Statutory first charge overrides prior mortgage, and a later sale without revenue notice cannot be sustained.

The statutory first charge under the Kerala General Sales Tax Act prevailed over a prior mortgage because the provision used a non-obstante clause and extended to the entire property, including the mortgagee's interest, not merely the equity of redemption. The Court also held that a sale conducted by the Recovery Officer without notice to the Revenue, after an earlier revenue attachment and sale notice, could not stand. The State was left free to proceed afresh under the revenue recovery law for realisation of its dues, while the auction purchaser was relegated to refund of the purchase money.

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Issues: Whether the statutory first charge created in favour of the State for sales tax arrears prevails over a prior mortgage in favour of a secured creditor, and whether the sale conducted by the Recovery Officer without regard to the earlier revenue attachment could stand.

Analysis: Section 26-B of the Kerala General Sales Tax Act creates a first charge on the property of the defaulting dealer and begins with a non-obstante clause. The Court applied the settled doctrine of priority of State debts and followed the Supreme Court rulings on identical statutory first-charge provisions, holding that such charge extends to the entire property, including the mortgagee's interest, and is not confined to the equity of redemption. The Court further held that, since the revenue authorities had already attached the property and issued sale notice, the later sale by the Recovery Officer without notice to the Revenue could not be sustained. At the same time, the State was permitted to proceed afresh under the revenue recovery law for realisation of its dues, and the auction purchaser was left to seek refund of the purchase money.

Conclusion: The statutory first charge of the State prevailed over the secured creditor's mortgage, and the sale by the Recovery Officer was invalid and liable to be set aside.

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