LANDMARK JUDGMENTS ON FRAUD UPON COURT SUPPRESSION OF MATERIAL FACTS

Fraud is conduct or act or course of deception, an intentional concealment, omission, or perversion of truth, to (1) gain unlawful or unfair advantage, (2) induce another to part with some valuable item or surrender a legal right, or (3) inflict injury in some manner. Willfull fraud is a criminal offense which calls for severe penalties, and its prosecution and punishment (like that of a murder) is not bound by the statute of limitations.

Indian contract act Sec 17 defines fraud as “Fraud” means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto of his agent, or to induce him to enter into the contract:-

Sub Section (1)
the suggestion, as a fact, of that which is not true, by one who does not believe it to be true;
Sub Section (2)
the active concealment of a fact by one having knowledge or belief of the fact;
Sub Section (3)
a promise made without any intention of performing it
Sub Section (4)
any other act fitted to deceive;
Sub Section (5)
any such act or omission as the law specially declares to be fraudulent.
Under section 18
Misrepresentation” means and includes –
Sub Section (1)
the positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true
Sub Section (2)
any breach, of duty which, without an intent to deceive, gains an advantage to the person committing it, or any one claiming under him, by misleading another to his prejudice or to the prejudice of any one claiming under him;
Sub Section (3)
causing, however innocently, a party to an agreement to make a mistake as to the substance of the thing which is the subject of the agreement.

In another landmark judgment on Suppression of Material Facts Supreme Court of India Mithoolal Nayak vs Life Insurance Corporation Of … on 15 January, 1962 Equivalent citations: 1962 AIR 814, 1962 SCR Supl. (2) 571 it was held that the policy-holder was guilty of fraudulent suppression of material facts relating to his health and the Company was entitled to avoid the contract . policy holder is not even entitled for refund of amounts as the statement was on a material matter or there was suppression of facts which it was material to disclose.

Supreme Court of India and various high Court have den precated the practice of fraud upon court and many times such litigants are thrown out of court following are some of the landmark judgments on the issue.

IN S.P. Chengalvaraya Naidu (dead) by L.Rs. v. Jagnnath (dead) by Lrs., (1994) 2 SCC 1 : (1994 AIR SCW 243 : AIR 1994 SC 853) the two Judges Bench of this Court held:

“Fraud avoids all judicial acts, ecclesiastical or temporal” observed Chief Justice Edward Coke of England about three centuries ago. It is the settled proposition of law that a judgment or decree obtained by playing fraud on the Court is a nullity and non est in the eyes of law. Such a judgment/decree by the first Court or by the highest Court-has to be treated as a nullity by every Court, whether superior or inferior. It can be challenged in any Court even in collateral proceedings..”
[15]

In Indian Bank v. Satyam fibres (India) Pvt. Ltd., (1996) 5 SCC 550 : (1996 AIR SCW 3281 AIR 1996 SC 2592) another two Judges bench, after making reference to a number of earlier decisions rendered by different High Courts in India, stated the legal position thus:
“Since fraud affects the solemnity, regularity and orderliness of the proceedings of the Court and also amounts to an abuse of the process of Court, the Courts have been held to have inherent power to set aside an order obtained by fraud practised upon that Court. Similarly, where the Court is misled by a party or the Court itself commits a mistake which prejudices a party, the Court has the inherent power to recall its order.”

in S.P. Chengalvaraya Naidu (dead) by L.Rs. v. Jagannath (dead) by L.Rs. and Ors., 1993 6 JT 331, the Court held that where a preliminary decree was obtained by withholding an important document from the court, the party concerned deserves to be thrown out at any stage of the litigation.

[6] In Prestige Lights Ltd. v. State Bank of India, 2007 8 SCC 449, it was held that in exercising power under Article 226 of the Constitution of India the High Court is not just a court of law, but is also a court of equity and a person who invokes the High Court’s jurisdiction under Article 226 of the Constitution is duty bound to place all the facts before the court without any reservation. If there is suppression of material facts or twisted facts have been placed before the High Court then it will be fully justified in refusing to entertain petition filed under Article 226 of the Constitution. This Court referred to the judgment of Scrutton, LJ. in R Kensington Income Tax Commissioners, 1917 1 KB 486, and observed:
In exercising jurisdiction under Article 226 of the Constitution, the High Court will always keep in mind the conduct of the party who is invoking such jurisdiction. If the applicant does not disclose full facts or suppresses relevant materials or is otherwise-guilty of misleading the Court, then the Court may dismiss the action without adjudicating the matter on merits. The rule has been evolved in larger public interest to deter unscrupulous litigants from abusing the process of Court by deceiving it. The very basis of the writ jurisdiction rests in disclosure of true, complete and correct facts. If the material facts are not candidly stated or are suppressed or are distorted, the very functioning of the writ courts would become impossible.
[7] In A.V. Papayya Sastry and Ors. v. Government of A.P. and Ors., 2007 AIR(SC) 1546, the Court held that Article 136 does not confer a right of appeal on any party. It confers discretion on this Court to grant leave to appeal in appropriate cases. In other words, the Constitution has not made the Supreme Court a regular Court of Appeal or a Court of Error. This Court only intervenes where justice, equity and good conscience require such intervention.
[8] In Sunil Poddar and Ors. v. Union Bank of India, 2008 2 SCC 326, the Court held that while exercising discretionary and equitable jurisdiction under Article 136 of the Constitution, the facts and circumstances of the case should be seen in their entirety to find out if there is miscarriage of justice. If the appellant has not come forward with clean hands, has not candidly disclosed all the facts that he is aware of and he intends to delay the proceedings, then the Court, will non-suit him on the ground of contumacious conduct.
[9] In K.D. Sharma v. Steel Authority of India Ltd. and Ors., 2008 12 SCC 481, the court held that the jurisdiction of the Supreme Court under Article 32 and of the High Court under Article 226 of the Constitution is extraordinary, equitable and discretionary and it is imperative that the petitioner approaching the Writ Court must come with clean hands and put forward all the facts before the Court without concealing or suppressing anything and seek an appropriate relief. If there is no candid disclosure of relevant and material facts or the petitioner is guilty of misleading the Court, his petition may be dismissed at the threshold without considering the merits of the claim. The same rule was reiterated in G. Jayshree and Ors. v. Bhagwandas S. Patel and Ors., 2009 3 SCC 141.

Adv.Rajesh Tekale, High Court, Mumbai

1 reply
  1. Amol Lendave
    Amol Lendave says:

    Very informative article on fraud upon court.The judgements are very relevant on suppression of material facts.

    Reply

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