Priority of claims.

The claims arising out of the matters specified in the Schedule shall have priorities in accordances with the following principles, namely :— (a) category I shall have precedence over all other categories and category II shall have precedence over categories III and IV ; and category III shall have precedence over category IV ; (b) the claims arising out of matters specified in each category except category III shall rank equally and be paid in full, but if the amount is insufficient to meet such claims in full, they shall abate in equal proportions and be paid accordingly; (c) the liabilities specified in category III shall be discharged in the manner agreed to by the State Government of one part with the banks and institutions of other part subject to the priorities specified in this section, in accordance with the terms of the secured loans and the priority inter se of such loans ; and (d) the question of payment of a liability with regard to a matter specified in a lower category shall arise only if a surplus is left after meeting all the liabilities specified in the immediately higher category.