SARFAESI enforcement overrides uncrystallised sales tax first charge, supporting auction purchaser's title and mutation rights.

A secured creditor's enforcement and sale under the SARFAESI Act can prevail over a State sales tax first-charge claim where the tax liability has not been lawfully crystallised against the auctioned property. Section 35's overriding effect and section 13(6) vesting title in the transferee support the auction purchaser's title, while an adverse revenue entry and refusal to mutate the purchaser's name lack legal basis if no valid demand procedure is shown under the State sales tax law. The sale certificate describing the property as free from known encumbrances and earlier revenue records showing it as unencumbered further support mutation in the purchaser's favour.

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Issues: Whether the secured creditor's rights under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 override the State's claim of first charge for sales tax dues under the H.P. General Sales Tax Act, 1968, and whether the adverse revenue entry and refusal to mutate the auction purchaser's name were lawful.

Analysis: The property had been taken possession of by the secured creditor under section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and sold in exercise of powers under that Act. The Act contains an overriding clause in section 35, and section 13(6) vests title in the transferee. Although section 16B of the H.P. General Sales Tax Act, 1968 declares tax to be a first charge on the dealer's property, the State's charge had not crystallised against the auctioned property in a manner that could defeat the secured creditor's prior and completed enforcement action. The record also showed that no valid demand procedure under sections 14 and 16A of the H.P. General Sales Tax Act, 1968 had been shown before the adverse entry was made. The revenue record had earlier reflected the property as unencumbered, the sale certificate stated that the sale was free from known encumbrances, and there was no legal basis to fasten the borrower's tax liability upon the auction purchaser.

Conclusion: The secured creditor's statutory rights prevailed, the State's adverse entry could not stand, and the refusal to mutate the property in the auction purchaser's name was unlawful.

Ratio Decidendi: Where a later special central enactment confers overriding enforcement powers on a secured creditor and contains a non obstante clause, an inconsistent state tax first-charge provision cannot defeat a prior completed sale under that enactment in the absence of lawful crystallisation and demand of the tax liability.

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