2003 (10) TMI 610 - SC - Indian Laws

Supreme Court sets aside High Court judgments obtained through fraud, orders fresh consideration of matters

The SC set aside HC judgments involving fraud on court and suppression of material facts. The court held that fraud vitiates all solemn acts and res ... Commission of fraud on court and suppression of material facts - principle 'actus curiae neminem gravabit' - Whether the right of the auction purchaser could have been set at naught by reason of a consent order passed in his absence ? - HELD THAT:- In Chittaranjan Das v. Durgapore Project Limited and Ors. [1994 (12) TMI 343 - CALCUTTA HIGH COURT], It has been held: 'Suppression of a material document which affects the condition of service of the petitioner, would amount to fraud in such matters. Even the principles of natural justice are not required to be complied within such a situation. It is now well known that a fraud vitiates all solemn acts. Thus, even if the date of birth of the petitioner had been recorded in the service returns on the basis of the certificate produced by the petitioner, the same is not sacrosanct nor the respondent company would be bound thereby.' 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. It is true that pursuant to or in furtherance of the consent order, the respondents had deposited the amount and the State Government has appropriated the same. The legal, issues as regard the effect of commission of fraud on court vis-a-vis the conduct of the parties are still at large. The High Court was therefore, required to adjust the equities between,the parties. The Bank cannot also unjustly enrich itself insofar as; while enforcing a preliminary decree of mortgage, it cannot take also recourse to recover the decretal amount from the judgment-debtors at the expense of the auction purchaser. In such an event also, the Court may have to find out a remedy which would be just and equitable. The High Court furthermore failed to notice the principle 'actus curiae neminem gravabit'. Following the judgement of Rajesh D. Darbar and Ors. v. Narasingrao Krishnaji Kulkarni and Ors. [2003 (8) TMI 477 - SUPREME COURT], we are of the opinion that the impugned judgments cannot be sustained which are set aside accordingly. The matters may now be considered afresh by the High Court in the light of the observations made hereinbefore. These appeals are allowed. Issues Involved:1. Effect of fraud on court.2. Validity of auction sale and subsequent possession.3. Jurisdiction and powers of the court to set aside decrees obtained by fraud.4. Equitable adjustments and remedies available to parties affected by fraudulent acts.Detailed Analysis:1. Effect of Fraud on Court:The core issue in these appeals is the effect of fraud on court. The judgment reiterates that 'fraud vitiates every solemn act' and emphasizes that 'fraud and justice never dwell together.' Fraud, whether by misrepresentation or deceit, invalidates judicial acts, contracts, and transactions. The court cites several precedents, including Derry v. Peek and Lazarus Estate v. Berly, to underscore that fraud unravels all judicial acts and decisions.2. Validity of Auction Sale and Subsequent Possession:The appellant became the highest bidder in an auction sale of 30 acres of land, which was confirmed by the Executing Court. However, the auction sale was later set aside by the High Court, directing the appellant to seek partition or include the purchased area in the mortgagor's share. The appellant's subsequent possession and investment in the land were challenged, leading to further legal disputes. The court emphasizes that any order obtained by fraud is non-est in the eyes of law, rendering the auction sale and subsequent possession invalid if fraud is proven.3. Jurisdiction and Powers of the Court to Set Aside Decrees Obtained by Fraud:The judgment asserts that courts have inherent jurisdiction to set aside decrees obtained by fraud. It references Manohar Lal Chopra v. Raj Bahadur Rao Raja Seth Hiralal, stating that civil courts can pass orders necessary for the ends of justice or to prevent abuse of process. The court highlights that principles of res judicata do not apply to judgments obtained by fraud, as fraud vitiates all judicial acts.4. Equitable Adjustments and Remedies Available to Parties Affected by Fraudulent Acts:The court discusses the need for equitable adjustments when fraud is involved. It emphasizes that third-party rights, such as those of the auction purchaser, cannot be nullified by consent orders in which they were not a party. The judgment underscores the principle 'actus curiae neminem gravabit' (an act of the court shall prejudice no man) and the need for courts to adjust equities between parties. The court acknowledges that the Bank cannot unjustly enrich itself at the expense of the auction purchaser and that appropriate remedies must be found to ensure justice.Conclusion:The Supreme Court set aside the impugned judgments, emphasizing that fraud vitiates all judicial acts and that courts have inherent powers to address fraud. The matters were remanded to the High Court for fresh consideration, with instructions to adjust equities and provide just remedies in light of the observations made. The appeals were allowed without costs.