SARFAESI priority over tax and arbitration attachments allows registration of a sale certificate free from encumbrances.

A duly registered secured creditor under the SARFAESI regime has priority over later attachment orders, including tax recovery attachments, by virtue of Section 26E. Once the secured asset is sold to realise the secured debt, those attachments cannot continue to obstruct transfer or registration of the sale certificate, except to the extent of any surplus remaining after satisfaction of the secured debt. Where no surplus remains, the encumbrances created by the tax authority and under an arbitration award become ineffective and may be deleted so that the purchaser's title is not clouded.

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Issues: Whether, after registration of security interest under the SARFAESI regime, the secured creditor's claim had priority over the attachment orders issued by the tax authority and the arbitration proceedings, and whether the sale certificate presented by the auction purchaser was entitled to registration free from those encumbrances.

Analysis: The property stood mortgaged in favour of the secured creditor and the security interest was registered. By virtue of Section 26E of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the debts due to the secured creditor rank in priority over all other debts, including taxes, cesses and other dues. Once the secured creditor proceeds to realise the secured asset, other attachments cannot operate to defeat that priority and survive only to the extent of any surplus remaining after satisfaction of the secured debt. In the absence of any surplus after payment of the bank's dues, the attachments created by the tax authority and under the arbitration award became otiose and liable to be deleted so as not to cloud the purchaser's title.

Conclusion: The attachment entries could not prevail against the secured creditor's prior claim, and the sale certificate was entitled to be registered without reference to those encumbrances.

Final Conclusion: The writ petition was allowed and the registering authority was directed to register the sale certificate and delete the attachment entries.

Ratio Decidendi: Under Section 26E of the SARFAESI Act, a duly registered secured creditor's claim has priority over other debts and statutory attachments, and such attachments cannot survive where no surplus remains after satisfaction of the secured debt.

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