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CS Professional · Corporate Restructuring, Valuation and Insolvency · Winding-up by Tribunal under the Companies Act, 2013

Ganga Forgings Ltd is in winding up. After paying the sums covered by the proviso to section 326(1) (two-year wages and holiday remuneration) in full, Rs 60 lakh remains. Claims ranking under section 326(1) are workmen's dues of Rs 50 lakh and a secured creditor's shortfall claim of Rs 30 lakh under clause (b), both within the workmen's portion limit. How much do the workmen receive?

The workmen receive Rs 37.5 lakh. The available Rs 60 lakh is less than the combined claims of Rs 80 lakh, so the claims abate in equal proportions, meaning each is paid 75 percent, and 75 percent of Rs 50 lakh is Rs 37.5 lakh.

  1. ARs 50 lakh
  2. BRs 30 lakh
  3. CRs 40 lakh
  4. DRs 37.5 lakhCorrect

Explanation

Under section 326(2), debts under sub-section (1) are paid in full unless assets are insufficient, in which case they abate in equal proportions. Claims total Rs 80 lakh against Rs 60 lakh, so each gets 75%. Workmen receive 0.75 x 50 = Rs 37.5 lakh, and the secured creditor gets Rs 22.5 lakh. An equal split of Rs 30 lakh each ignores proportional abatement.

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