Priority of secured creditor's charge permits sale of secured asset free from tax dues despite sales tax attachment.

Section 26E of the SARFAESI Act was treated as giving the secured creditor priority over enforcement of sales tax dues, but the State's reliance on the first charge under section 37 of the Maharashtra Value Added Tax Act remained unresolved because the dates on which the tax charge arose were not placed before the Court. The secured asset was therefore directed to be sold free from tax liabilities, while the inter se priority of charge was left for separate determination. The Sales Tax Department's attachment was not set aside, but it was clarified that the attachment would not affect the sale or the purchaser's title to the secured property.

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Issues: Whether the secured asset could be sold free from sales tax liabilities and whether the Sales Tax Department's attachment would affect the purchaser's title.

Analysis: The secured creditor relied on the statutory priority given by section 26E of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, while the State relied on the first charge created under section 37 of the Maharashtra Value Added Tax Act, 2002. Since the dates on which the sales tax charge allegedly arose were not placed before the Court, the petition was disposed of by declaring that the secured asset must be sold free from tax liabilities, leaving inter se priority of charge to be decided separately. The attachment by the Sales Tax Department was not set aside, but it was clarified that the attachment would not affect the sale of the secured property.

Conclusion: The purchaser of the secured asset would take it free from tax liabilities, and the Sales Tax Department's attachment would not impede the sale.

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