Waterfall Mechanism For Liquidation

• 21 Jul 2020

• The waterfall mechanism under Insolvency and Bankruptcy Code gives priority to secured financial creditors over unsecured financial creditors.
• The mechanism says that if a company is being liquidated, these secured financial creditors must be first paid the full extent of their admitted claim, before any sale proceedings are distributed to any other unsecured creditor.
• Under Section 53 of the IBC, which deals with waterfall mechanism, the top most priority, however, is given to costs related to the liquidation process and dues of workmen of the corporate debtor. The dues of the workmen include all their salaries, provident, pension, retirement and gratuity fund, as well as any other funds maintained for the welfare of the workmen.