Secured creditor priority under SARFAESI overrides State revenue charge over mortgaged property.

A secured creditor's prior mortgage and statutory protection under the SARFAESI Act were held to prevail over the State's excise-related revenue claim. The property had been mortgaged before the departmental entry was made, and the dispute concerned whether the State could assert first charge and block removal of the revenue entry, registration of the sale certificate and mutation after auction. Section 26E gave the secured creditor priority over other debts, revenues, taxes, cesses and rates, and Section 35 conferred overriding effect on the SARFAESI Act. The State's excise charge and revenue entry could not defeat the secured creditor's interest in the secured asset.

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Issues: Whether the State Excise and Revenue authorities could assert priority over the secured creditor's debt and prevent removal of the revenue entry, registration of the sale certificate, and mutation of the auctioned property.

Analysis: The property had been mortgaged in favour of the secured creditor long before the departmental entry was made. The dispute turned on the inter se priority between the secured creditor's rights under the SARFAESI Act and the State's claim of first charge under the Himachal Pradesh Excise Act. The governing legal position recognises that Section 26E of the SARFAESI Act gives priority to secured creditors over all other debts, revenues, taxes, cesses and other rates, and Section 35 gives the Act overriding effect. The State's reliance on its excise charge and related revenue entry could not override the secured creditor's prior and statutorily protected interest in the secured asset.

Conclusion: The secured creditor's claim had priority over the departmental claim, and the revenue entry could not be sustained against the secured asset.

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