Secured creditor priority under SARFAESI prevails over State tax dues, protecting a bona fide auction purchaser's title.

A secured creditor's claim under the SARFAESI regime was held to have priority over State sales tax dues, because the property was already mortgaged to the bank and formed part of a secured asset. Applying Section 26E of the SARFAESI Act, the Court recognised that a secured creditor's debt prevails over Government revenues, taxes, cesses and other charges. The purchaser, having bought the property in a public e-auction, paid the full consideration and obtained a sale certificate and registered sale deed, was entitled to protection of that title. The State's revenue charge could not defeat the prior security interest or the auction purchaser's rights.

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Issues: Whether the dues of a secured creditor under the SARFAESI regime have priority over State sales tax dues, and whether the purchaser in a bank auction was entitled to protection against the revenue charge on the property.

Analysis: The property was already mortgaged with the bank and formed part of a secured asset. The bank had proceeded under the SARFAESI mechanism, the petitioner had purchased the property in public e-auction, paid the full sale consideration, and obtained a sale certificate and registered sale deed. Section 26E of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 gives priority to the debts of a secured creditor over all other debts and over revenues, taxes, cesses and other rates payable to the Government. Applying that statutory priority, the Court held that the State's charge could not defeat the bank's prior security interest or the petitioner's title derived from the auction sale.

Conclusion: The secured creditor's claim had priority over the State tax dues, and the petitioner, as a bona fide auction purchaser, was entitled to have the sale deed released and the revenue charge removed.

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