Secured creditor priority under SARFAESI did not justify quashing the tax charge on mortgaged property.

A secured creditor's interest registered in the CERSAI portal was treated as having priority over government tax dues under Section 31B of the SARFAESI Act, allowing enforcement against mortgaged property notwithstanding the tax charge. However, that priority did not justify quashing the tax authority's charge at that stage, because any surplus remaining after satisfaction of the secured debt could still be available towards the tax dues, and the Sub-Registrar could record the eventual SARFAESI sale by appropriate endorsement. The charge was therefore not quashed, with liberty reserved to the secured creditor or auction purchaser to seek the relevant entry after sale.

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Issues: Whether a charge created by the tax authority over mortgaged property could be quashed in view of the secured creditor's priority under Section 31B of the Securitization Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

Analysis: The secured creditor had already created and uploaded the mortgage particulars in the CERSAI portal. Section 31B gives priority to the secured interest over government tax dues, so the secured creditor may proceed against the property notwithstanding the charge. At the same time, the existence of that priority did not justify deleting or quashing the tax charge at that stage, because any surplus after the secured debt is satisfied may still be available for adjustment towards the tax dues, and the Sub-Registrar can note the eventual SARFAESI sale by appropriate endorsement.

Conclusion: The charge was not quashed. Liberty was left open to the secured creditor or the auction purchaser to make a representation to the Sub-Registrar after the sale for appropriate entry in relation to the SARFAESI sale.

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