Secured creditor priority prevails over revenue recovery attachment on mortgaged property under SARFAESI and debt recovery law.

A secured creditor's claim over mortgaged property was treated as having priority over the State's revenue recovery attachment. The property had been mortgaged to a bank, possession was taken under SARFAESI after the account became non-performing, and the State relied on a statutory first charge for sales tax dues. The Court applied the settled position under Section 26E of the SARFAESI Act and Section 31B of the Recovery of Debts and Bankruptcy Act, holding that banks and financial institutions have priority in recovering their dues notwithstanding any competing revenue charge. The impugned attachment and communications could not be sustained.

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Issues: Whether the secured creditor had priority over the State's revenue recovery attachment on the secured property and was entitled to have the impugned communications and attachment quashed.

Analysis: The subject property had been mortgaged to the bank and possession was taken under the SARFAESI regime after the account became a non-performing asset. The State asserted a first charge for recovery of sales tax dues and insisted on access to the property. The Court held that the issue was settled by prior decisions and that Section 26E of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and Section 31B of the Recovery of Debts and Bankruptcy Act, 1993 confer priority on banks and financial institutions to recover their dues, notwithstanding any statutory first charge claimed by the Revenue.

Conclusion: The secured creditor's priority prevailed over the State's revenue claim, and the impugned attachment and communications could not stand.

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