Supreme Court Clarifies Priority of Secured Creditors over Government Dues in Insolvency Cases

In a recent landmark judgment, the Supreme Court clarified the hierarchy of debt repayment in insolvency cases, emphasizing that secured creditors enjoy higher priority than dues owed to the Central or State Government. The Court highlighted the overriding effect of Section 238 of the Insolvency and Bankruptcy Code (IBC), stating that it supersedes provisions of other specific enactments such as the Electricity Act, 2003. This decision provides essential clarity on the treatment of government dues and reaffirms the principles of the waterfall mechanism under Section 53 of the IBC.