Secured creditor priority over tax dues prevails under Section 31B, making attachment of mortgaged property unsustainable.

The statutory insertion of Section 31B gives secured creditors priority to realise secured debts from mortgaged assets over all other debts, including Government dues such as sales tax arrears, by virtue of its non obstante clause. That priority was treated as applicable even to pending matters, and inconsistent attachment of the secured property could not be sustained. The revenue authorities were left free to pursue other recovery remedies available under the sales tax law, but not against the mortgaged asset in derogation of the secured creditor's priority.

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Issues: Whether a secured creditor has priority over Government dues, including sales tax arrears, in respect of mortgaged property, and whether the attachment order could stand in view of the statutory amendment introducing priority for secured creditors.

Analysis: The statutory amendment introducing Section 31B into the principal enactment confers, by a non obstante clause, priority on secured creditors to realise secured debts by sale of assets over which security interest is created, over all other debts and Government dues including taxes, cesses and rates. The provision was treated as governing even pending lis, and the earlier Full Bench answer had already resolved the conflict in favour of the secured creditor. On that basis, the attachment of the mortgaged property could not be sustained, though the revenue authorities were left free to pursue recovery through other remedies available under the sales tax law.

Conclusion: The challenge succeeded, the secured creditor's priority was upheld, and the attachment order was set aside.

Ratio Decidendi: A statutory first charge or priority in favour of a secured creditor under Section 31B prevails over Government tax dues and renders inconsistent attachment proceedings unsustainable.

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