Secured creditor priority over tax recovery reinforced, with registration of sale of secured assets permitted subject to documentation

Secured creditors were recognised as having priority over State recovery of tax dues under the applicable statutory scheme, which also gave public notice effect to registration of security interests and attachment orders with the Central Registry. On that basis, the sale of the secured properties was permitted to be registered, provided the papers were otherwise in order, and the sale consideration was directed to be kept in a separate interest-bearing account pending further orders.

---

---

Issues: Whether the secured creditor's claim had priority over the State's recovery of tax dues and whether the sale of the secured assets could be registered.

Analysis: The applicable statutory scheme recognized the priority of secured creditors over all other debts, including revenues, taxes, cesses and rates payable to the Central Government, State Government or local authority. The amended provisions also contemplated registration of security interests and attachment orders with the Central Registry, and treated such registration as public notice. On that basis, the sale of the properties was directed to be registered if the papers were otherwise in order, while the sale consideration was ordered to be kept in a separate interest-bearing account pending further orders.

Conclusion: The secured creditor's priority was upheld over the tax recovery claim, and registration of the sale was permitted.

---