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Accounting for Companies – II

notes Following are few terms related to relevant date:
1. Interest on Liabilities: Interest on liabilities e.g., loan and debentures etc., would depend
on the solvency of the company. If the company is solvent, and there is surplus after paying
the principal amount and interest on the all debts up to the commencement of winding up,
interest on liabilities will be payable up to the date of actual payment. And if the company
is insolvent, interest on liabilities will be payable up to the date of commencement of the
proceeding of winding up.
2. Fraudulent Preference: When one creditor is preferred to another creditor in the matter
of payment of his dues, it is called fraudulent preference. The object of the Act being a
pari passu distribution, Section 531 provides that every transfer of property, movable or
immovable, delivery of goods, payment, execution or any act relating to property, made,
taken or done by or against a company within six months before commencement of its
winding up shall be deemed, in the event of its being wound up, a fraudulent preference
of its creditors and therefore invalid.
3. Voluntary Transfer of Property: Under Section 531A, any voluntary transfer of property
of any kind by a company, otherwise than in the ordinary course of business for valuable
consideration, made within a period of one year before the presentation of a petition for
winding up, or the passing of a resolution for voluntary winding up, is void against the
liquidator.
4. Over Riding Preferential Payments: A new Section 529A has been included in the
Companies Act in 1985. According to this section a new category of preferential payments
known as ‘overriding preferential payment’ is to be settled in priority to other debts under
Section 530. Section 529A of the Companies Amendment Act 1985 states that the following
amounts to the extent such debts rank u/S 529(1)(c) shall be paid in priority to all other
debts:
(a) Workmen’s dues;

(b) Debts due to secured creditors to the extent such debts rank [under clause (c) of the
provision to sub-section (i) of Section 529] pari passu with such dues.
Workmen’s dues mean the total of the following sums due from the company:

(a) All wages or salary including wages payable for time or piece-work and salary earned
wholly or in part by way of commission of any workman and any compensation
payable to any workman under any of the provisions of the Industrial Disputes Act,
1947;
(b) All accrued holiday remuneration becoming payable to any workman on account of
winding up;
(c) Unless the company is being wound up voluntarily merely for the purposes of
reconstruction or of amalgamation with any other company, or unless it has taken
out a workmen’s compensation insurance policy, all amounts due in respect of any
compensation or liability for compensation under Workmen’s Compensation Act,
1923 in respect of death or disablement of any workman of the company;
(d) All sums due to any workman from a provident fund, a pension fund, a gratuity fund
or any other fund for the welfare of the workmen, maintained by the company.

Section 529 provides that workmen’s dues and dues to secured creditors shall be paid in full, unless
the assets are insufficient to meet them, in which case they shall abate in equal proportions.

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