CERSAI-registered secured creditor priority protects auction purchaser against later State tax claims over the secured asset.

A prior mortgage registered with CERSAI under the SARFAESI framework had priority over the State tax authorities' later claim, because Chapter IVA and Section 26-C treat such registration as public notice and protect the earlier registered security interest. The State could not enforce its dues against the secured assets or the auction purchaser once the secured creditor's interest had been created and registered first. Its claim, if any, was limited to any residual sale proceeds after satisfaction of the secured creditor's dues. The auction purchaser therefore took title free from the State's asserted encumbrance.

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Issues: Whether the State tax authorities could assert or enforce their dues against the secured assets and the auction purchaser despite the prior mortgage and CERSAI registration in favour of the secured creditor under the SARFAESI regime.

Analysis: The secured creditor's mortgage predated the State's claim and was registered with CERSAI. Upon the coming into force of Chapter IVA of the SARFAESI Act, the statutory scheme under Section 26-C treated such registration as public notice and accorded priority to the creditor whose security interest was registered earlier. The enforcement of a later security interest remained subject to the prior registered interest and could not be used to continue chasing the same secured asset in the hands of the purchaser. The State's claim, if any, was confined to residual sale proceeds after satisfaction of the secured creditor's dues.

Conclusion: The State tax authorities did not have priority over the secured creditor or the auction purchaser. The secured creditor's enforcement prevailed, and the purchaser obtained title free from the State's asserted encumbrance.

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