Section 529 of the Act contains an illustration on how to assess workmen's dues

Section 529 of the Act contains an illustration on how to assess workmen's dues
as against secured creditors. This is as under:
(i) Value of the security held by secured creditors - Rs. 1lakh;
(ii) Dues of the workers - Rs. 1lakh;
(iii) Amount due to secured creditors - Rs. 3lakhs;
(iv) Aggregate claim under (ii) & (iii) - Rs. 4lakhs;
(v) The pari passu share then will be 1 : 3 for workmen and secured creditors
respectively in the amount of Rs. 1lakh, the value of the security.
The aforesaid debts shall be paid in preference to all other debts in the winding-up of a company and shall be paid in full unless the assets of the company are not sufficient to meet them, in which case they shall be reduced in equal proportions.
A secured creditor who was holding a decree against the company was not compelled to stay realisation just only because certain workers who were entitled to pari passu participation had not yet finalised their claims. [Auckland Holdings Ltd. Vs. Shree Ambica Jute Mills Ltd. [1994] 2 Compo 1.J. 83 (Ca1.)]. Workers who have been re-employed and have not lost their jobs because the company was sold as a going concern are not entitled to a pari passu distribution with'secured creditors. They cannot prevent decree-holder creditors from realising their security. The purpose of section 529A is to provide a special cushion for relieving workers of the distress caused by total displacement. Re-employed workmen would rank as ordinary creditors [Abdul Hanif Vs. Shree Ambica Jute Mills Ltd. [1994] 2 Compo 1.J. 86 (Ca1.)].
Section 530 - On Preferential Payments
Order of priority, subject to Section 529A is given hereunder:
1. All Revenues, Taxes, Cesses and Rates due to the Central or a State Government or to a Local Authority. The amount. should have become due and payable within twelve months before the winding-up order.
2. Wages or Salary of any Employee. All wages or salary of any employee in respect of services rendered to the company and due for a period not exceeding four months during the twelve months preceding the winding-up. The amount shall not exceed such amount as may be specified bYlthe Central Government, presently, Rs. 20,000 for anyone claimant.
The following points may be noted in this regard: (a) Ex gratia payments to employees are not entitled to priority [Vijay Cardboard
Co. Ltd. Vs. Collector, Hyderabad District AIR 1957 A.P.].
(b) The expression 'wages' shall include bonus, wages accrued and due during a
period of illegal lockout [Official Liquidator Vs. M. Chandra Sekaran (1951) 2
MLT 185].
(c) Any advance by a bank to enable the company to pay wages to workmen shall
rank in priority in the same manner as the wages of the workmen [Rampgill
Mill (1967) 1 Compo 1.J. 262].

3. Secured Holiday Remuneration. All secured holiday remuneration becoming payable to .an employee on the termination of his employment before or by the effect of the winding-up.