Registered security interest priority under SARFAESI can prevail over state tax attachment, protecting auction purchaser title.

A duly registered security interest under the SARFAESI framework is described as prevailing over subsequently asserted State tax claims, including where a tax attachment is entered in revenue records without proof of a valid statutory proclamation or compliance with recovery procedure. The text further notes that, on the stated facts, an auction purchaser taking under an SARFAESI sale was not shown to have actual or constructive notice of the State's claim, and an "as is where is, whatever there is" sale did not continue an unsupported State encumbrance against the transferred property. The stated result is that the secured creditor's priority is preserved and the revenue-record encumbrance is to be removed.

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Issues: Whether the secured creditor's registered security interest had priority over the State tax authorities' claim and whether the sale in favour of the auction purchaser could pass title free from the alleged MVAT encumbrance.

Analysis: The security interest had been registered with CERSAI long before the tax attachment, and the Court treated the dispute as governed by the Full Bench ruling on the statutory priority conferred by section 26E of the SARFAESI Act, 2002. The Court held that after the enforcement of the statutory regime, the dues of a secured creditor registered under the SARFAESI framework rank in priority over State tax dues, and that a mere attachment entry in the revenue record, without proof of statutory proclamation and without compliance with the required recovery procedure, does not establish an enforceable superior charge against the secured asset. The Court also held that, on the facts, the auction purchaser had not been shown to have constructive or actual notice of the State's claim, and the sale on an "as is where is, whatever there is" basis did not continue the State encumbrance against the property sold under SARFAESI.

Conclusion: The secured creditor's claim had priority, the auction purchaser received clear title free from the MVAT encumbrance, and the State tax authorities were directed to remove the revenue-record encumbrance.

Ratio Decidendi: A duly registered security interest under the SARFAESI Act prevails over subsequently asserted State tax claims, and an unproclaimed or procedurally unsupported tax attachment cannot defeat the secured creditor's statutory priority or bind the auction purchaser in the absence of constructive or actual notice.

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