Secured creditor priority prevails over State tax claim under SARFAESI, with sale proceeds released to the bank.

A State tax dues claim under the Gujarat Value Added Tax Act, 2003 could not defeat a bank's priority as secured creditor over the borrower's secured assets under the SARFAESI regime. The Court treated the issue as settled by its earlier binding decision that Section 48 of the Gujarat Value Added Tax Act does not override the secured creditor's priority. On that basis, the bank's superior claim to the secured assets was recognised and the State's first-charge claim was not accepted, with the sale proceeds to be released and appropriated accordingly.

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Issues: Whether the State tax department could first charge over the secured assets of the borrower and defeat the bank's claim as a secured creditor under the SARFAESI regime.

Analysis: The issue was treated as settled by the earlier binding decision of the Court, which held that the bank, as secured creditor, has priority over the secured assets of the borrower and that such priority cannot be overridden by Section 48 of the Gujarat Value Added Tax Act, 2003. In view of that settled position, no fresh adjudication on the competing claim to the sale proceeds was required. The auction had already been conducted pursuant to interim directions, and the sale proceeds were lying in a separate account pending final orders.

Conclusion: The bank's claim to priority over the secured assets prevailed, and the State's claim of first charge was not accepted.

Final Conclusion: The writ application was disposed of by recognizing the bank's superior claim over the secured assets and directing release and appropriation of the sale proceeds accordingly.

Ratio Decidendi: A State tax dues claim under the Gujarat Value Added Tax Act, 2003 cannot defeat the priority of a secured creditor over secured assets governed by the SARFAESI Act.

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