Holding

A decree or consent order obtained by fraud is void and res judicata does not apply; the consent order is set aside.

Summary

The appellant, Ram Chandra Singh, purchased mortgaged land at a court auction after the bank obtained a decree against the mortgagor for defaulting on a loan. The mortgagor and his sister obtained a consent order from the High Court directing payment of the decretal amount in instalments, but the appellant alleged that the consent order was procured by fraud because the parties suppressed the earlier auction sale. The High Court dismissed the appellant's review on the ground of res judicata. The Supreme Court held that fraud vitiates any decree or consent order and that res judicata cannot apply where a judgment is obtained by fraud, especially when a third‑party right has been created. Consequently, the consent order was declared void, the High Court's decision set aside, and the matter remanded for fresh consideration. The Court emphasized the inherent jurisdiction of courts under CPC s.151 to set aside orders obtained by fraud.

Issues considered

The effect of fraud on court on the operation of res judicata.
Whether a consent order obtained by fraud is enforceable.
The jurisdiction of the High Court to set aside a decree obtained by fraud under CPC.
The rights of a third‑party purchaser when a consent decree is later found to be fraudulent.

Legislation cited

Code of Civil Procedures. 11, s. 151, s. 47

Subjects

fraud on courtres judicataconsent decreeinherent jurisdictionCPCauction salethird party rightsequity

Judgment

RAM CHANDRA SINGH A
v.
SA VITRI DEVI AND ORS.

OCTOBER 9, 2003

[V.N. KHARE, CJ. AND S.B. SINHA, J.] B

Code of Civil Procedure-Section 11-Res-judicata-Default of
loan repayment by respondents to Bank-Decree by Trial Court in favour
of the Bank-First appeal by respondents before High Court-During
pendency of the appeal, auction sale of mortgaged lands in favour of C
appellant in execution-Direction by High Court to pay the decretal
amount in instalments on basis of consent between the parties-Review
Petition by appellant before High Court on ground of suppression of
auction sale and commission of fraud-Dismissal of review petition by
High Court on ground of res-judicata:--Validity of-Held, is not valid D
since the consent order was obtained on fraud and the appellant was not
party to the appeal-Hence, remanded back to High Court for fresh
consideration to take into account subsequent events.

Respondent 2 had taken a loan from respondent-Bank by
mortgaging lands admeasuring 95.20 acres. On default of repayment, E
the Bank filed a suit before trial court claiming the loan amount with
pendente-lite and future interest and for a preliminary decree for
possession of the mortgaged lands. In the suit of the Bank, respondent
1, sister of respondent 2, filed an application claiming a share in the
mortgaged lands on the basis of a preliminary decree of the trial court F
passed in her favour in a partition suit. The trial court passed a
preliminary decree in favour of the Bank for the loan amount with
pendente-lite and future interest. A preliminary decree was also passed
for sale of the share of respondent 2 in the mortgaged lands. The trial
court passed a fiAal decree for sale of the mortgaged lands.
G
The respondent filed a First Appeal before High Court. The High
Court allowed the First Appeal passing a consent order directing the
respondents to pay the decretal amount to the Bank in two instalments.
On failure of the respondents to pay the decretal amount, the Bank
filed an Execution application before the Executing court for sale of H
543
544 SUPREME COURT REPORTS [2003] SUPP. 4 S.C.R.
A the mortgaged-lands. The trial •court .directed sale of part of the
mortgaged lands through auction. The auction sale was confirmed by
the Executing Court in favour of the appellant, being the highest ·
bidder, and the appellant deposited the bid-amount accordingly. The
respondents 'filed an application (or setting aside the auction sale. The
B application was dismissed. The appellant took possession of the auctioned
land. The respondents filed a Revision Petition before High Court on
the ground that the decretal amount.has been paid as per the consent
order. The High Court allowed the revision petition and set aside the
auction sale;

