Prior secured creditor rights under SARFAESI can prevail over customs attachment absent a statutory first charge.

A customs attachment over property does not automatically override a bank's prior secured interest where no encumbrance or statutory first charge has been created in favour of the customs department. The text notes that the property was already subject to SARFAESI enforcement, the bank's charge predated the customs demand, and the earlier customs communication merely asked the Sub-Registrar not to entertain transfer. Section 26E of the SARFAESI Act gives priority to registered secured creditors over other debts, taxes and cesses, and the general principle is that Crown debts do not prevail absent a specific statutory first charge. On that basis, the customs attachment could not defeat the secured creditor's claim.

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Issues: Whether the customs department's attachment over the property had priority over the bank's secured interest and the petitioner's purchase under the SARFAESI mechanism.

Analysis: The property had already been brought within the bank's enforcement proceedings under the SARFAESI Act, and the bank's charge predated the customs demand. The earlier attachment relied upon by the customs authorities was only a communication requesting the Sub-Registrar not to entertain transfer, and no encumbrance was registered or charge created in favour of the customs department. Section 26E of the SARFAESI Act gives priority to secured creditors over all other debts, taxes and cesses after registration of security interest, and the established principle is that Crown debts do not prevail unless the statute creates a specific first charge.

Conclusion: The customs attachment could not override the bank's secured charge, and the petitioner was entitled to have the attachment lifted.

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