law: Companies Act, 2013 
  325.
  
    Application
  
  of insolvency rules in winding up of insolvent companies.
  1.      In the winding up of
  
  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 debts, opts to realise his security,—
                       
  
   i.        
  
    the
  
  liquidator shall be entitled to represent the workmen and enforce such charge;
                      
  
   ii.        
  
    any
  
  amount realised by the liquidator by way of enforcement of such charge shall be
  
  applied rateably for the discharge of workmen’s dues; and
                     
  
   iii.        
  
    so
  
  much of the debts due to such secured creditor as could not be realized by him
  
  or the amount of the workmen’s portion in his security, whichever is less,
  
  shall rank pari passu with the workmen’s dues for the purposes of
  
  section 326.
  1.     
  2.      All persons under
  
  sub-section (1 ) shall be entitled to prove and receive dividends out of
  
  the assets of the company under 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
  
  his debts, 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 .—For the purposes of
  
  this sub-section, 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.
  1.     
  2.     
  3.      For the purposes of
  
  this section, section 326 and section 327,—
  a.     
  
    “workmen’’,
  
  in relation to a company, means the employees of the company, being workmen
  
  within the meaning of clause (s ) of section 2 of the Industrial Disputes
  
  Act, 1947;
  b.    
  
    “workmen’s
  
  dues’’, in relation to a company, means the aggregate of the following sums due
  
  from the company to its workmen, namely:—
                       
  
   i.        
  
    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 in respect of
  
  services rendered to the company and any compensation payable to any workman
  
  under any of the provisions of the Industrial Disputes Act, 1947;
                      
  
   ii.        
  
    all
  
  accrued holiday remuneration becoming payable to any workman or, in the case of
  
  his death, to any other person in his right on the termination of his
  
  employment before or by the effect of the winding up order or resolution;
                     
  
   iii.        
  
    unless
  
  the company is being wound up voluntarily merely for the purposes of
  
  reconstruction or amalgamation with another company or unless the company has,
  
  at the commencement of the winding up, under such a contract with insurers as
  
  is mentioned in section 14 of the Workmen’s Compensation Act, 1923, rights
  
  capable of being transferred to and vested in the workmen, all amount due in
  
  respect of any compensation or liability for compensation under the said Act in
  
  respect of the death or disablement of any workman of the company;
                     
  
   iv.        
  
    all
  
  sums due to any workman from the provident fund, the pension fund, the gratuity
  
  fund or any other fund for the welfare of the workmen, maintained by the
  
  company;
  a.     
  
  
  b.     
  
  
  c.     
  
   “workmen’s
  
  portion’’, in relation to the security of any secured creditor of a company,
  
  means the amount which bears to the value of the security the same proportion
  
  as the amount of the workmen’s dues bears to the aggregate of the amount of
  
  workmen’s dues and the amount of the debts due to the secured creditors.
  Illustration
  The
  
  value of the security of a secured creditor of a company is Rs. 1,00,000. The
  
  total amount of the workmen’s dues is Rs. 1,00,000. The amount of the debts due
  
  from the company to its secured creditors is Rs. 3,00,000. The aggregate of the
  
  amount of workmen’s dues and the amount of debts due to secured creditors is
  
  Rs. 4,00,000. The workmen’s portion of the security is, therefore, one-fourth
  
  of the value of the security, that is Rs. 25,000.