Secured creditor priority over tax dues prevents departmental attachment of mortgaged property from surviving.

A secured creditor's statutory priority to realise secured debts from mortgaged assets was treated as prevailing over Government tax dues, and the amended provision was read as overriding contrary laws and applying to pending disputes. On that basis, the bank's charge over the mortgaged property was recognised as superior to the department's claim. The Sales Tax Department's attachment over the same property could not survive once secured creditor priority was affirmed, and the attachment was treated as without legal authority in the circumstances. The mortgaged property was therefore released from departmental attachment, preserving the secured creditor's enforcement rights.

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Issues: (i) Whether a secured creditor has priority of charge over the mortgaged property as against the Government's tax dues; (ii) Whether the attachment made by the Sales Tax Department over the mortgaged property could survive.

Issue (i): Whether a secured creditor has priority of charge over the mortgaged property as against the Government's tax dues.

Analysis: The governing principle was held to be that, by virtue of the statutory priority conferred on secured creditors, the right to realise secured debts by sale of the secured assets prevails over all other debts and Government dues. The amended provision was treated as overriding other laws and as applicable even to pending disputes.

Conclusion: The issue was answered in favour of the secured creditor, and the Bank's priority over the departmental dues was recognised.

Issue (ii): Whether the attachment made by the Sales Tax Department over the mortgaged property could survive.

Analysis: Once the Bank's priority as secured creditor was recognised, the departmental attachment over the mortgaged property could not stand. The attachment was therefore treated as lacking legal authority in the circumstances of the case.

Conclusion: The attachment was held to be without jurisdiction and was directed to be removed.

Final Conclusion: The writ petition succeeded to the extent of securing release of the mortgaged property from the departmental attachment, thereby protecting the secured creditor's priority over the Government's claim.

Ratio Decidendi: A secured creditor's statutory priority to realise secured debts from mortgaged assets prevails over Government tax dues, and any contrary departmental attachment over such secured assets cannot be sustained.

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