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Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether the secured creditor, having registered its security interest with CERSAI, had priority over the State tax department's claim and whether the attachment order passed after the auction could be sustained.
Analysis: The security interest in favour of the bank was created much earlier and was registered with CERSAI, which constituted public notice of the charge. Section 26E of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 gives priority to a secured creditor whose security interest is registered, and such priority overrides inconsistent State tax claims, including a first charge under the Maharashtra Value Added Tax Act, 2002, by virtue of the statutory scheme and the overriding effect of the Central enactment. The State tax department had not registered any claim or attachment with CERSAI. The attachment was also not shown to have been validly levied on the specific secured asset before the auction. The auction purchasers derived their rights through the secured creditor, and the clauses in the auction notice did not displace the statutory priority. The bank was therefore entitled to ignore the later attachment and proceed with confirmation of sale.
Conclusion: The attachment order could not prevail over the secured creditor's prior registered security interest and was liable to be set aside; the bank and auction purchasers succeeded.
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