Secured creditor priority over tax attachment prevails against recovery proceedings for secured assets.

A secured creditor enforcing a mortgagee's assigned rights was treated as having priority over Income Tax Department attachment and tax recovery claims against the secured assets. The assignment was characterised as an assignment of security interest, not a sale transaction, and the objection based on Section 281 and income-tax recovery provisions was rejected. The stated principle was that a secured creditor's right to realise secured debt by sale of charged property prevails over government dues, including tax, cesses and rates, and that later statutory recognition of this priority applies to pending disputes.

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Issues: Whether a secured creditor acquiring the mortgagee's rights by assignment would have priority over the Income Tax Department's attachment and tax dues, and whether the impugned attachment orders were liable to be set aside.

Analysis: The governing principle was that the rights of a secured creditor to realise secured debts by sale of assets over which security interest is created take priority over all other debts and government dues, including taxes, cesses and rates. The later statutory recognition of that priority was applied to pending lis, and the assignment document was treated as an assignment of security interest rather than as a sale transaction. The objection based on Section 281 and the Income-tax recovery provisions was rejected in view of the secured creditor's priority.

Conclusion: The petitioner, as secured creditor, was held entitled to priority over the Income Tax Department's claim, and the attachment orders were liable to be set aside.

Final Conclusion: The writ petitions of the secured creditor succeeded and the tax attachment was raised, while the connected writ petition relating to the same properties was rendered incapable of separate relief.

Ratio Decidendi: A secured creditor's right to enforce security interest has statutory priority over recovery of government tax dues, and such priority prevails against attachment proceedings in respect of the secured assets.

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