2003 Supreme(SC) 873

2003(7) Supreme 267
SUPREME COURT OF INDIA
(From Patna High Court)
V.N. Khare, CJI., S.B. Sinha, J.
Ram Chandra Singh -Appellant
versus
Savitri Devi & Ors. -Respondents
Civil Appeal No. 8216 of 2003
(Arising out of SLP (C) No. 6535 of 1999)
With
Civil Appeal No. 8217 of 2003
(Arising out of SLP (C) No. 20273 of 1999)
Decided on 9-10-2003
Counsel for the Parties :
For the Appearing Parties : Dr. G.C. Bharuka, Sr. Advocate, Sanjiv Goel, Devashish Bharuka, B.K. Satija, S.B. Upadhyay, Advocate (NP), R.S. Dvivedi, Ajay Kumar, S.R. Setia, Ajay Choudhary, Advocate (NP), Amit Kumar, Advocate (NP), Ram Lal Roy, R.N. Keshwani, Advocates.

IMPORTANT POINT
An act of fraud on Court is always viewed seriously. Any affair tainted with fraud cannot be perpetuated or saved by the application of any equitable doctrine including res-judicata.

Headnote:(i) Civil Procedure Code, 1908-Section 151, Order XXVI, Rule 13 and 14(2), Order XX, Rule 18-Power of Court for setting aside a preliminary decree on ground that it was obtained by practising fraud-Inherent jurisdiction with Court-Once it is held that a judgment and decree has been obtained by practising fraud on court, principles of res-judicata shall not apply.

       Held : Commission of fraud on court and suppression of material facts are the core issues involved in these matters. Fraud as is well- known vitiates every solemn act. Fraud and justice never dwells together. Fraud is a conduct either by letter or words, which induces the other person, or authority to take a definite determinative stand as a response to the conduct of former either by word or letter. It is also well settled that misrepresentation itself amounts to fraud. Indeed, innocent misrepresentation may also give reason to claim relief against fraud. A fraudulent misrepresentation is called deceit and consists in leading a man into damage by willfully or recklessly causing him to believe and act on falsehood. It is a fraud in law if a party makes representations which he knows to be false, and injury ensues therefrom although the motive from which the representations proceeded may not have been bad. (Paras 15 to 18)

       An act of fraud on court is always viewed seriously. A collusion or conspiracy with a view to deprive the rights of the others in relation to a property would render the transaction void ab initio. Fraud and deception are synonymous. (Para 22)

       Although in a given case a deception may not amount to fraud, fraud is anathema to all equitable principles and any affair tainted with fraud cannot be perpetuated or saved by the application of any equitable doctrine including res-judicata. (Para 23)

       Keeping in view the aforementioned principles, the questions raised in these appeals are required to be considered. The High Court observed that the application of intervention filed by the appellant purported to be under Order XXVI, Rules 13 and 14(2) and Order XX, Rule 18 was not maintainable as they do not confer any power to court for setting aside a preliminary decree on the ground that it was obtained by practising fraud. But once the principles aforementioned are to be given effect to, indisputably the court must be held to have inherent jurisdiction in relation thereto. (Para 28)

       Once it is held that a judgment and decree has been obtained by practising fraud on the court it is trite that the principles of res-judicata shall not apply. The High Court, therefore, in our opinion committed a serious error in referring to the earlier orders passed by it so as to shut the doors of justice on the face of appellant for all time to come. We, therefore, are of the opinion that the impugned judgment dated 10.12.1998 cannot be sustained. (Para 31)

       (ii) Civil Procedure Code, 1908-Section 151-Inherent jurisdiction-Respondent, mortgagor had taken loan from a Bank-Lands mortgaged in favour of Bank-Default in repayment of loan-Recovery suit filed by Bank and also for preliminary decree as regard mortgaged property admeasuring 95.20 acres-A preliminary decree passed in favour of bank-Execution petition-30 acres out of total area of 57.12 acres of land put on auction sale-Auction sale confirmed by Executing Court pursuant whereto, appellant deposited the amount-Brother of mortgagor filing objection-Appellant took possession of auctioned land-Revision filed by respondents-Auction sale set aside-Appeal against-Preliminary decree passed challenged as collusive and fraudulent-Matter to be considered afresh by the High Court.

       Held : So far as the order dated 10.5.1999 passed in Civil Review No. 245/1998 is concerned, suffice it to say that the High Court should have considered the question as to whether the right of the auction purchaser could have been set at naught by reason of a consent order passed in his absence. The appellant was not a party in the First Appeal. He was also not a party to the compromise. The consent order, as is well-known, is an agreement between the parties with the seal of the Court superadded to it. The appellant herein in the Review Application categorically stated that the parties to the appeal had suppressed the auction sale as also the confirmation thereof. The effect of the events appearing subsequent to the filing of First Appeal resulting in creation of a third party right was bound to be taken into consideration by the High Court. A third party right cannot be set at naught by consent. The High Court, therefore, was required to consider the contention of the appellant in their proper perspective. The High Court, in our opinion, was obligated to address itself on these questions for the purpose of reviewing its order. (Paras 32 & 33)