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Issues: Whether a secured creditor under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 has priority over State tax dues and attachment entries, and whether the Sale Certificate issued in favour of the auction purchaser could be refused registration on that basis.
Analysis: Section 26E of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 confers priority on the dues of a secured creditor over all other debts, revenues, taxes, cesses and other rates payable to the Central Government, State Government or local authority after registration of the security interest. Section 35 gives the Act overriding effect over inconsistent laws. Applying the Supreme Court decisions on priority of secured debt over governmental dues, the Court held that the State authorities could not assert priority over the mortgaged property once it had been validly proceeded against under the SARFAESI regime. The Court also found that the attachment entries and refusal to register the Sale Certificate were contrary to the statutory scheme and without legal justification.
Conclusion: The secured creditor's claim had priority over the State's tax claim, and the refusal to register the Sale Certificate could not be sustained.
Ratio Decidendi: After registration of security interest, Section 26E of the SARFAESI Act gives the secured creditor priority over governmental dues, and by virtue of Section 35 that priority prevails over inconsistent State action, including attachment entries that obstruct registration of a validly issued Sale Certificate.
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