Secured creditor priority under SARFAESI prevails over later tax attachment; Section 281 does not create a Revenue charge.

A registered security interest under Section 26E of the SARFAESI Act takes priority over a later attachment by the Income-tax Department when the mortgage is created and registered first. Section 281 of the Income-tax Act is only a protective anti-alienation provision; it does not itself create a charge in favour of the Revenue or confer power on the tax authorities to declare title. Any challenge to the validity of a transfer must be pursued before the civil court, while the Tax Recovery Officer remains confined to attachment and recovery under the Second Schedule. On the stated facts, the bank's prior registered mortgage prevailed and the departmental attachment could not stand.

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Issues: Whether a secured creditor's registered security interest under the SARFAESI Act has priority over a subsequent attachment by the Income-tax Department, and whether Section 281 of the Income-tax Act creates a charge in favour of the Revenue.

Analysis: Section 281 of the Income-tax Act is a protective provision aimed at preventing an assessee from defeating recovery by transferring assets during pending proceedings or after completion of proceedings. It does not by itself confer a power on the Income-tax authorities to declare title or create a positive charge over the property. Any declaration that a transfer is void must be pursued in the civil court, and the Tax Recovery Officer's role is confined to attachment and recovery in accordance with the Second Schedule. Section 26E of the SARFAESI Act, introduced with a non obstante clause, accords priority to secured creditors after registration of the security interest and operates notwithstanding other laws, including tax recovery claims. On the facts, the bank's mortgage was created and registered before the Income-tax attachment, whereas the departmental attachment came later.

Conclusion: The bank's prior registered security interest prevailed over the later tax attachment, and Section 281 did not create a superior charge in favour of the Revenue.

Final Conclusion: The petitions succeeded, and the orders encumbering the properties were set aside in favour of the secured creditors.

Ratio Decidendi: A registered security interest under Section 26E of the SARFAESI Act takes priority over a subsequent income-tax attachment, and Section 281 of the Income-tax Act does not itself create a charge in favour of the Revenue.

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