true when such assets are not mortgaged in favour of secured creditors of the company in liquidation. The secured creditors, therefore, have no charge on such unsecured assets as also no consequential, preferential or even pari passu claim over the sale proceeds C derived from these assets of the company. To the contra, the contention on behalf of the respondents is that the debts of the secured creditors would rank pari passu with that of the workmen as regards those dues of the secured creditors as could not be realised from the sale of secured assets, for the D reason that they have relinquished their security to the extent of workmen's dues in terms of Section 529(1) of the Act. In support of their respective contentions, the appellant has relied upon the judgment of this Court in the case of Allahabad Bank v. Canara Bank and Another [(2000) 4 SCC 406], while the respondents E have placed heavy reliance upon the judgment of this Court in the case of UCO Bank v. Official Liquidator, High Court, Bombay & Anr. [(1994) 5 SCC 1]; Andhra Bank v. Official Liquidator [(2005) 5 SCC 75]; and IC/Cl Bank Ltd. V. Sidco Leathers Ltd. and Others [(2006) 10 SCC 452]. As both the F parties to the present lis have relied upon the different decisions of this Court, this Court is now called upon to state the correct exposition of law in view of the divergent views stated in the afore-referred judgments. 4. I may, at the very outset, refer in brief to the facts giving rise to the present appeal. M/s. UMI Special Steels Ltd. (for short, the UMI) is a company incorporated under the provisions G of the Act. It possesses assets at different places throughout India. Out of these assets of the UMI, some were mortgaged to H 356 SUPREME COURT REPORTS [2012] 13 S.C.R. A the banks and financial institutions while others were not, particularly the assets located at Chennai, Pune, Faridabad and Kolkata. Towards the end of the year 2001, the company became sick. It, thereafter, approached the Board for Industrial and Financial Reconstruction (for short, 'the BIFR') for being B declared a sick unit. BIFR, vide its opinion dated 8th March, 2002, opined that UMI should be wound up. On consideration of the opinion of the BIFR, the High Court, vide its order dated 5th August, 2003 passed an order of winding up of UMI and appointed an official liquidator for conducting and completing c the liquidation proceedings. This order of the High Court attained finality. In pursuance of this order, the official liquidator took over all the assets of the company. It is the undisputed position before us that the SASF/IDBI, the main secured creditor of UMI, filed an Original Application before the Debts 0 Recovery Tribunal (ORT) being OA No.72 of2004 for recovery of its debts aggregating to Rs.63.34 crore as on 31st January, 2004. Upon this application, the ORT issued notice on 5th July, 2004 and since then, the matter is pending before the ORT without any further proceedings. E 5. In the meanwhile, the official liquidator invited claims from all the secured creditors and amongst others, the IDBI also filed its claim on 30th July, 2006. The admitted claim of the secured creditors was Rs.1,60,08,43,739/- while that of the workmen was Rs.16,38,44, 741.25. It is also not disputed F before us that the secured assets of the company were sold separately and a separate account thereof was maintained. Similarly, the unsecured assets were sold separately by the fficial liquidator, for which again a separate account was maintained. The total sale proceeds from the secured assets G were Rs. 108.90 crore, out of which a sum of Rs.93,64,93,586/ - was distributed amongst the secured creditors and an amount of Rs.8, 19,22,371.12 had been paid to the workmen. The Ci)fficial Liquidator sold the unsecured properties of the Company for a total sum of Rs.8.51 crores. This included the H JITENDRA NATH SINGH v. OFFICIAL LIQUIDATOR & 357 ORS. [SWATANTER KUMAR, J.] assets located at different places, which were not mortgaged A to any bank or financial institution. The dispute between the parties primarily relates to distribution of this sum of Rs. 8.51 crores. According to the workmen their entire remaining claim of Rs. 8.19 crores and odd should be satisfied in preference to all other claimants, in terms of Section 529A of the Act. B However, it is contended on behalf of the secured creditors that they have a pari passu charge even on the sale proceeds of the unsecured assets in terms of the statutory provisions and more particularly , in view of the fact that they had given up their security in favour of the workmen to the extent of c Rs.8, 19,22,371.12. It is only upon such satisfaction that the sale proceeds can be distributed amongst ot-her creditors in accordance with law. The notice of the O.A. filed by the secured creditors was also issued to the Official Liquidator. 6. One of the workmen, Jitendra Nath Singh, the appellant D in the present appeal, filed an application being I.A. No. 1511/ 2008 in Company Petition No. 2/2002 praying that the sale proceeds from the unsecured assets should first be distributed to the workmen. This IA was rejected by the Company Court vide order dated 28th November, 2008. Against this order, E Company Appeal No.10 of 2008 was filed by the workmen before the High Court. Three other workmen also filed an application praying that 50 per cent of their verified claim. in respect of wages be paid to them by the official liquidator. The Company Court passed an interim order in Company Appeal F No.10 of 2008 dated 24th April, 2009 directing that money be distributed by the official liquidator only after obtaining permission of the Court. In view of this order, the Company Court rejected the claim of the three workmen vide its Order dated 16th April, 2010. Being aggrieved, these three workmen G filed Company Appeal No.1 of 2010 before the High Court. 7. Both these appeals were dismissed by the High Court by a common judgment dated 30th September, 2010. Being dissatisfied with the judgment of the High Court, the workman H 358 SUPREME COURT REPORTS [2012] 13 S.C.R. A Jitendra Nath Singh has preferred the present appeal against the decision in respect of Company Appeal No. 10/2008. 8. In light of the above faicts, the contention of the appellant in the present appeal is that in respect of unsecured assets, 8 the claim of the workmen ranl