JUDGMENT 1. - These three connected appeals are disposed of by this common judgment. 2. The facts of Special Appeal No. 32/2004 arising out of S.B. Misc. Company Application No. 162/2003 in S.B. Company Petition No. 10/1991, Rajasthan Financial Corporation v. The Official Liquidator of M/s. Machhar Textile Mills (P) Ltd. are noted hereunder. 3. The Rajasthan Financial Corporation, Jaipur, filed a Company Application No. 162 of 2003 under Section 446(2), 446(d) of the Companies Act, 1956 and R. 9 of the Company (Court) Rules, 1959, before the learned Company Judge with a prayer to confirm the sale price of Rs. 8,00,000/- for 1 plant and machinery on cash down basis. The said plant and machinery belonged to Company M/s. Machhar Textile Mills (P) Ltd. in winding up. While confirming the sale made of the plant and machinery for Rs. 8,00,000/-, the learned Company Judge directed the Rajasthan Financial Corporation (for short the RFC") to deposit a sum of Rs. 2,00,000/- out of the sale proceeds 1 Rs. 8,00,000/- with the Official Liquidator for meeting the necessary expenses for winding up proceedings of the Company (in liquidation). The RFC was permitted to keep the balance amount of the sale proceeds subject to the liability of making good the preferential claim of income tax and sales tax as and when raised and decided as well as the pari passu charge of the workmen under sections 529 and 529-A of the Companies Act, 1956 and to this extent the RFC was directed to file undertaking in the court. The learned Company Judge further directed that as and when any further sum is required by the Official Liquidator for expenses of the winding up proceedings of the Company (in liquidation), such amount would be made available by the applicant RFC, Jaipur. 4. Being aggrieved by the said order of the learned Single Judge, the present appeal has been filed by the Rajasthan Financial Corporation. The other two appeals are also of the same nature. 5. We have heard the learned counsel for the appellant and the Official Liquidator and also perused the record. 6. 4. Being aggrieved by the said order of the learned Single Judge, the present appeal has been filed by the Rajasthan Financial Corporation. The other two appeals are also of the same nature. 5. We have heard the learned counsel for the appellant and the Official Liquidator and also perused the record. 6. Shri R.N. Mathur, learned counsel appearing for the RFC, candidly submitted that the appellant RFC may not have any objection for meeting the pari passu charge of the workmen and other secured creditors in accordance with the provisions of sections 529 and 529-A of the Companies Act, but the fact is that there are no existing claims of the workmen pending with the Official Liquidator and also no claims of any secured creditors having pari passu charge over the assets mortgaged with the RFC have not been filed and filed by the Official Liquidator and, therefore, the RFC being a secured creditor who was granted leave to remain due of winding up proceedings cannot be made to part with the portion of the sale proceeds of the plant and machinery for meeting expenses to be incurred by the Official Liquidator or the claim of the other secured creditors. 7. On the other hand, Shri G.K. Garg, learned counsel appearing for the Official Liquidator, supported the order of the learned Single Judge and submitted that for meeting the expenses in relation to the Company (in liquidation) for which winding up orders have been passed by the Company Judge, the RFC is bound to meet such expenses out of the sale proceeds and, therefore, there is nothing wrong in the learned Company Judge directing the RFC to deposit a part of such sale proceeds with the Official Liquidator and further undertaking to pay balance amount as and when such occasion arises. 8. We are of the opinion that for the reasons stated herein the present appeals must fail. Sections 529 and 529-A of the Companies Act, 1956 are reproduced herein below to the extent it is necessary for deciding the controversy in hand: 529. 8. We are of the opinion that for the reasons stated herein the present appeals must fail. Sections 529 and 529-A of the Companies Act, 1956 are reproduced herein below to the extent it is necessary for deciding the controversy in hand: 529. Application of insolvency rules in winding up of insolvent companies : (1) In the winding up to an insolvent company, the same rules shall prevail and be observed with regard to : (a) debts provable; (b) the valuation of annuities and future and contingent liabilities; and (c) the respective rights of secured and unsecured creditors; as are in force for the time being under the law of insolvency with respect to the estates of persons adjudged insolvent; Provided that the security of every secured creditor shall be deemed to be subject to a pari passu charge in favour of the workmen to the extent of