Priority of prior registered security interest prevails over later tax lien; secured creditor may enforce outside liquidation.

A later statutory tax lien could not override a prior registered security interest created in favour of a financial creditor, because priority followed the earlier perfected charge under Section 48 of the Transfer of Property Act. The cited Rainbow Papers ruling did not alter this result, as it did not concern rival secured interests or enforcement under Section 52 of the Insolvency and Bankruptcy Code. The liquidator was also justified in allowing the secured creditor to realise its security outside liquidation and in directing release of the tax attachment, since the lien had not been disclosed in the claim form and was not registered with the Registrar of Companies.

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Issues: (i) Whether a statutory lien claimed by the State Tax Department could override a prior registered security interest created in favour of a financial creditor. (ii) Whether the liquidator was justified in permitting the secured financial creditor to realise its security interest and in directing release of the tax attachment.

Issue (i): Whether a statutory lien claimed by the State Tax Department could override a prior registered security interest created in favour of a financial creditor.

Analysis: The charge in favour of the financial creditor was created and registered in 2012, while the State Tax Department's lien arose only in 2019. The priority rule under Section 48 of the Transfer of Property Act, 1882 supports earlier created rights over later ones. The State Tax Department may claim a security interest by operation of law, but that does not place it ahead of a prior perfected and registered charge. The decision in Rainbow Papers does not assist the State Tax Department on the question of priority because it did not deal with a contest between rival secured interests or with enforcement under Section 52 of the Insolvency and Bankruptcy Code, 2016.

Conclusion: The later statutory lien could not defeat the prior registered security interest of the financial creditor.

Issue (ii): Whether the liquidator was justified in permitting the secured financial creditor to realise its security interest and in directing release of the tax attachment.

Analysis: Under Section 52 of the Insolvency and Bankruptcy Code, 2016, a secured creditor may elect to realise its security interest outside the liquidation estate. The financial creditor exercised that option, and the liquidator verified the security interest and facilitated enforcement. The State Tax Department had not disclosed the lien in its claim form and the lien was not registered with the Registrar of Companies. In these circumstances, the liquidator's conduct was held to be in accordance with the Code and the liquidation regulations, and the direction to release the attachment was upheld.

Conclusion: The liquidator's actions were valid, and the direction to release the tax charge was sustained.

Final Conclusion: The appeal failed because priority attached to the earlier registered security interest of the financial creditor, and the tax lien could not obstruct its enforcement under the insolvency framework. The impugned order was upheld and the connected applications were disposed of.

Ratio Decidendi: A later statutory tax lien cannot prevail over an earlier registered security interest, and once a secured creditor elects to realise security outside liquidation under Section 52 of the Insolvency and Bankruptcy Code, 2016, the liquidator may facilitate that enforcement notwithstanding the subsequent tax attachment.

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