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

Zenith Textiles Ltd is being wound up by the Tribunal under the Companies Act, 2013. Its liquidator has funds and must decide how to rank the company's unpaid debts. Under the overriding preferential payment provision, which debt is paid in priority to all other debts?

Workmen's dues are paid in priority to all other debts in a winding up under the Companies Act, 2013. The overriding preferential payments provision gives them this rank, so trade creditors, auditors or preference shareholders do not rank ahead of them.

  1. ADues of unsecured trade creditors
  2. BWorkmen's duesCorrect
  3. CFees of the company's statutory auditors
  4. DDues of preference shareholders

Explanation

Section 326(1) provides that in a winding up under the Act, workmen's dues are paid in priority to all other debts, along with the specified secured creditor shortfall pari passu. Trade creditors, auditors and preference shareholders have no such overriding priority under this provision.

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