ORAL JUDGMENT VIJAY MANOHAR SAHAI 1. We have heard Ms. Manisha Lavkumar learned 2. The learned advocate for the appellant hasurged that since the appellant was secured creditor and the amount has already been disbursed to the secured creditor on 5.8.2008,therefore, after expiry of 12 months period as per section 530(1)(a) of the Act, no amount canbe recovered from the appellant beyond the period of 12 months and the directions given by the learned Single Judge for refunding the amount of Rs. 4,52,398/-for payment of tax dues by the Official Liquidator, is illegal and is liable to be set aside. On the other hand, Mr. Gaurang H.Bhatt learned advocate for the Official Liquidator has urged that in view of the written undertaking given by the appellant before withdrawing the amount on 5.8.2008, the appellant advocate for the appellant and Mr. Gaurang H. Bhatt learned advocate for the Official Liquidator. is under legal duty to refund the amount so thatthe tax liability of the Company could be paid. 3. The learned advocate for the appellant has placed reliance on section 529A and section 530(1)(a) of the Companies Act, which are reproduced herein below: [Overriding preferential payments. 529A.(1) 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 to 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.] Preferential payments. 530. (1) In a winding up, [subject to the provisions of section 529A,] there shall be paid in prior 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; 4. The learned advocate for the appellant has placed reliance on the decision of the Hon’ble Apex Court in the case of Rajratha Naranbhai Mills Co. Lt. The learned advocate for the appellant has placed reliance on the decision of the Hon’ble Apex Court in the case of Rajratha Naranbhai Mills Co. Lt. vs. Sales Tax Officer, Petlad, reported in (1991)3 SCC 283 , wherein, in para-13, the Hon’ble Apex Court has held as under: 13..... To put it in simpler words, the State has a priority over debts, liability and obligation of which was born within the time frame of those twelve months and as such due and becoming due and payable within those twelve months next before the relevant date, ascertainable if necessary later, if not already ascertained. We are of the respectful agreement with the interpretation put by the Court of Appeal to Section 264 of the English Companies Act in Airedale Garage case, analogous as it is to the provision in hand, warranting the same interpretation; more so when any other interpretation would lead to the results feared by the Company Law Committee extracted above. In such view of the matter, we need not elaborately comment, discuss or demolish, sentence by sentence, the reasoning given by the Single Bench as also the Division Bench of the High Court towards interpreting the provision. The words ‘having become due and payable within 12 months next before the relevant date’ need be understood to meaning putting a restriction or cordoning off the amount for which priority is claimable and not in respect of each and every debt on account of taxes, rates and cesses etc. which may be outstanding at that time and payable. And further that such priority is in respect only of debts those of which become due and payable because the liability to those is rooted, founded and belonging to that period of twelve months prior to the relevant date and none other; both the conditions existing.” 5. The Hon’ble Apex Court after making the aforesaid observation directed the liquidator in paragraph 14 of the decision “to re-examine the claim for priority in accordance with the interpretation of the provision put by us, that is to say, he must first ascertain as to whether the liability to sales tax belongs to and is founded within the period of 12 months next before June 26, 1967, and as such due and payable but preserving, however, the order of the Division Bench in relation to the view it has taken about penalties.” 6. The learned advocate for the appellant has also placed reliance on a Single Judge decision of the Bombay High Court in the case of Syndicate Bank vs. Official Liquidator, Wester Works Engineers Ltd. And Ors, reported in 1999 Company Cases [Vol. 98] 487, wherein, it has been held as under: “Therefore, it is clear that the priority of the State is qua unsecured creditors and not qua secured creditors. Having said so, the first contention of the applicants must be accepted that the common law doctrine which has been recognised in India and saved is that the claims of the Crown prevail over the claims of unsecured creditors and not over secured creditors. That brings us to the second and third questions, viz., whether section 178 of the Income Tax Act has made any difference and/or it prevails over the provisions of section 529A of the Companies Act. It was sought to be contended on behalf of the deputy official liquidator that considering the judgment in Imperial Chit Funds (p.) Ltd. vs. ITO [1996] 86 Comp Cas 555 (SC), the income-tax dues under section 178 of the Income-Tax Act will prevail over the rights of the secured creditors. The question whether the claims of income-tax dues, have preference over claims of secured creditors was not at all in issue. If section 529A is considered it is clear that it has an overriding effect. Section 529A was brought in by an amendment and was inserted in the Companies Act by Act of 1985. The section 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 to the extent such debts rank under clause(c) of the provisions of sub-section (1) of section 529 pari passu with such dues shall be paid in priority over all other debts. Once having so held, it is now clear that both under the general law as well as under the provisions of the Companies Act read with the provisions of the Income-tax Act the rights of secured creditors and workers as set out under section 529A would override the claims of tax authorities in respect of an order made under section 178 of the Income-tax Act. Having said so, the objections raised on behalf of the official liquidator must be rejected. 7. Having said so, the objections raised on behalf of the official liquidator must be rejected. 7. The learned advocate for the appellant has also placed reliance on the decision of the learned Single Judge of Kerala High Court in the case of Re Ktc Tyres (India) Ltd. vs. Unkown, reported in 2002 TAXMAN 899 (Kerala), wherein, it has been held in para-7 as under: “Claim of secured creditors has not been overridden by section 520 which is subject to rights of secured creditors. The right of secured creditors are safeguarded by section 529A by employing a non obstante clause.” 8. It has been held in the aforesaid case-law that secured creditor would have a preferential right over and above the dues of the tax authority and the rights of the secured creditors are amply protected under section 529A by enacting a non obstante clause, which could not be taken away by applying sec. 530(1)(a) which is available only in the case of unsecured creditors. After the expiry of 12 months period from the relevant date, that is to say that in this case 29.11.2001 which is the date of winding up and the date of making the payment, therefore, the dues for a period of 12 months with effect from the date of winding up and the dues cannot be calculated subsequent to the 12 months of the date of windings up. 9. The argument of learned advocate Mr. Gaurang H. Bhatt for the respondents that the disbursement made to the appellant of Rs. 1,11,00,000/-on 5.8.2008 was in pursuance to an interim order, but the balance amount was to be calculated which was the difference on the decision as to ratio. It was not that the Company Court has directed vide order dated 5.8.2008 that if any tax amount is to be payable, then the appellant shall refund the amount back. The undertaking given by the appellant on 9.8.2008 reads as under: “I, D.A. Pathak, Occupation-service working as Deputy Manager of State Bank of India. Stressed Assets Management Branch, Ahmedabad. The applicant do hereby file this solemn undertaking in compliance of directions issued by the Hon’ble Court vide an order order dated 5.8.2008 (Coram: Hon’ble Mr. Justice C.K. Buch) passed in above numbered company application. The Hon’ble Court has directed the Official Liquidator to give an amount of Rs. Stressed Assets Management Branch, Ahmedabad. The applicant do hereby file this solemn undertaking in compliance of directions issued by the Hon’ble Court vide an order order dated 5.8.2008 (Coram: Hon’ble Mr. Justice C.K. Buch) passed in above numbered company application. The Hon’ble Court has directed the Official Liquidator to give an amount of Rs. 1,11,00,000/- (Rupees One Crore Eleven Lac only) as full and final settlement to be paid to the Applicant Bank. The applicant undertakes that if any claim is lodged by the workers and any amount is found to be payable to them, the said amount received from the Official Liquidator will be repaid to the official Liquidator with interest at prevailing bank rate as soon as ordered by the Hon’ble Court. Solemnly affirmed at Ahmedabad, on 9th day of August, 2008.” 10. It is not disputed by learned advocate Mr. Gaurang H. Bhatt for the Official Liquidator that the appellant is a secured creditor. We, therefore, hold that once the appellant is secured creditor and after the sale of assets of the company, the amount of Rs. 1,11,00,000/- having been paid to the appellant out of the sale proceeds towards their dues, it is not open to the respondents to direct the appellant to refund a certain amount so that the amount can be paid towards the tax liability of the company in liquidation. 11. For the aforesaid reasons, this appeal is allowed. The order passed by the learned Single Judge dated 8.12.2011 in OLR No. 167/2011 cannot be maintained and is hereby set aside. The parties shall bear their own costs.