Prior CERSAI-registered security interest prevails over State tax dues, invalidating later demand notices and prohibitory measures.

A secured creditor with prior CERSAI registration was held to have statutory priority over the State's GST and MVAT dues, because Section 26B recognises registration of security interests and Section 26E gives a non-obstante priority in payment to such a creditor. The Court rejected the attempted distinction between GST and MVAT liabilities, holding that the registered security interest prevailed where the registrations pre-dated the impugned tax measures. Accordingly, the petitioner-bank's priority claim succeeded and the demand notices, prohibitory order and related communications were liable to be quashed.

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Issues: Whether a secured creditor whose security interest was registered with CERSAI prior to the impugned tax demands, prohibitory order and communications could claim priority over the State's GST/MVAT dues and have the impugned actions set aside.

Analysis: The Full Bench ruling relied upon by the Court had explained that Section 26B of the Securitisation and Reconstruction of Financial Assets and Security Interest Act, 2002 recognises registration of security interests with the Central Registry, and Section 26E, operating through a non-obstante clause, accords priority in payment to a secured creditor having such registration. The Court applied the same reasoning to both petitions, holding that the attempted distinction between GST dues and MVAT dues could not defeat the principle that priority attaches to the secured creditor's registered security interest. Since the petitioner's security interests were registered in 2015, 2016 and 2018, whereas the impugned measures were issued later, the petitioner-bank's claim had precedence over the State's claims.

Conclusion: The petitioner-bank's registered security interests had priority over the State tax demands, and the impugned demand notices, prohibitory order and communications were liable to be quashed.

Final Conclusion: Both writ petitions were allowed on the footing that prior CERSAI-registered secured interests prevailed over the State authorities' dues.

Ratio Decidendi: A secured creditor with prior CERSAI registration enjoys statutory priority over all other dues, including taxes, cesses and other government or local authority claims, unless displaced by a legally recognised exception.

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