Statutory priority of secured creditors prevails over later tax recovery attachment against mortgaged property.

A mortgage created in favour of a secured creditor before tax recovery steps was held to attract statutory priority under Section 26E of the SARFAESI Act, so the secured debt ranked ahead of later government recovery action. The Court applied the rule that, where special enactments conflict, the later law with an overriding priority provision prevails, and relied on the corresponding priority under Section 31B of the RDDB Act. It also noted that the presence of an alternative remedy under FEMA did not bar writ jurisdiction where the impugned order was without jurisdiction. The attachment of the mortgaged property was therefore not sustainable and was liable to be quashed.

---

---

Issues: Whether the secured creditor's mortgage and statutory priority under Section 26E of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 override the subsequent attachment made for recovery of tax dues, and whether the impugned attachment of the mortgaged property could be sustained.

Analysis: The property had been mortgaged in favour of the secured creditor before the tax recovery steps were initiated. Section 26E gives priority to secured creditors and provides that, after registration of the security interest, debts due to such creditor are to be paid in priority over all other debts and government dues. The Court applied the principle that, where two special enactments conflict, the later enactment with the overriding provision prevails. It relied on the statutory priority under Section 26E, the corresponding priority provision under Section 31B of the Recovery of Debts and Bankruptcy Act, 1993, and the settled position that secured creditors' rights prevail over subsequent governmental recovery proceedings. The Court also held that the alternative remedy under Section 37A(5) of the Foreign Exchange Management Act, 1999 did not oust writ jurisdiction in the face of an order lacking jurisdiction.

Conclusion: The attachment could not be sustained against the mortgaged property and was liable to be quashed in favour of the secured creditor.

---