priority of charges

Tarun Goyal (Querist) 02 May 2009 This query is : Resolved
i would like to know whether in case of winding up of a company the dues of the saletax authorities under section 53 of the M.P commercial act 1994 will have first charge or the dues of the secured creditor will have first charge.

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adv. rajeev ( rajoo ) (Expert) 02 May 2009
certainly govt., dues will have be cleared first, then others.

A V Vishal (Expert) 02 May 2009
Section 530
PREFERENTIAL PAYMENTS.
(1) In a winding up, subject to the provisions of section 529A, there shall be paid in priority to all
other debts -
(a) all revenues, taxes, cesses and rates due from the company to the Central or a State
Government or to a local authority at the relevant date as defined in clause (c) of sub-section (8),
and having become due and payable within the twelve months next before that date;
(b) 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 employee, in respect of services rendered to the
company and due for a period not exceeding four months within the twelve months next before
the relevant date, subject to the limit specified in sub-section (2) ;
(c) all accrued holiday remuneration becoming payable to any employee, 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 or resolution;
(d) unless the company is being wound up voluntarily merely for the purposes of reconstruction or
of amalgamation with another company, all amounts due, in respect of contributions payable
during the twelve months next before the relevant date, by the company as the employer of any
persons, under the Employees' State Insurance Act, 1948 (34 of 1948), or any other law for the
time being in force;
(e) unless the company is being wound up voluntarily merely for the purposes of reconstruction or
of amalgamation with another company, or unless the company has, at the commencement of the
winding up, under such a contract with insurers as is mentioned in section 14 885 of the
Workmen's Compensation Act, 1923 (8 of 1923), rights capable of being transferred to and
vested in the workman, all amounts due in respect of any compensation or liability for
compensation under the said Act in respect of the death or disablement of any employee of the
company;
(f) all sums due to any employee from a provident fund, a pension fund, a gratuity fund or any
other fund for the welfare of the employees, maintained by the company, and
(g) the expenses of any investigation held in pursuance of section 235 or 237, in so far as they
are payable by the company.