Recent rulings by Indian courts have affirmed that secured creditors have priority over government tax claims during insolvency proceedings, underlining the significance of the Insolvency and Bankruptcy Code (IBC), 2016. Key judgments, including from the Bombay and Madras High Courts, have consistently supported the principle that secured creditors' rights, as enshrined in Section 31B of the IBC and Section 26E of the SARFAESI Act, take precedence over state claims for taxes such as sales tax, commercial tax, and income tax. These decisions uphold that secured creditors can recover debts through the sale of mortgaged assets before satisfying government dues. This emerging legal clarity strengthens the position of lenders during debt recovery and insolvency processes.
