The rights of secured creditors take precedence over government dues once a sale under the SARFAESI Act is registered.

JUDGMENT

(Dated this the 27^th day of January of 2026)

The petitioners are auction purchasers in an e-auction conducted by the State Bank of India. They were the successful bidders for a sale price of Rs.1,30,00,000/- and they had remitted the amount and Ext.P1 registered sale certificate is executed by the bank on 24.11.2022. The petitioners, after the registration of sale certificate, applied to the 1^st respondent for mutation of the property, to which Ext.P2 reply is sent stating that mutation cannot be effected as money due to the Government under sales tax and revenue recovery proceedings are pending and the State has priority over all debts. Petitioners, thereafter, applied for encumbrance certificate which is produced as Ext.P3 which shows that the sales tax dues are after the equitable creation of equitable mortgage with the 3^rd respondent bank on 11.05.2010. In such circumstances the petitioners approached this court to quash Ext.P2 and to direct respondent No.1 and 2 to remove the entries in the registers relating to encumbrance to subject property and to effect mutation.

2. The Government Pleader filed a counter affidavit, wherein it is contended that petitioners purchased the immovable property on the basis of Ext.P1 Sales Certificate and the same is duly registered as document No.2939/1/2022 and have filed an application for mutation. The Village officer sought for a clarification to the Taluk office and the Tahsildar has clarified that the property situated in Sy.No.740/2 extending to 0.0804 Hectares was attached through revenue recovery proceedings and hence, mutation can be effected only after lifting the attachment. As per the requisition received from the Assistant Commissioner (Assessment), Special Circle, Thrissur the District Collector, Thrissur issued revenue certificate in accordance with Section 69(3) of the Revenue Recovery Act , 1968 (the Act) to realise the sales tax dues from one Smt.Annie Ouseph. Notices under Sections 7 and 34 of the Act were issued and the same were served on the defaulter through the Village Officer.

3. Despite giving notice and directions, the defaulter failed to remit the amount and therefore, the landed properties of Smt.Annie Ouseph were attached vide order dated 22.10.2019 of the Tahsildar Mukundapuram. The same property is already attached by the Munsiff Court, Thrsisur in O.S.No.5039 of 2013 and O.S. No.5038 of 2013 in I.A.Nos. 15327 of 2013 and 15329 of 2013 respectively. Dues are there to the Provident Fund Organisation also. The letter issued from Deputy General Manager, SBI, Ernakulam revealed that the properties were mortgaged in 2010 and bank took symbolic possession in 2014 and physical possession on 22.3.2016. Revenue recovery proceedings were initiated long after the bank initiated the recovery proceeding on 3.12.2015.

4. Heard the learned counsel for the petitioners and the standing counsel for the respondent bank

5. It is not in dispute that Ext.P1 sale certificate is registered on 24.11.2022 and the petitioners have already filed an application for effecting mutation. Section 26-E of the SARFAESI Act grants priority to secured creditors after the registration of security interest and the debts due to any secured creditor shall be paid in priority over all the debts and all revenues, taxes cesses, and other rates payable to the Central Government or State Government or local authority.

6. In HDFC v. Sub Registry Officer ( 2011 KHC 851 ), Madan S. v. Sub Registrar, Kollam , [2014 (1) KLT 406] and in Travancore Devaswom Board, v. Deputy Examiner, Local Fund Audit and others [2020(3) KHC 129] , this court had an occasion to observe that the sale carried on either SARFAESI Act and under the RDB Act have precedence over the statutory charges due to the Government under the KVAT act or other