Order of Priority. Thus, the order of priority in paying off debts in a winding-up shall be as follows:

4. Amount Due in Respect of Contribution under ESI Act. All amounts due in respect of contributions payable during the twelve months before the winding-up under the Employees' State Insurance Act, 1948 or any other law.
5. Amount Due under Workmen's Compensation Act. All amounts due in respect of any compensation or liability for compensation under the Workmen's Compensation Act, 1923 in respect of death or disablement of any employee of the company.
Retrenchment and lay-off compensation payable under the Workmen's Compensation Act shall, however, not qualify for preferential payment.
6. Sums Due on Account of PF, etc. 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.
7. Expenses of Investigation. The expenses of any investigation held in pursuance of Section 235 or 237 in so far as they are payable by the company.
Advances made by a third person to pay wages or salary of an employee or holiday remuneration to him or to any other person on his death, shall have the same right of priority in winding-up, up to the amount by which the employee or other person in his own right would have been entitled to [Section 530(4)]. .
The aforesaid claims mentioned under (1) to (7) shall rank pari passu, i.e., equally amongst themselves. In case assets are not sufficient to meet them fully, they shall abate (i.e., reduced) in equal proportion [Section 530(5) (a) ].
Where the assets of the company available for payment of general creditors are insufficient to meet them, +he aforesaid debts shall have priority over the claim of holders of debentures under any floating charge created by the company, and be paid accordingly out of any property comprised in or subject to that charge [Section 530(5)(b)].
Order of Priority. Thus, the order of priority in paying off debts in a winding-up shall be as follows:
(i) Workmen's dues and debts due to secured creditors; (ii) Costs and expenses of winding-up; (iii) Preferential debts; (iv) Floating charge; and (v) Unsecured creditors.
The question of the claims of tax dues vis-a-vis secured creditors and workers dues was examined in detail by the Bombay High Court in Wester Works Engineer Ltd. Vs. Official Liquidator [1999] 20 SCL 210 (Born.). The Court in this case held that the priority of the State is qua (against) unsecured creditors and not qua secured creditors. Section 529 A, the court observed, makes it clear that notwithstanding anything contained in other provisions of the Act or any other law for the time being in force, dues of workers. and debts due to the secured creditors shall be paid in priority over all other debts. Section 529 A overrides the provisions of Section 178 of the Income Tax Act.

Q 26. What is meant by Fraudulent Preference? Explain briefly the effects of such a fraudulent preference in the event of a company being wound-up.