the workmen's portion therein, and, where a secured creditor, instead of relinquishing his security and proving his debt, opts to realise his security - (a) the liquidator shall be entitled to represent the workmen and enforce such charge; (b) any amount realised by the liquidator by way of enforcement of such charge shall be applied rate ably for the discharge of workmen's dues; and (c) so much of the debt due to such secured creditor as could not be realised by him by virtue of tie foregoing provisions of this proviso or the amount of the workmen's portion in his security whichever is less, shall rank pari passu with the workmen's due for the purposes of section 529-A. (2) All persons who in any such case would be entitled to prove for and receive dividends out of the assets of the company, may come in under the winding up, and make such claims against the company as they respectively are entitled to make by virtue of this section: Provided that if a secured creditor instead of relinquishing his security and proving for his debt proceeds to realise his security, he shall be liable to (pay his portion of the expenses) incurred by the liquidator (including a provisional liquidator, if any) for the preservation of the security before its realisation by the secured creditor). (Explanation. (Explanation. - For the purposes of this proviso, the portion of expenses incurred by the liquidator for the preservation of a security which the secured creditor shall be liable to pay shall be the whole of the expenses less an amount which bears to such expenses the same proportion as the workmen's portion in relation to the security bears to the value of the security). (3) ......... (a) ......... (b) ......... (iii) ....... (iv) ........ (c) ........ (ii) ........ 529A. Overriding preferential payment. - Notwithstanding anything contained in any other provision of this Act or any other law for the time being in force, in the winding up of a company : (a) workmen's dues; and (b) debts due to secured creditors to the extent such debts rank under clause (c) of the proviso to sub-section (1) of section 529 pari passu with such dues, shall be paid in priority in all other debts. (2) The debts payable under clause (a) and clause (b) of sub-section (1) shall be paid in full, unless the assets are insufficient to meet them, in which case they shall abate in equal proportions. 9. From a perusal of the aforesaid provisions of section 529, particularly the proviso to sub-section (2) of the said section, it is clear that secured creditor who can choose to realise the security on its own by remaining due of winding up proceedings, also cannot deny his liability to bear the expenditure incurred by the Official Liquidator in connection with the Company (in liquidation), for the preservation of the security. The amendment by Act No. 35 of 1985 by way of substituting the words "pay his portion of expenses" instead of words "pay the expenses" w.e.f. 24.5.1985 also indicates that at least the secured creditor is bound to pay his portion of the expenses. Rule 292 of the Companies (Court) Rules, 1959 is also reproduced hereunder: "292. The amendment by Act No. 35 of 1985 by way of substituting the words "pay his portion of expenses" instead of words "pay the expenses" w.e.f. 24.5.1985 also indicates that at least the secured creditor is bound to pay his portion of the expenses. Rule 292 of the Companies (Court) Rules, 1959 is also reproduced hereunder: "292. Where the company has no available assets.-Where a company against which a winding up order has been made has no available assets, the Official Liquidator may with the leave of the Court, incur any necessary expenses in connection with the winding up out of any permanent advance or other fund to be held by the Central Government, and the expenses so incurred shall be recouped out of the assets of the company in priority to the debts of the company: Provided that where any money has been advanced to the Official Liquidator by the petitioning or other creditor or contributory for meeting any preliminary expenses in connection with the winding up, the Official Liquidator may incur any necessary expenses out of such amount, and the money so advanced shall be paid out of the assets of the company in priority to the debts of the company." 