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Issues: (i) Whether a decree and consequential proceedings obtained by practising fraud on the court and by suppressing material facts could be sustained or protected by res judicata. (ii) Whether the High Court could review or uphold a consent order so as to defeat the rights of an auction purchaser who was not a party to the compromise and had acquired third-party rights.
Issue (i): Whether a decree and consequential proceedings obtained by practising fraud on the court and by suppressing material facts could be sustained or protected by res judicata.
Analysis: Fraud vitiates all solemn acts and a party who obtains a judicial advantage by deliberate deception cannot retain it. Suppression of material facts and collusive conduct amount to fraud on the court. Where an order or decree is shown to have been procured by fraud, the court has inherent jurisdiction to recall or set aside the resulting order, and the bar of res judicata cannot be invoked to perpetuate such illegality.
Conclusion: The fraud-based challenge was maintainable and the impugned order resting on the fraudulent decree could not be sustained.
Issue (ii): Whether the High Court could review or uphold a consent order so as to defeat the rights of an auction purchaser who was not a party to the compromise and had acquired third-party rights.
Analysis: A consent order operates as an agreement with judicial sanction, but it cannot be used to nullify rights already created in favour of a non-party auction purchaser. The court was required to consider the effect of the confirmed auction sale and the subsequent creation of third-party rights before disposing of the review. Equitable principles also required adjustment of the parties' positions so that no one was prejudiced by an act of the court.
Conclusion: The review order could not stand, and the High Court was required to examine the matter afresh in light of the auction purchaser's rights.
Final Conclusion: The impugned judgments were set aside and the matters were remitted to the High Court for fresh consideration in accordance with the observations made.
Ratio Decidendi: An order or decree obtained by fraud and suppression of material facts is a nullity, cannot be shielded by res judicata, and may be recalled or set aside by the court exercising its inherent powers; a consent order cannot override vested third-party rights acquired independently of the compromise.
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