Secured creditor priority over tax attachment allowed registration of the SARFAESI sale certificate.

A secured creditor under SARFAESI was held entitled to priority over an income-tax attachment, so the attachment over the mortgaged property could not be continued and the sale certificate could be registered. The property had been mortgaged by a corporate guarantor for the borrower's loan, and the bank had already effected a sale in favour of a successful bidder. The Court noted that a secured creditor's claim prevails over other dues, including Crown debts, and that the attached property belonged to the corporate guarantor, who was not the tax defaulter. On that basis, the tax attachment was not justified for recovery of the borrower's tax liability.

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Issues: Whether the petitioner bank, as a secured creditor, was entitled to have the attachment raised so that the sale certificate could be registered, despite the income-tax attachment over the mortgaged property.

Analysis: The property had been mortgaged by the corporate guarantor to secure the borrower's loan, and the bank had already proceeded under the SARFAESI mechanism and effected sale in favour of a successful bidder. The attachment by the tax authority was intended to recover dues of the borrower, but the Court held that a secured creditor's claim has priority over all other dues, including Crown debts. The Court also noted that the attached property belonged to the corporate guarantor, who was not the tax defaulter, and therefore the attachment could not be justified for recovery of the borrower's tax liability.

Conclusion: The attachment could not be continued, and the petitioner bank was entitled to have it raised so that registration of the sale certificate could proceed.

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