Secured creditor priority prevails over sales tax arrears where hypothecated assets and their sale proceeds are in court.

Sales tax arrears recoverable as arrears of land revenue do not override a prior secured creditor's claim over hypothecated movables and the sale proceeds realised from them. The State's priority for Crown debt applies generally against unsecured debts, but the bank's hypothecation created a recognised security interest in the assets and their proceeds. Because the fund in court represented the fruits of the secured property, it was not available to satisfy the State's unsecured claim in preference to the bank. The direction to pay the proceeds to the Sales Tax Department was unsustainable, and the bank's secured right prevailed.

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Issues: Whether sales tax arrears recoverable as arrears of land revenue have priority over the bank's secured debt arising from hypothecation of movables and the sale proceeds lying in court.

Analysis: The sales tax liability became recoverable as arrears of land revenue only after assessment, demand, and default under the sales tax statute. The Revenue Recovery Act authorised recovery of such dues as arrears of revenue, but the doctrine of priority of Crown debt operates generally against unsecured debts. The bank's claim was founded on hypothecation, which created a recognised security interest in the pledged movables and the sale proceeds realised from them. The proceeds in court represented the fruits of the secured assets and were not available to satisfy an unsecured State claim in preference to the secured creditor.

Conclusion: The State had no priority over the bank's secured claim, and the direction to pay the sale proceeds to the Sales Tax Department was unsustainable.

Final Conclusion: The revision was allowed and the bank's secured right prevailed over the State's claim for sales tax arrears from the fund in court.

Ratio Decidendi: Crown debt has priority over unsecured debts, but it does not override a prior secured creditor's claim over hypothecated property or its sale proceeds unless a statute clearly provides otherwise.

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