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Fraud case and No litigation charges

Supreme Court of India
 
PETITIONER: S.P CHENGALVARAYA NAIDU
 Vs.
RESPONDENT: JAGANNATH

DATE OF JUDGMENT 27/10/1993

BENCH:KULDIP SINGH (J)

BENCH:KULDIP SINGH (J) SAWANT, P.B.

CITATION:

 1994 AIR 853 1994 SCC (1) 1
 JT 1993 (6) 331 1993 SCALE (4)277

JUDGMENT:

The Judgment of the Court was delivered by KULDIP SINGH, J.- “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.

2. Predecessor-in-interest of the respondents-plaintiffs filed application for final decree for partition and separate possession of the plaint-properties and for mesne profits. The appellants-defendants contested the application on the ground that the preliminary decree, which was sought to be made final, was obtained by fraud and, as such, the application was liable to be dismissed. The trial Judge accepted the contention and dismissed the application for grant of final decree. The respondents- plaintiffs went in appeal before the High Court. A Division Bench of the High Court went through plethora of case-law and finally allowed the appeal and set aside the order of the trial court. This appeal is by way of certificate granted by the High Court.

3. One Jagannath was the predecessor-in-interest of the respondents. He was
working as a clerk with one Chunilal Sowcar. Jagannath purchased at court
auction the properties in dispute which belonged to the appellants. Chunilal
Sowcar had obtained a decree and the court sale was made in execution of the
said decree. Jagannath had purchased the property in the court auction on behalf
of Chunilal Sowcar, the decree-holder. By a registered deed dated November 25,
1945, Jagannath relinquished all his rights in the property in favour of
Chunilal Sowcar. Meanwhile, the appellants who were the judgment-debtors had
paid the total decretal amount to Chunilal Sowcar. Thereafter, Chunilal Sowcar,
having received the decretal amount, was no longer entitled to the property
which he had purchased through Jagannath. Without disclosing that he had
executed a release deed in favour of Chunilal Sowcar, Jagannath filed a suit for
partition of the property and obtained a preliminary decree. During the pendency of the suit, the appellants did not know that Jagannath had no locus standi to file the suit because he had already executed a registered release deed,relinquishing all his rights in respect of the property in dispute, in favour of Chunilal Sowcar. It was only at the hearing of the application for final decree that the appellants came to know about the release deed and, as such, they challenged the application on the ground that non- disclosure on the part of Jagannath that he was left with no right in the property in dispute, vitiated the proceedings and, as such, the preliminary decree obtained by Jagannath by playing fraud on the court was a nullity. The appellants produced the release deed (Ex. B- 1 5) before the trial court. The relevant part of the release deed is as under: “Out of your accretions and out of trust vested in me, purchased the schedule mentioned properties benami in my name through court auction and had the said sale confirmed. The said properties are in your possession and enjoyment and the said properties should henceforth be held and enjoyed with all rights by you as had been done:

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       So far if any civil or criminal proceedings have to be conducted in respect of the said properties or instituted by others in respect of the said properties you shall conduct the said proceedings without reference to me and shall be held liable for the profits or losses you incur thereby. All the records pertaining the aforesaid properties are already remaining with you.

4. The High Court reversed the findings of the trial court on the following
reasonings:

“Let us assume for the purpose of argument that this document, Ex. B-15, was of the latter category and the plaintiff, the benamidar, had completely divested himself of all rights of every description. Even so, it cannot be held that his failure to disclose the execution of Ex. B-15 would amount to collateral or extrinsic fraud. The utmost that can be said in favour
of the defendants is that a plaintiff who had no title (at the time when the
suit was filed) to the properties, has falsely asserted title and one of the
questions that would arise either expressly or by necessary implication is
whether the plaintiff had a subsisting title to the properties. It was up to the
defendants, to plead and establish by gathering all the necessary materials,
oral and documentary, that the plaintiff had no title to the suit properties. It
is their duty to obtain an encumbrance certificate and find out whether the
plaintiff had still a subsisting title at the time of the suit. The plaintiff
did not prevent the defendants, did not use any contrivance, nor any trick nor any deceit by which the defendants were prevented from raising proper pleas and adducing the necessary evidence. The parties were fighting at arm’s length and it is the duty of each to traverse or question the allegations made by the other and to adduce all available evidence regarding the basis of the plaintiff’s claim or the defence of the defendants and the truth or falsehood concerning the same. A party litigant cannot be indifferent, and negligent in his duty to place the materials in support of his contention and afterwards seek to show that the case of his opponent was false. The position would be entirely different if a party litigant could establish that in a prior litigation his opponent prevented him by an independent, collateral wrongful act such as keeping his witnesses in wrongful or secret  confinement, stealing his documents to prevent him from adducing any evidence, conducting his case by tricks and misrepresentation
resulting in his misleading of the Court. Here, nothing of the kind had happened and the contesting defendants could have easily produced a certified registration copy of Ex. B-15 and non-suited the plaintiff; and, it is absurd for them to take advantage of or make a point of their own acts of omission or negligence or carelessness in the conduct of their own defence.” The High Court further held as under:

