Secured creditor priority under SARFAESI prevails over later State tax claims, and revenue entries must be removed.

The HC held that a secured creditor's prior mortgage and registered security interest under the SARFAESI framework took priority over the State's later tax and excise claims. Applying the statutory mandate that secured debts are to be paid in priority and that the SARFAESI Act has overriding effect, the Court found that the State's first-charge claim under the Himachal Pradesh VAT regime could not defeat the bank's earlier security interest. The revenue entries reflecting the State's claim against the secured asset were therefore liable to be removed.

---

---

Issues: Whether the secured creditor's debt had priority over the State's tax and excise dues and whether the revenue entries recording the State's claim over the secured asset were liable to be removed.

Analysis: The property had been mortgaged in favour of the bank earlier in time, and the bank's security interest was recorded in the central registry before the State departments entered their revenue claims. The Court applied the settled principle that secured creditors stand in priority over unsecured or later claims, and relied on the statutory mandate under the SARFAESI Act that secured debts are to be paid in priority and that the Act operates with overriding effect. It was further held that the State's first-charge provision under the Himachal Pradesh Value Added Tax Act could not prevail against the secured creditor's rights under the SARFAESI framework.

Conclusion: The secured creditor's claim prevailed over the State's tax and excise claims, and the red entries in the revenue record were liable to be removed.

Ratio Decidendi: A secured creditor's right under the SARFAESI Act, especially where the security interest is prior in time and the Act confers priority and overriding effect, prevails over a later statutory first charge claimed by the State under revenue legislation.

---