c The appellant filed a Title suit for setting aside the preliminary
decree passed by the trial court in the partition· suit in favour of
respondent 1. The appellant also filed an application before the trial
court in the partition suit of respondent 1 stating that the preliminary
decree obtained by respondent 1 was collusive and fraudulent and
D ~ence the final decree proceeding initiated is null and void; and that
the father of respondent 2, having died in 1944, respondent 2 alone
succeeded to the mortgaged lands as the Hindu Succession Act, 1956
came in force much later. The trial court allowed the application of'
the appellant. ·
E
The respondents filed a Civil Revision Petition before the High
Court. The appellant also filed a Civil Review Application before the
High Court for revit~wing.the consent order passed in the First appeal
filed by the respondents on the ground that the parties to the _appeal·
F had suppressed the fact of auction sale of the mortgage lands to the
appellant before the Court. The High C~urt a~lowed the Civil Revision
Petition of the respondents and dismissed the Civil Review Application
.
\

of. the appellant on the gro~nd of res-judicara. Hence these appeals.

The appellant contended that the respondents obtained a consent
G order from the High Courf by committing fraud on the court and
hence cannot be allowed to take. the benefit thereof; and that the
mortgaged lands were purchased by him in auction sale even before
the consent order passed by the High Court in First Appeal to the
respondents to pay the decretal ·amount to the Bank in two instalments
H and hence the consent order is null and void.
R.C. SINGH v. SAVITRI DEVI 545

The respondents contended that they have paid the decretal A
amount to the Bank pursuant to consent order passed by the High
Court in the First appeal.

Allowing the appeals and remanding the matters to the High
Court, the Court
B
HELD: 1.1. Fraud vitiates every solemn act. Fraud and justice
never dwell together. Fraud is a conduct either ·by letter or words,
which induces the other person or authority to take a definite
determinative stand as a response to the conduct of former either by
word or letter. Misrepresentation itself amounts to fraud. Innocent C
misrepresentation may also give reason to claim relief against fraud.
A fraudulent misrepresentation is called deceit and consists in leading
a man into damage by willfully or recklessly causing him to believe and
act on falsehood. It is a fraud in law if a party makes representations
which he knows to be false and injury ensue;; therefrom although the
motive from which the representations proceeded may not have been D
bad. An act of fraud on court is always viewed seriously. A collusion
or conspiracy with a view to deprive the rights of the others in relation
to .a property would render the transaction void ab initio, Fraud and
deception are synonymous. Although in a. given case a deception
may not amount to fraud, fraud is anathema to all equitable E
principles and any affair tainted with- fraud cannot be perpetuated,
or saved by the application of any equitable doctrine including
res:judicata. Any order obtained by practicing fraud on court inion-
est in the eyes of law. [551-E-H, 554-A, F, 559-C)

1.2. Th~ High Court ob~erved that the application for intervention F
filed by the appellant purported to be under Order XXVI, Rules 13
and 14(2) and Order XX Rule 18 CPC was not maintainable as they
do not confer any power to court for setting asid~ a preliminary decree
on the ground that it was obtained by practicing fraud. From the
aforesaid principle, the High Court must be held to have inherent G
jurisdiction in relation thereto. (556-F]

Ram Preeti Yadav v. U.P. Board of High School & Intermediate
Education & Ors., JT (2003) Supp. 1 SC 25; Smt. Shrisht Dhawan -v.
Mis Shaw Brothers, AIR (1992) SC 1 555; S.P. Chengalvaraya Naidu v.
Jagannath, (1994) I sec 1; IndianBankv. Satyam Fibres (India) Pvt. Ltd, H
546 SUPREME COURT REPORTS [2003] SUPP. 4 S.C.R.
A [1996) 5 SCC 550 and Chittaranjan Das v. Durgapore Praject Ltd &
Ors., [99 CWN 897), referred to.

Derry v. Peek, (1989) 14 AC 337, referred to.

B Kerr on Fraud and Mistake; Bigelow on Fraudulent Conveyances;
Arlidge & Parry on Fraud, referred to.

1.3. Once it is held that a judgment and decree h<ts been obtained
by practicing fraud on the court, it is trite that the principles of
res-judicata shall not apply. The High Court. therefore, committed a
C serious error in referring to the earlier orders passed by it so as to shut
the doors of justid:.on the face of the appellant for all time to come.
In the Civil Revie.;;· Petition of the appellant, the High Court should
have considered the question as to whether the right of the auction
purchaser could have been set at naught by reason of a consent order
D passed in his· absence. The appellant was not a party in the First
Appeal. He was also not a party to the compromise. [557-F-H]
't)
Manohar Lal Chopra v. Rai Bahadur Rao Raja S~th Hiralal, AIR
(1962) SC 527 and Sharda v. Dharmpal, [2003] 4 SCC 493, referred to.

