Schedule 2 of The Inchek Tyres Limited and National Rubber Manufacturers Limited (Nationalisation) Act, 1984
THE SECOND SCHEDULE [See sections 18, 19, 20 (1), 21 (1) and 23 (1)] ORDER OF PRIORITIES FOR THE DISCHARGE OF LIABILITIES OF THE TWO COMPANIES Category I—
- (a)Wages, salaries and other dues payable to the employees of the companies.
- (b)Arrears in relation to contributions to be made by the companies to the provident fund, Employees’ State Insurance Fund, Life Insurance Corporation premium and any other arrear under any law for the time being in force. Post-take over management period Category IIPrincipal amount of loans advanced by—
- (a)the Central Government;
- (b)a State Government;
- (c)banks and public financial institutions;
- (d)any other sources. Category III—
- (a)Any credits availed of by the companies for the purpose of carrying on any trading or manufacturing operations, other than the liabilities specified in sub-section (2) of section5.
- (b)Any dues of State Electricity Boards or other Government and semi-Government institutions against supply of goods or services, other than the liabilities specified in sub-section (2) of section5.
- (c)Arrears of interest on loans and advances. Category IV—
- (a)Revenue, taxes, cesses, rates or other dues to Central Government, a State Government or any local authority.
- (b)Any other dues. Category VPrincipal amount of secured loans advanced by—
- (a)the Central Government;
- (b)a State Government;
- (c)banks and public financial institutions. Category VIPrincipal amount of secured loans advanced by—
- (a)the Central Government;
- (b)a State Government;
- (c)banks and public financial institutions;
- (d)any other sources. Category VII—
- (a)Any credits availed of by the companies for the purpose of carrying on any trading or manufacturing operations.
- (b)Any dues of State Electricity Boards or other Government and semi-Government institutions against supply of goods or services.
- (c)Arrears of interest on loans and advances.
- (d)Revenue, taxes, cesses, rates or other dues to Central Government, a State Government or any local authority.
- (e)Any other loans or dues.
Summary
- The Second Schedule defines the priority of seven categories for discharging the liabilities of the two companies.
- Category I covers employee wages, salaries, and statutory arrears such as provident fund, Employees' State Insurance, and Life Insurance Corporation premiums.
- Categories II, III, and IV govern liabilities arising during the post-takeover management period, prioritizing government/bank loans, trade credits/utility dues, and government taxes.
- Categories V, VI, and VII cover pre-takeover liabilities, prioritizing secured public loans, other secured loans, and general trade credits, utility dues, interest, and taxes.
- Under Section 19, higher categories must be paid in full before lower categories receive payment; if funds are insufficient, claims in that category are paid in equal proportions.
- Under Section 20, the Commissioner is not required to examine lower category claims if the available funds are exhausted by higher categories.
Practical examples
FAQ
1. How are claims prioritized under the Second Schedule?
Claims are arranged in seven distinct categories. Category I has the highest priority and must be paid first. Category VII has the lowest priority and is paid last.
2. What happens if there is not enough money to pay all claims within a single category?
If the available funds are insufficient, all claims within that specific category rank equally and are reduced in equal proportions.
3. Does the Commissioner have to examine every claim submitted?
No. Under Section 20(2), if the Commissioner finds that the money is not enough to meet the liabilities of higher categories, they are not required to examine claims in any lower category.
4. Under which category do employee wages and provident fund arrears fall?
They fall under Category I, which gives them precedence over all other debts.
5. What happens if there is still money left after all categories in the Second Schedule are paid in full?
Under Section 23(1), any remaining balance is disbursed by the Commissioner back to the concerned company.
Test yourself
Q1.Under the Second Schedule of The Inchek Tyres Limited and National Rubber Manufacturers Limited (Nationalisation) Act, 1984, which category of claims has the highest priority and precedence over all other categories?
Q2.Under Section 19 and the Second Schedule of The Inchek Tyres Limited and National Rubber Manufacturers Limited (Nationalisation) Act, 1984, what happens if the money with the Commissioner is insufficient to pay all the claims in a single category in full?
Q3.Under Section 20(2) of The Inchek Tyres Limited and National Rubber Manufacturers Limited (Nationalisation) Act, 1984, what is the Commissioner's duty regarding lower category claims under the Second Schedule if funds are insufficient?
Q4.Under Section 18 and the Second Schedule of The Inchek Tyres Limited and National Rubber Manufacturers Limited (Nationalisation) Act, 1984, within what time limit must a person prefer a claim before the Commissioner?
Q5.Under the Second Schedule of The Inchek Tyres Limited and National Rubber Manufacturers Limited (Nationalisation) Act, 1984, which category covers the principal amount of loans advanced by the Central Government during the post-takeover management period?