Secured creditor priority under SARFAESI prevails over gratuity recovery as land revenue against mortgaged assets.

A secured creditor that has already invoked SARFAESI measures and taken possession of the mortgaged assets retains priority over recovery of gratuity dues sought as arrears of land revenue under the Payment of Gratuity Act. Section 26E of the SARFAESI framework gives the secured creditor a superior claim, and the social welfare character of gratuity legislation does not displace that priority in the absence of an overriding statutory provision. Accordingly, attachment of the secured assets cannot be sustained against property already in the creditor's possession, although the underlying recovery proceedings may continue against any surplus remaining after satisfaction of the secured debt.

---

---

Issues: Whether the secured creditor's mortgage and possession under the SARFAESI Act had priority over recovery of gratuity dues as arrears of land revenue under the Payment of Gratuity Act, and whether the attachment of the secured assets could be sustained.

Analysis: The petitioner had already invoked Section 13(2) and Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and had taken possession of the secured assets before the attachment was made. The gratuity dues were sought to be recovered under Section 8 of the Payment of Gratuity Act, 1972 as arrears of land revenue. The statutory scheme of the SARFAESI Act, reinforced by Section 26E, confers priority on the secured creditor. The recovery of gratuity as arrears of land revenue does not create a superior charge over the secured creditor's interest. The social welfare character of the gratuity legislation does not alter the priority rule where no corresponding overriding provision exists.

Conclusion: The secured creditor's claim had priority over the gratuity recovery proceedings, and the attachment of the secured assets was unsustainable. The recovery certificate itself was not quashed, but it could not be enforced against the secured assets already in the petitioner's possession.

Final Conclusion: The writ petition succeeded to the extent of invalidating the attachment over the mortgaged secured assets, while the gratuity recovery proceedings were otherwise left intact and enforceable only against any surplus remaining after satisfaction of the petitioner's dues.

Ratio Decidendi: Where a secured creditor has taken possession of secured assets under the SARFAESI Act, recovery of statutory dues as arrears of land revenue cannot override the secured creditor's prior charge in the absence of a contrary overriding provision.

---