In State Tax Officer v Rainbow Papers Ltd (2022), the Supreme Court treated the State as a secured…

Rainbow Papers (2022) held that the State was a secured creditor under the GVAT Act and observed that a security interest "could be created by operation of law". The 2026 Explanation to section 3(31) now provides that a security interest exists only where it is created "pursuant to an agreement or arrangement, by the act of two or more parties", and not "merely by operation of any law". Under the new Explanation to section 53(1)(e)(i), government dues for the two years before the liquidation commencement date rank under clause (e)(i), whether secured by act of parties or by operation of law, and the remainder under clause (f), not with secured creditors.