Secured creditor priority under SARFAESI prevails over later tax charges, protecting auction purchaser title.

State sales tax or VAT dues do not outrank a secured creditor enforcing its security interest under SARFAESI, and a later charge over the secured asset cannot defeat a valid auction sale. Where the bank had sold the property in exercise of SARFAESI powers and the auction purchasers obtained title through the sale certificate, the subsequent tax charge could not impair that title. A Sub-Registrar is therefore not justified in withholding registration or keeping the sale deed pending solely because of such a later charge. The administrative refusal and the tax charge were liable to be set aside.

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Issues: Whether the charge created by the sales tax authorities over property sold in SARFAESI auction could prevail over the rights of the secured creditor and the auction purchasers, and whether the Sub-Registrar was justified in keeping the registered sale deed pending on the basis of that charge.

Analysis: The property had been sold by the bank in exercise of SARFAESI powers after issuance of notice and taking possession, and the petitioners had become successful auction purchasers and absolute owners upon issuance and registration of the sale certificate. The Court applied the settled principle that dues of a State authority by way of sales tax or VAT do not rank above the claim of a secured creditor, and that the statutory priority given to secured creditors under Section 26E excludes precedence of unsecured public dues. Once the secured asset was sold to enforce the bank's secured debt, any attachment or charge created for the original owner's tax liability could not defeat the auction sale or the title derived therefrom. The Sub-Registrar's refusal to return the sale deed solely on the basis of the later tax charge was therefore unsupported in law.

Conclusion: The charge created for sales tax dues could not prevail over the SARFAESI auction sale, and the Sub-Registrar was not justified in keeping the sale deed pending. The impugned communication and the tax authority's charge were liable to be set aside.

Final Conclusion: The petitioners' title derived from the secured creditor's auction sale was protected against the subsequent tax charge, and the administrative refusal based on that charge could not be sustained.

Ratio Decidendi: Dues recoverable by a State authority do not take precedence over the rights of a secured creditor enforcing its security interest, and any subsequent charge over the secured asset cannot impair the title acquired by a valid SARFAESI auction purchaser.

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