E 1.4. The consent order is an agreement between the parties with
the seal of the Court superadded to it. The appellant in the Review
application stated that the parties to the appeal had suppressed the
auction sale as also the confirmation thereof. The effect of the events
appearing subsequent to the filing of the First Appeal resulting in
F creation of a third party right was bound to be taken into consideration
by the High Court. A third party right cannot be set at naught by
consent. The High Court, therefore, was required to consider the
contention of the appellant in their proper perspective. The High Court
was obliged to address itself on these questions for the purpose of
G reviewing its order. [558-A-C]

Dwaraka Prasad Agarwal (d) by Lrs. & Anr. v. B.D. Agarwal &
Ors., [2003) 6 SCC 230, relied on.

1.5. Though in furtherance of the consent order, the respondents
H had deposited the amount and the Bank has appropriated the same,
R.C. SINGH v. SA VITRI DEVI [SINHA J.] 547

the legal issues as regard the effect of commission of fraud on court A
vis-a-vis the conduct of the parties are still at large. The High Court
is 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 recourse to recover the
decretal amount from the judgment-debtor at the expense of the B
auction purchaser. The High Court also failed to notice the principle
'actus curiae neminem gravabit'. (559-D-F]

Rajesh D. Darbar & Ors. v. Narasingrao Krishnaji Kulkarni & Ors.,
JT (2003) 7 SC 209, referred to.
c
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 8216 of
2003.

From the Judgment and Order dated 10.12.98 of the Patna High Court
in C.R. No.1520 of 1997.
D
WITH

C.A. No. 8217 of 2003.

Dr. G.C. Bharuka, Sanjiv Goel, Devashish Bharuka, B.K. Satija, S.B. E
Upadhyay (NP), R.S. Dvivedi, Ajay Kumar, S.R. Setia, Ajay Choudhary,
(NP), Amit Kumar (NP), Ram Lal Roy, R.N. Keshwani for the appearing
parties.

The Judgment of the Court was delivered by
F
S.B. SINHA, J. : Leave granted.

Effect of fraud on court is the primal question involved in these
appeals which arise out of judgments and order dated 10.12.1998 passed
in CR No. 1520of1997 and dated 10.5.1999 passed in Civil Review No.
245 of 1998 by the High Court of Judicature at Patna. G
Respondent No. 2 herein Arun Prakash Pandey (hereinafter called as
'the Mortgagor') had taken loan from State Bank of India, wherefor lands
mortgaged in favour of the Bank. He became a defaulter in the matter of
repayment ofloan. The Bank filed a suit claiming a sum of Rs. 1,15,312.62 H
548 SUPREME COURT REPORTS [2003] SUPP. 4 S.C.R.

A with pendente-lite and future interest as also for a preliminary decree as
regard mortgaged property admeasuring 95.20 acres. IJl the said suit, the
sisters of the mortgagor were claiming 6 annas shares in the suit properties
purporting to be relying on or on the basis of a preliminary decree passed
in a partition suit dated 19. 7 .1979 filed by the respondent No. 1 in relation
B to the said mortgaged land. A preliminary decree in favour of the bank for
the aforementioned amount with pendente-lite and future interest @ 6%
p.a. was passed. A preliminary decree of sale of 10 Annas shares of the
mortgagor was also passed by the learned Vth Additional Sub Judge on
or about 22.6.1981 whereafter a final decree for sale of the mortgage
C property was passed on 4.8.1982 in suit No. 88/9/1977-80.

