Secured creditor priority over sales tax dues protects bona fide auction purchasers and supports mutation after SARFAESI sale.

Section 26E of the SARFAESI Act gives a registered secured creditor priority over later State claims for sales tax and other dues, so a tax charge created after the security interest cannot defeat rights acquired through a valid auction sale. Where the borrower's secured asset is sold by public auction and sale certificates are issued to bona fide purchasers, the purchasers' title crystallises from those certificates and mutation in the revenue record follows as a consequential step. A subsisting State attachment or charge cannot be maintained against such title, and delay in seeking mutation does not by itself bar relief.

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Issues: Whether the secured creditor's charge and sale pursuant to SARFAESI proceedings had priority over sales tax dues claimed by the State, and whether the petitioners, as bona fide auction purchasers, were entitled to mutation of their names in the revenue record by removal of the State's charge.

Analysis: The dispute concerned properties sold by the secured creditor in public auction after default by the borrower, followed by sale certificates in favour of the petitioners. The State's claim rested on a subsequent tax charge and rejection of mutation on the ground that the State's encumbrance subsisted. Section 26E of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 gives priority to secured creditors over all other debts and dues, including taxes and cesses, once the security interest is registered. The Court relied on the settled position that Crown debt yields to a prior secured debt and that a tax charge cannot defeat rights already crystallised in favour of a secured creditor and its bona fide auction purchaser. The mutation entry was treated as a consequential step flowing from the petitioners' title under the sale certificates, and delay was held not to bar relief.

Conclusion: The secured creditor's claim prevailed over the State's tax charge, and the petitioners were entitled to mutation of their names with the State's attachment or charge set aside.

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