OVERRIDING PREFERENTIAL PAYMENTS

The Companies (Amendment) Act, 1985 has introduced section 529A which states that certain dues are to be settled in the case of winding up of a company even before the payments to preferential creditors under section 530. Section 529A states that in the event of winding up a company workmen’s dues and debts due to secured creditors, to the extent such debts rank under section 529(1)(c), shall be paid in priority to all other debts. The workmen’s dues and debts to secured creditors shall be paid in full, unless the assets are insufficient to meet them, in which case they shall abate in equal proportions. It may be noted here that workmen’s dues, in relation to a company, means the aggregate of the following sums:
(i) all wages or salary including wages payable for time or piece work and salary earned wholly or in part by way of commission of any workman and any compensation payable to any workman under any of the provisions of the Industrial Disputes Act, 1947; (ii) all accrued holiday remuneration becoming payable to any workman or in the case of his death to any other person in his right, on the termination of his employment before, or by the effect of, the winding up order; (iii) all amounts due in respect of any compensation or liability for compensation under Workmen’s Compensation Act, 1923 in respect of death or disablement of any workman of the company; (iv) all sums due to any workman from a provident fund, a pension fund, a gratuity fund or any other fund for the welfare of the workmen maintained by the company.