A First Appeal was preferred thereagainst by the respondents herein
and by an order dated 22.5.1988 a Division Bench directed that the decretal
amount be paid in two instalments. Allegedly, the said direction had not
been complied in letter been spirit. However, on an Execution Application
D filed by the Bank, 30 acres out of total area of 57.12 acres of land was
put on auction sale on or about 7.6.1988 wherein the petitioner became the
highest bidder upon offering a sum of Rs. 1,61,598.53 therefor. The said
auction sale had been confirmed by the Executing Court on 7.7.1988
pursuant whereto, the appellant deposited the amount. The brother of the
E mortgagor, thereafter, filed an objection in the said Execution case
pufiforted tO be in terms of Section 4 7 of the Code of Civil Procedure for
\
settfng ·aside the· a:uctiOn sale whiCh was marked asMisc: ·Civil 'Case No.
11188. The said application was dismissed by Judgment dated 27.8. 1988
inter alia on the ground that keeping in view the extent of land inherited
by the parties from their father befog 95.20 ~cres; 6o~ades·6f(an~ belonged
F to the mortgagor out of which only 30 acres ,had been auctioned. The
·~,o;/'',1_; ~:/
.i- -.t, .,_\jJ.',Jt" .I,.
appellant herein in terms of order passed on or about 11.12.1990 took
delivery of po~session -0f t~e aucti~ned:Jand; ,Qu~s~ionii:ig the judgment and
order dated 27 .8.1988; t~e.r:espogd~nts :f)lt:d a Rev.i~ion Peti~iol}.Applicatiol}
before.tht;:,High Court in the year !990 m~rked as Revision Petition No.
G 1700 of 1990. The aµcti9n .. sale ;\V,~S s.e~ a~j4e, by re.as_o!l of the judgment
dated 21.5 .1992 by the High Court inter alia directing that the following
1remedy be taken r-ecourse to. by the· appellant1:.r~ ·;:~ .11~~1 - ~ ~..r

"(a) to seek a part·ition by filing, a separate;suit for ~ausing out
H a· separate area from' the: share ,of •Arun !Prakash Pandey or
R.C. SINGH v. SAVITRI DEVI [SINHA, J.] 549

(b) to file an application in the aforesaid partition suit for A
including the area purchased by him in the Takhta of Arun
Prakash Pandey."

The appellant filed a Special Leave Petition thereagainst which was
marked as SLP (C) No. 8119/92 before this Court which was disposed B
of by an order dated 25.6.1992 stating :

"Learned counsel for the Petitioner withdraws this petition to cash
upon the order impugned against. Special leave Petition is disposed
of as withdrawn."
c
The appellant contends that upon obtaining possession, he made the
land cultivable wherefor he had spent a sum of about Rs. 2 lakhs.

The appellant herein, however, filed a Title Suit being No. 4/1994
inter alia for setting aside the decree passed in Partition Suit No. I 7/I 976 D
as also for setting aside the order in CR No. 1700 of 1990.

The appellant herein also filed an application in the said partition suit
No. 17/76 inter alia on the ground that the preliminary decree dated
19.7.78 was a collusive and fraudulent one and the final decree proceeding E
initiated on the basis thereof is null and viod; inter alia on the ground that
Ugam Prakash Pandey, father of the mortgagor having died in the year
1944, the mortgagor alone succeeded to the properties and not his sisters
as the Hindu Succession Act, 1956 did not come into force thence:. In
support of the said contention the appellant filed various documents. The F
said application was allowed holding :

"(a) Ugam Pandey died in the year 1944 when the Hindu
· Succession Act, 1956 had .not come into force.

(b) the documents prove that the plaintiff Smt. Savitri Devi had G
no interest in the suit property and that the preliminary decree
,, .prepared in' the partition suit is fraudulent, collusive and void
. d6cumerits· obtained. in collusion with Arun Prakash Pandey by
• 1 • 1· 1 suppressing the death of Ugam P.andey in the pla:il}t and jn her

· ' · " evid~nce by playing fraud. H
550 SUPREME COURT REPORTS [2003] SUPP. 4 S.C.R.

A (c) the final decree proceeding initiated by the Plaintiff on the
basis of preliminary decree is collusive and nullity and therefore
final decree proceeding is dropped."

A Civil Revision application was filed thereagainst which has been
B allowed by the High Court, S.L.P. (Civil) No. 6535 of 1999 arises out of
the said order.

