Secured creditor priority prevails over income tax attachment where no statutory first charge exists.

A secured creditor's mortgage and enforcement rights under SARFAESI were treated as superior to the income tax department's claim over the same secured assets, because no provision in the Income-tax Act created a first charge for revenue. Provisional attachment under Section 281-B, assessment proceedings under Section 144, and Rule 93 of the Second Schedule did not override the bank's secured interest. In the absence of a statutory first charge, the doctrine of crown debt could not displace the secured creditor's priority, and the bank's claim prevailed over the department's attachment-based assertion.

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Issues: Whether a secured creditor has priority over the income tax department's claim against secured assets, and whether the department could assert a preferential right on the basis of attachment under the Income-tax Act.

Analysis: The assets had been mortgaged to secure the bank's loan, and the bank had initiated measures under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The income tax department relied on provisional attachment under Section 281-B of the Income-tax Act, 1961 and assessment proceedings under Section 144 of the Income-tax Act, 1961, but no provision in the Income-tax Act, 1961 was shown to create a first charge in favour of the revenue. Rule 93 of the Second Schedule to the Income-tax Act, 1961 was not sufficient to override the secured creditor's rights. In the absence of a statutory first charge, the doctrine of crown debt did not displace the bank's secured interest.

Conclusion: The secured creditor had priority over the income tax department in respect of the secured assets, and the petition was disposed of with directions in favour of the bank.

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