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Preferential Creditors

soumyakanta sahoo (2 Points)

29 November 2018

what is preferential creditors?

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prasad Nilugal ( GST Practitioner & Accounts ) (14916 Points)
Replied 29 November 2018

When busniess goes bankcrupt , preferential creditors has the right to be paid before other , These creditors will be 1st in the line .

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Shrikant (Associate) (350 Points)
Replied 03 December 2018

Agreed to the answers given by Mr. Nilugal and Mr. Surana.

However, 'Preferential Creditors' was term in old English Bankruptcy Law. Under the Section 326 (Overriding Preferential Payments.) and Section 327 (Preferential Payments) of the Companies Act, 2013 has provided as to which creditors of the Company and the sequence as to who will get paid in priority in a case when Company becomes insolvent or bankrupt and admitted to the National Company Law Tribunal under the Insolvency and Bankruptcy Code, 2016 for the same.

Reproduction of some part of the Section 326 of the Companies Act, 2013 for your reference.

In the winding up of a company under this Act, the following debts shall be paid in priority to all other debts:—

(a) workmen's dues; and

(b) where a secured creditor has realised a secured asset, so much of the debts due to such secured creditor as could not be realised by him or the amount of the workmen's portion in his security (if payable under the law), whichever is

less, pari passu with the workmen's dues:

For the further information, kindly let us know.

Thank You.