Secured creditor priority under SARFAESI prevails over later State tax charge and defeats subsequent attachment.

A duly registered secured creditor enforcing its mortgage under the SARFAESI Act has priority over a later State VAT charge, because Section 26E gives overriding effect to the secured creditor's claim once the security interest is registered. Where the bank had already issued notice, taken possession, sold the property, and issued a sale certificate, the subsequent revenue entry and attachment based on the State's charge could not displace that priority. The impugned encumbrance therefore could not survive against the secured asset.

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Issues: Whether the secured creditor's registered security interest and sale under the SARFAESI Act have priority over the State's charge recorded under the Gujarat Value Added Tax Act, and whether the revenue entry and attachment deserve to be quashed.

Analysis: The property had been mortgaged to the bank and the bank had enforced its security under the SARFAESI Act by issuing notice, taking possession, selling the property, and issuing a sale certificate. The State's charge was recorded later in time. Section 26E of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 gives priority to a secured creditor after registration of the security interest and operates notwithstanding any contrary law. The Court applied the settled principle that a secured creditor's claim prevails over State dues where the State charge arises later and the secured asset has already been proceeded against under the SARFAESI mechanism.

Conclusion: The bank's secured interest prevails over the State's VAT charge, and the impugned attachment and revenue entry could not survive.

Ratio Decidendi: A duly registered secured creditor acting under the SARFAESI Act has priority over a later statutory tax charge, and the State cannot defeat that priority by recording a subsequent revenue encumbrance.

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