Fraud vitiates compromise decrees where company property is transferred without authority and no title can pass.

A compromise decree and sale deed relating to company property under winding up were treated as invalid because the transaction was found to have been engineered without proper authorisation, without a board resolution, and on suspicious facts surrounding the alleged agreement, Lok Adalat compromise, execution of the deed, and claimed consideration. The transaction was held to be designed to defeat the winding-up process and to involve fraud on both the District Court and the Lok Adalat. Applying the principle that fraud vitiates every judicial act and that a litigant must come to court with clean hands, the Court held that no rights could arise from the transaction and the applicants acquired no title or interest in the property.

---

---

Issues: Whether the compromise decree and consequent sale deed obtained in favour of the applicants were vitiated by fraud and could confer any right over the company property.

Analysis: The property sold was part of the assets of a company under winding up. The sale was found to have been engineered without proper authorisation from the company and without any board resolution, while the circumstances of the alleged agreement, the compromise before the Lok Adalat, the execution of the sale deed, and the claimed payment of consideration were held to be inherently suspicious and inconsistent. The Court held that the entire transaction was designed to defeat the winding-up process and that fraud had been played on the District Court as well as the Lok Adalat. Applying the settled principle that fraud vitiates every judicial act and that a person who comes to court must come with clean hands, the Court held that no rights could arise from such a transaction.

Conclusion: The compromise decree passed by the Lok Adalat was a nullity and the applicants acquired no title or interest in the property.

---