10. The Bombay High Court Division Bench in the case of Maharashtra State Financial Corporation & Anr. v. Official Liquidator, High Court, Bombay, (1995 (Vol. 82) Comp. Cases 342 (Bom.) held that section 529 and 529A of the Companies Act do not take away the right of secured creditors to stand outside the winding up and exercise their power of sale without the intervention of the court, but by creating a pari passu charge in favour of the workmen, these sections do affect the right of a mortgagee to sell the security directly by himself. The mortgagee, i.e., the secured creditor, is required to join the pari passu charge holder in the sale. He cannot sell the property ignoring the pari passu charge holder. Therefore, the secured creditor as well as the official liquidator as the representative of the workmen, must join in the sale. The court further held that there is no inconsistency between the provision of section 29 of the State Financial Corporations Act and section 529 of the Companies Act. Section 29 of the State Financial Corporations Act merely confers certain powers on the mortgagee. The court further held that there is no inconsistency between the provision of section 29 of the State Financial Corporations Act and section 529 of the Companies Act. Section 29 of the State Financial Corporations Act merely confers certain powers on the mortgagee. It does not cover a situation where there is a pari passu charge holder, therefore, the power to sell which is given to a financial corporation under section 29 of the State Financial Corporations Act has to be exercised consistently with the right of a pari passu charge holder. Such a right can be exercised with the consent of the pari passu charge holder or on orders of the court after making him a party to the proceedings to enforce the security. 11. The Apex Court in the case of International Coach Builders Ltd. v. Karnataka State Financial Corporation, AIR 2003 SC 2012 held that the right of the State Financial Corporation under Section 29 of the State Financial Corporations Act (SFC Act) to sell and realise the security cannot be exercised without reference to the Company Court when a winding up order is made against the company. The moment a winding up order is made in respect of a debtor company, the provisions of sections 529 and 529A come into play and whatever superior rights had been ensured to SFCs under the provisions of the SFC Act get subjected to and operate only in conjunction with the special rights given to the workmen, who as pari passu charge holders are represented by the official liquidator. The unhindered right hitherto available to the SFCs to realise their security, without recourse to the Court, no longer holds true as the right vested in the official liquidator is a statutory impediment to such exercise and has to be reckoned with. And since the Official Liquidator can do nothing without the leave or concurrence of the Court, all necessary applications must, therefore, come to the Company Court. 12. There is no conflict between Section 29 of the SFC Act and the Companies Act at all, since the rights under Section 29 were not intended to operate in the situation of winding up of a company. 12. There is no conflict between Section 29 of the SFC Act and the Companies Act at all, since the rights under Section 29 were not intended to operate in the situation of winding up of a company. Even 'assuming to the contrary, if a conflict arises, Section 29 of the SFC Act cannot override the provisions of Section 529(1) and 529A of the Companies Act, 1956, inasmuch as the SFCs cannot exercise the right under Section 29 ignoring a pari passu charge of the workmen. 13. The rights of the pari passu charge holders would run equally, temporarily and potently with the rights of the secured creditors. The Official Liquidator, as the representative of the workmen, to enforce such pari passu charge would have right of representing the workmen equally with the rights of the secured creditors. Though the charge by itself may not amount to mortgage, all the provisions which apply to a simple mortgage, so far as may be, apply to a charge. Thus, the Official Liquidator, as the representative of the workmen's pari passu charge, would be in the position of a co-mortgagee. The existence of the pari passu charge holder being represented by the Official Liquidator would necessarily bring in supervision of the Company Court as the Official Liquidator cannot act without directions from and supervision of the Company Court. The statutory right of the SFCs to sell the property under Section 29 of the SFC Act is now subject to the provisions of Section 529 and Section 529A of the Companies Act. The statutory right to sell the property under section 29 of the SFC Act has now to be exercised in randem with the rights of pari passu charge in favour of the workmen created by the proviso to section 529 of the Companies Act. 14. The Hon'ble Supreme Court in an earlier case of M/s. J.K. (Bombay) Private Ltd. v. M/s. New Kaiser-I-Hind Spinning and Weaving Co. Ltd. & Ors., AIR 1970 SC 1041 held as under: "The effect of a winding up order is that except for certain preferential payments provided in the Act the property of the company is to be applied in satisfaction of its liabilities pari passu. Pari passu distribution is to be made in satisfaction of the liabilities as they exist at the commencement of the winding up. Pari passu distribution is to be made in satisfaction of the liabilities as they exist at the commencement of the winding up. On a winding up order the undertaking and the assets of the company pass under the control of the liquidator whose statutory duty is to realise them and to pay from out of the sale proceeds its creditors. Such creditors acquire on such order being passed the right to have the assets realised and distributed among them pari passu. No new rights can thereafter be crated and no incompletely rights can be completed, for, doing so would be contrary to the creditors' right to have the proceeds of the assets distributed among them pari passu." 