Secured creditor priority prevails over customs attachment when SARFAESI sale and valid mortgage predate the revenue claim.

A prior secured interest created by deposit of title deeds and a later SARFAESI sale can prevail over a customs attachment when the customs law does not create a statutory first charge. The secured creditor's priority was recognised under Section 26E of the SARFAESI Act, and the purchaser's title was treated as protected where no effective attachment entry appeared in the encumbrance register. The contention that the mortgage was invalid for want of registration was rejected because a deposit of title deeds mortgage remained valid under the applicable registration regime. On these principles, the customs claim could not displace the earlier secured debt.

---

---

Issues: Whether the customs attachment over the subject property could be sustained against the petitioner's prior secured interest and SARFAESI purchase, and whether the absence of a registered or encumbered entry defeated the petitioner's claim to have the attachment lifted.

Analysis: The property had been sold to the petitioner under SARFAESI proceedings long before the customs attachment, and the mortgage in favour of the financial institution was created earlier by deposit of title deeds. The customs department relied on an intimation sent to the registering authority, but no effective entry of attachment was found in the encumbrance register. On that basis, the petitioner was treated as a bona fide purchaser protected in law. The Court also applied the overriding effect of Section 26E of the SARFAESI Act and held that a secured creditor's claim had priority in a pending lis. The contention that the mortgage was ineffective for want of registration was rejected, since the deposit of title deeds mortgage was valid under the applicable registration regime. As the Customs Act was found not to create a first charge in favour of the revenue, the customs claim could not prevail over the prior secured debt.

Conclusion: The customs attachment was held unsustainable, and the petitioner's prior secured interest was upheld.

Ratio Decidendi: Where a secured creditor's mortgage and SARFAESI sale predate a customs attachment, and the customs law does not create a statutory first charge, the secured creditor's priority prevails and the attachment cannot defeat the purchaser's title, especially where the attachment is not effectively reflected in the registration records.

---