1. Trust property sale — Court permission sought for sale at highest price — Suppression of higher offer by trustees — Sale executed based on misrepresentation. (Para 2 , 3 , 5 , 6 )
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1996 Supreme(SC) 446
SUPREME COURT OF INDIA
A.M. AHMADI, C.J.I., M.K.MUKHERJEE AND SUJATA V. MANOHAR, JJ.
Gowrishankar and another, Appellants
Versus
Joshi Amba Shankar Family Trust and others, Respondents.
Civil Appeal No. 3684 of 1996 (arising out of SLP (C) No. 18562 of 1995),
D / - 22-2-1996.
Important Points
A judgment or decree obtained by playing fraud on the court is a nullity and non est. Suppressing a higher offer while seeking court permission to sell trust property constitutes fraud, rendering the resulting sale order void regardless of the subsequent purchaser's bona fides.
Subject
Civil Law - Trust Law
Act Referred
Headnote
Income Tax Act - Section 230-A - Purposes of trust for paucity of funds - Purchase of property - By deed of declaration dated January Joshi created respondent trust in relation to his three immovable properties one of which is house and ground at that street referred to as property for the benefit of his poor relations and for other charitable and pious purposes - As trustees were finding it difficult to carry out the purposes of trust for paucity of funds they moved the High Court for modification of terms trust deed so as to empower them to sell above properties - By its order dated November High Court granted such power subject to condition that it would be exercised only with the permission of Court and the concurrence of the total number of trustees in office – Held, According to trustees version made therein they discussed about the offer of the appellants and then made it known to them that the sale of the property would be on as is where is condition and therefore they asked appellants to confirm that the offer would be for sale without vacant possession but the appellants did not respond though they had promised to come back - Certain other averments have also been made therein to contend that the appellants were not serious about offer - No correspondence much less contemporaneous record nor any other material was produced before Court in support of the above claim made in the counter affidavit - At the risk of repetition it may be recalled that trustees had earlier intimated appellants that they would discuss about their offer and asked them to wait for their decision - Appeal allowed
Legal Category Hierarchy
Table of Contents
2. Appellants alleged fraud on court via suppression of higher offer; Trustees and purchasers contended the offer was not bona fide and purchasers were bona fide purchasers. (Para 7 , 8 , 9 )
3. Trustees suppressed a higher offer and falsely represented a lower offer as the highest to obtain court permission, constituting fraud on the court. (Para 12 , 13 , 14 , 15 )
4. A judgment or decree obtained by playing fraud on the court is a nullity and non est, regardless of the bona fides of subsequent purchasers. (Para 16 )
5. Appeal allowed — Impugned order set aside — Matter remitted to High Court to call for fresh offers not less than the previously offered amount. (Para 16 )
6. What is the legal status of a judgment or decree obtained by playing fraud on the court?
A judgment or decree obtained by playing fraud on the court is a nullity and non est. It can be challenged in any court, whether superior or inferior, even in collateral proceedings. (Para 16 )
7. Does the bona fide status of a purchaser validate a sale if the court's permission was obtained by fraud?
No. If the permission to sell was obtained by practicing fraud upon the court, the question of whether the purchasers purchased the property bona fide without notice of other offers is immaterial. (Para 16 )
8. Does suppressing a higher offer while claiming a lower one is the highest to obtain court permission constitute fraud?
Yes. Making incorrect and untrue statements to persuade the court to grant permission to sell by suppressing higher offers constitutes fraud on the court. (Para 13 , 14 )
JUDGMENTS :- Special leave granted. Heard the learned counsel for the parties.
2. This appeal is directed against the judgment and order dated July 11, 1995 rendered by the Madras High Court disposing of two Original Side appeals. Facts leading to this appeal and relevant for its disposal are as under :
By a deed of declaration dated January 15, 1939 (sic) one Ambasankar Joshi created the respondent No.1 - trust in relation to his three immovable properties, one of which is house and ground No.429 (new No. 162) at that street, Madras (hereinafter referred to as the property) for the benefit of his poor relations and for other charitable and pious purposes. As the trustees were finding it difficult to carry out the purposes of the trust for paucity of funds they moved the High Court in 1979 for modification of the terms of the trust deed so as to empower them to sell the above properties. By its order dated November 28, 1988 the High Court granted such power subject to the condition that it would be exercised only with the permission of the Court and the concurrence of 3/4th of the total number of trustees in office.
3. Armed with the above order the trustees invited offers for purchase of the property and on receipt of some offers sought permission of the High Court to sell the same at the highest price offered which was granted on February 9, 1984. However, in spite of the permission so granted, the trustees did not sell the property at the highest price offered, which was Rs.8,18,000/- till then, and instead thereof invited, and received, fresh offers including one from the respondent Nos. 10 to 18 (hereinafter referred to as the purchasers) who are brothers and members of a joint family, for Rs.9,00,000/-, by a resolution dated December 9, 1989 the trustees accepted the offer of the purchasers and entered into a formal agreement for sale with them on December 15, 1989, after receiving a sum of Rs.1,80,000/- an earnest money. Then on Janaury 15, 1990, the trustees applied for the clearance certificate required under the Income Tax Act for sale of the property. A week thereafter on Janaury 23, 1990 to be precise the appellants herein sent a letter to the trustees which reads as under :
"By an order dated 9th February, 1984 in Application No.60 of 1989 in C.S. No. 530 of 1979 on the Original Side of the High Court at Madras. His Lordship Mr. Justice Sengottuvelan was pleased to permit the trust, the applicant in the above Application to sell the immovable property together with the superstructure thereon bearing door No.162 (old No.420). Mint Street, Madras 79 at the highest price offered.
As offers were not called for by due publication in the press for which we were waiting so far, we are now offering for the said property together with the superstructure, fittings and fixtures, being door No. 162 (new) Mint Street, Madras-79 a sum of Rs.14,20,000/- (Rupees Fourteen Lakhs and Twenty Thousand Only) which price is negotiable.
We have been in occupation of the said premises for over a half century running a Hotel, Industry, a portion thereof being occupied for our personal residential purposes, paying rent to the trust regularly and without default during all these years. Since we are keenly interested in the property, we therefore request you to consider the offer, which is negotiable favourably. Kindly acknowledge and let us have a favourable reply at the earliest.
Thanking You".
4. In acknowledging the above letter the trustees intimated the appellants, by letter dated February 26, 1990, that their offer to purchase the property for Rs. 14,20,000/- would be placed before the meeting of the trustees and the decision taken would be communicated to them; and, accordingly, asked them to wait for the result of the meeting.
5. Thereafter on March 16, 1990 the trust through the managing trustees, filed an application in the High Court (Application No. 1660 of 1990) seeking permission to sell the property to the purchasers for Rs.9,00,000/-
