Registered secured creditor priority prevails over unenforced State tax attachments, protecting auction purchasers from continuing revenue-record encumbrances.

Registered secured creditors have priority over State tax dues and statutory charges under the central recovery regime where their security interests are registered. State first-charge provisions do not displace that priority, particularly where State charges are unregistered or subsequent. A mere State attachment cannot defeat secured-creditor priority unless it was completed through the prescribed public-proclamation and recovery process. Following payment and issuance of a sale certificate, an auction purchaser may enjoy the secured asset free of a State boja or encumbrance; an "as is where is" condition does not preserve an inferior State claim. State attachments and revenue-record encumbrances contrary to these principles require removal.

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Issues: (i) Whether registered secured creditors' dues take priority over State tax dues and statutory charges; (ii) Whether State attachment orders issued before enforcement of the secured-creditor priority provisions can defeat that priority without a lawful public proclamation and consequential recovery steps; (iii) Whether an auction purchaser of a secured asset may be subjected to a State boja/encumbrance after completion of the secured sale.

Issue (i): Whether registered secured creditors' dues take priority over State tax dues and statutory charges.

Analysis: Section 26E of the SARFAESI Act and Section 31B of the RDDB Act confer priority upon secured creditors in distribution of sale proceeds over all debts, revenues, taxes, cesses and rates payable to governmental authorities. The State provisions creating a first charge, including Section 82 of the MGST Act and amended Section 37 of the MVAT Act, do not displace that statutory priority. The secured interests in the cases were registered before the State departments' charges, or the State charges were not registered.

Conclusion: The secured creditors' registered dues have priority over the State tax dues, in favour of the secured creditors.

Issue (ii): Whether State attachment orders issued before enforcement of the secured-creditor priority provisions can defeat that priority without a lawful public proclamation and consequential recovery steps.

Analysis: A mere attachment order is insufficient. For a pre-enforcement attachment to resist the secured creditor's priority, the State must establish attachment and public proclamation in accordance with the applicable revenue-recovery procedure, along with the required consequential steps. The State did not establish compliance with those requirements in any of the relevant petitions.

Conclusion: The unproclaimed and incompletely enforced State attachments cannot defeat the secured creditors' statutory priority, in favour of the secured creditors.

Issue (iii): Whether an auction purchaser of a secured asset may be subjected to a State boja/encumbrance after completion of the secured sale.

Analysis: Upon payment of consideration and issuance of the sale certificate in a secured sale, the auction purchaser is entitled to enjoy the asset free from a State encumbrance that cannot prevail over the secured creditor's priority. An "as is where is" sale condition does not permit the State to pursue the same asset or retain a revenue-record boja after enforcement of the security interest.

Conclusion: The State cannot retain or enforce a boja/encumbrance against the auction purchasers' secured-sale assets, in favour of the auction purchasers.

Final Conclusion: The impugned State attachment orders, notices, communications and revenue-record encumbrances were invalidated, and consequential removal of the encumbrances was required.

Ratio Decidendi: Statutory priority of a duly registered secured creditor under the central recovery regime prevails over State tax charges unless a pre-existing State attachment was lawfully completed through the prescribed public-proclamation and recovery process.

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