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Section 26: Priority to secured creditors over all other debts and Government revenues

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 • Official Statutory Text & Practice Guide

Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 2002
Section 25 All 42 Sections of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 Section 27

Legal Commentary & Landmark Judgments: Section 26

Section 26 (read with Chapter IV-A) governs the Central Register and establishes the statutory priority of secured creditors over all other debts and Government revenues.

  • Core Legal Standard: Section 26 provides for public inspection of particulars of securitisation, asset reconstruction, and security interest entered in the Central Register (CERSAI).
  • Operational Mechanism: Under the statutory scheme reinforced by Section 26E, once a security interest is registered with CERSAI, debts due to any secured creditor shall be paid in priority over all other debts and all revenues, taxes, cesses, and rates payable to the Central Government, State Governments, or local authorities.
Key Landmark Precedents:
  • Punjab National Bank v. Union of India (2022) 7 SCC 260: A three-judge bench authoritatively held that registered security interests under SARFAESI give secured creditors absolute priority over all crown debts and tax dues of the Central or State Governments, confirming bank priority over excise and GST claims.
Legal Commentary:

Section 26 and Chapter IV-A eliminated the doctrine of priority of crown debts in secured asset recovery. By ensuring that CERSAI-registered mortgages rank ahead of municipal, sales tax, and central revenue attachments, it protected banks from retrospective fiscal confiscation.

Section 25 All 42 Sections of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 Section 27