Secured creditor priority over revenue dues upheld where mortgage predated tax liability and SARFAESI sale had already occurred.

A secured creditor's right to realise dues from mortgaged property prevailed over a Tax Recovery Officer's attachment because the security interest was created before the income-tax dues arose and the asset had already been proceeded against under SARFAESI and sold in auction. Section 31B of the Recovery of Debts and Bankruptcy Act, 1993 gives priority to the secured creditor for recovery from the secured asset over other dues, including revenue claims. The attachment was therefore unsustainable and was set aside.

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Issues: Whether the Tax Recovery Officer's attachment could defeat the secured creditor's right to realise dues from the mortgaged property, having regard to the priority conferred by section 31B of the Recovery of Debts and Bankruptcy Act, 1993.

Analysis: The security interest in the property was created before the income-tax dues sought to be recovered had arisen. The property had already been proceeded against under the SARFAESI Act and sold in auction. Section 31B accords priority to the secured creditor for realisation of secured debt from the secured asset over all other dues, including revenue dues. On these facts, the Revenue could not the secured creditor from enforcing its security by attachment of the same property.

Conclusion: The attachment order was unsustainable and was set aside; the petition succeeded.

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