Priority in recovering dues from a company that has become non-functional but has not been wound up – Khandelwal Tube Mill Kamgar Sangh Vs. The Government of Maharashtra – Bombay High Court

When a secured creditor takes resort to the provisions of Section 13 of the Act of 2002 he can take recourse to the measures prescribed under Section 13(4) thereof. After taking such action and after all costs, charges and expenses that have been incurred by the secured creditor are received by it, in absence of any contract to the contrary the amounts received are to be held in trust for being applied firstly to the payment of such costs, charges and expenses and thereafter in discharge of the dues of the secured creditor. The residue of the money so received is to be paid to the person entitled thereto in accordance with his rights and interest. Admittedly in the present case the Secured Creditor has not taken recourse to the measures prescribed by Section 13(4) and therefore there would be no occasion for the contingency as prescribed under Section 13(7) of the Act of 2002 to operate.

Priority in recovering dues from a company that has become non-functional but has not been wound up – Khandelwal Tube Mill Kamgar Sangh Vs. The Government of Maharashtra – Bombay High Court Read Post »