15. The Andhra Pradesh High Court Division Bench in the case of Andhra Pradesh State Financial Corporation v. Southern Transformers & Electricals Ltd. (in liquidation) & Ors., 2000 Vol. 100 Comp. Cases 794 (A.R) upon a reference by BIFR under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985, while dealing with the controversy as to whether the secured creditor standing outside winding up the court may direct it to incur expenses for advertisement of the winding up petition upon such recommendation of BIFR, held that such secured creditor was not liable to deposit the advertisement costs and initial expenses of the official liquidator merely because he is a secured creditor and the secured creditor would be only bound to reimburse the Official Liquidator for the expenses incurred by him in connection with or for the purpose of maintenance and preservation of the security. It may be stated here that the said case before the A.P. High Court arose in different circumstances and though in cases coming from BIFR, the court held that the secured creditor would not bound to pay advertisement costs, yet the court held that such secured creditor would be bound to reimburse the expenses incurred by the official Liquidator in connection with the winding up proceedings in connection with or for the purpose of maintenance and preservation of the security. 16. The Punjab & Haryana High Court in the case of Punjab United Forge Ltd. (In liquidation) v. Punjab Financial Corporation and Others, 1993 Vol. 16. The Punjab & Haryana High Court in the case of Punjab United Forge Ltd. (In liquidation) v. Punjab Financial Corporation and Others, 1993 Vol. 76 Company Cases 660 (Per V.K. Bali, J.) held that under the proviso to sub-section (2) of section 529 of the Companies Act, 1956, a direction can be issued to the concerned secured creditors who choose to remain outside the winding up and who do not relinquish their securities, to contribute towards the maintenance and safe keeping of their securities as they are the ultimate beneficiaries and, in fact, that is precisely the legislative intention underlying the enactment of the proviso. The secured creditors are liable to share the running expenses that may be required to preserve the property. 17. It may be stated here that by the order of the learned Single Judge impugned in appeal before us, the learned Single Judge has only directed the appellant RFC to -deposit the portion of the sale proceeds of Rs. 8,00,000/- with the Official Liquidator towards meeting the expenses of the winding up which will be incurred during the course of winding up. There is no denial of the legal position of the equal right of the pari passu charge holder a too to share such sale proceeds by one of the secured creditors' realisation the sale proceeds upon sale of the security. If other security and assets of the company are also available, naturally, the other security holders or the Official Liquidator as the case may be, will realise such security and will distribute the proceed in accordance with the provisions of the Companies Act. In view of the fact that there is no legal prohibition against the Official Liquidator to claim the part of such expenses from the secured creditor who remains out of winding up proceedings and chooses to realise his own security, is sufficient to dismiss the present appeals. The Official Liquidator will naturally maintain separate account of expenses to be incurred by him in connection with the Company (in liquidation) as also the account of other realisations from the sale of assets of the Company and distribution of such sale proceeds, therefore, in ultimate analysis, if any, surplus is left out on the portion directed to be deposited with the Official Liquidator, that would go back to the Rajasthan Financial Corporation. But at this stage, the learned Single Judge cannot be said to have committed any error of law in directing the RFC to deposit a sum of Rs. 2,00,000/- out of the sale proceed of Rs. 8,00,000/- upon the sale of plant and machinery of the Company (in liquidation). 18. We are, therefore, of the considered opinion that the present appeals filed by the Rajasthan Financial Corporation have no force and the same are hereby dismissed. No order as to costs.Special appeal dismissed. *******