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“From this decision it follows that except proceedings for probate and other
proceedings where a duty is cast upon a party litigant to disclose all the
facts, in all other cases, there is no legal duty cast upon the plaintiff to
come to Court with a true case and prove it by true evidence. It would cut at
the root of the fundamental principle of law of finality of litigation
enunciated in the maxim ‘interest reipublicae ut sit finis litium’ if it should
be held that a judgment obtained by a plaintiff in a false case, false to his
knowledge, could be set aside on the ground of fraud, in a subsequent
litigation.” Finally, the High Court held as under:

“The principle of this decision governs the instant case. At the worst the
plaintiff is guilty of fraud in having falsely alleged, at the time when
he filed the suit for partition, he had subsisting interest in the
property though he had already executed Ex. B-15. Even so, that would not amount
to extrinsic fraud because that is a matter which could well have been traversed
and established to be false by the appellant by adducing the necessary evidence.
The preliminary decree in the partition suit necessarily involves an
adjudication though impliedly that the plaintiff has a subsisting interest in
the property.”

5. The High Court, in our view, fell into patent error. The short question
before the High Court was whether in the facts and circumstances of this case,
Jagannath obtained the preliminary decree by playing fraud on the court. The
High Court, however, went haywire and made observations which are wholly
perverse. We do not agree with the High Court that “there is no legal duty cast
upon the plaintiff to come to court with a true case and prove it by true
evidence”. The principle of “finality of litigation” cannot be pressed to the
extent of such an absurdity that it becomes an engine of fraud in the hands of
dishonest litigants. The courts of law are meant for imparting justice between
the parties. One who comes to the court, must come with clean hands. We are
constrained to say that more often than not, process of the court is being
abused. Property-grabbers, tax-evaders, bank-loan-dodgers and other unscrupulous
persons from all walks of life find the court-process a convenient lever to
retain the illegal-gains indefinitely. We have no hesitation to say that a
person, who’s case is based on falsehood, has no right to approach the court. He
can be summarily thrown out at any stage of the litigation.

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6. The facts of the present case leave no manner of doubt that Jagannath
obtained the preliminary decree by playing fraud on the court. A fraud is an act
of deliberate deception with the design of securing something by taking unfair
advantage of another. It is a deception in order to gain by another’s loss. It
is a cheating intended to get an advantage. Jagannath was working as a clerk
with Chunilal Sowcar. He purchased the property in the court auction on behalf
of Chunilal Sowcar. He had, on his own volition, executed the registered release
deed (Ex. B-15) in favour of Chunilal Sowcar regarding the property in dispute.
He knew that the appellants had paid the total decretal amount to his master
Chunilal Sowcar. Without disclosing all these facts, he filed the suit for the
partition of the property on the ground that he had purchased the property on
his own behalf and not on behalf of Chunilal Sowcar. Non-production and even
non-mentioning of the release deed at the trial is tantamount to playing fraud
on the court. We do not agree with the observations of the High Court that the
appellants- defendants could have easily produced the certified registered copy
of Ex. B-15 and non-suited the plaintiff. A litigant, who approaches the court,
is bound to produce all the documents executed by him which are relevant to the
litigation. If he withholds a vital document in order to gain advantage on the
other side then he would be guilty of playing fraud on the court as well as on
the opposite party.

7. We, therefore, allow the appeal, set aside the impugned judgment of the High Court and restore that of the trial court. The appellants shall be entitled to their costs which we quantify as Rs 11,000.

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