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Issues: Whether the secured creditor's charge over the mortgaged premises had priority over the Income Tax Department's attachment and whether the attachment was liable to be lifted.
Analysis: The secured debt was assigned to the petitioner, which had been substituted in the recovery proceedings and had also invoked enforcement measures under the SARFAESI regime by issuing notice under Section 13(2), taking possession under Section 13(4), and asserting its security interest in the subject property. The Court held that the question of priority between a secured creditor and tax dues was no longer res integra. Relying on the statutory priority conferred by Section 31-B of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and Section 26-E of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and following the principle that the Income Tax Act does not create paramountcy in favour of income tax dues, the Court held that secured creditors rank above government dues. The earlier attachment by the Tax Recovery Officer could not override the petitioner's prior secured interest.
Conclusion: The petitioner's mortgage and secured charge had priority over the Income Tax Department's dues, and the attachment could not stand against the petitioner's enforcement rights.
Final Conclusion: The attachment over the premises was directed to be lifted and the petitioner was permitted to proceed with sale of the secured asset.
Ratio Decidendi: Where a secured creditor's interest is protected by the SARFAESI and debt recovery statutes, that secured charge prevails over attachment for tax dues, and government dues do not acquire priority in the absence of a statute expressly creating such paramountcy.
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