The appellant furthermore filed a Civil Review application being No.
245of1998 for reviewing the order dated 22.5.1988 passed in First Appeal
No. 450 of 1981 whereby and whereunder the High Court of Patna
C modified the judgment and preliminary decree dated 22.6.1981 by directing
that the decretal amount be paid in two instalments inter alia on the ground
that the fact relating to the sale of the mortgage property in favour of the
petitioner has not been brought to its notice. The said Civil Review
application was dismissed by a learned Judge on 10.5.1999. S.L.P. (Civil)
D No. 20273 of 2000 arises out of the said order.
I•
Dr. G.C. Bharuka, the learned senior counsel appearing on behalf of
the appellant, inter alia would submit that the respondents, having obtained
a decree by practising fraud on the court, cannot be allowed to take the
E benefit thereof. Having regard to the fact that the father of the mortgagor
died in the year 1944, the learned counsel would urge, the question ofhi-s
sisters becoming his co-sharers did not arise as the Hindu Succession Act,
1956 did not come into force. The learned counsel would submit that
although an appeal was preferred from the preliminary decree passed in
favour of the Bank, no stay having been granted, the property could be put
F on auction and even ifthere were certain mistakes on the part of the court,
the appellant cannot suffer therefor. The judgment and order dated
27 .8.1988 setting aside the auction sale at the instance of the sisters, the
learned counsel would contend, must, therefore, be held to be illegal.

G It was. further submitted that the _High Court committed a manifest
error in modifying their judgment and order dated 22.6.1981 by passing
the judgment dated 22nd May, 1988 in First Appeal No. 450 of 1981 by
directing that the decretal amount payable to the bank be paid in two
instalments without taking into consideration the effect and purport of the
H sale of the mortgaged properties in court auction.
R.C. SINGH v. SAVITRI DEVI [SINHA, J.] 551

The learned counsel would submit that such an order could not have A
been passed on concession of the parties as the properties having been sold
on auction, the appellant derived a right in relation thereto. In any event,
the learned counsel would contend, as the. parties have taken recourse to
suppression of the aforementioned facts, the consent decree was a nullity
and in that view of the matter the High Court should have reviewed its B
earlier order.

Mr. Ram Lal Roy, the learned counsel appearing on behalf of the
respondents, on the other hand, would urge that the appellant herein having
not questioned the judgment and decree passed in the First Appeal, these C
appeals should not be entertained. Mr. Roy would submit that having
regard to the fact that the auction sale was· set aside as far back as on
21.5 .1992 and the Special Leave Petition filed thereagainst having been
dismissed by the Court, the review application was not maintainable. In
any event, the learned counsel would contend that as pursuant to and in D
furtherance of the consent order passed in First Appeal : the respondents
have already deposited the amount, this Court in exercises of its equitable
jurisdiction should not interfere with the impugned orders.

Commission of fraud on court and suppression of material facts are
the core issues involved in these matters. Fraud as is well-known vitiates E
every solemn act. Fraud and justice never dwells together.

Fraud is a conduct either by letter or words, which induces the other
person, or authority to take a definite detenninative stand as a response to
the conduct of fonner eight by word or letter. F
It is also well settled that misrepresentation itself amounts to fraud.
Indeed, innocent misrepresentation may also give reason to claim relief
against fraud.
....,
u
A fraudulent misrepresentation is called deceit and consists in leading
a man into damage by willfully or recklessly causing him to believe and
act on falsehood. It is fraud in law if a party makes representations which
he knows to be false, and injury ensues therefrom although the motive from
which the representations proceeded may not havP- been bad. H
552 SUPREME COURT REPORTS (2003] SUPP. 4 S.C.R.

A In Derry v. Peek, (1889) 14 AC 337, it was held:

In an 'action of deceit the plaintiff must prove actual fraud. Fraud
is proved when it is showq that a false representation has been
made knowingly, or without belief in its truth, or recklessly,
without caring whether it be true or false.
B
A false statement, made through carelessness and without
reasonable ground for believing it to be true, may be evidence of
fraud but does not necessarily amount to fraud. Such a statement,
if made in the honest belief that it is true, is not fraudulent and
c does not render the person make it liable to an action of deceit.

In Kerr on Fraud and Mistake at page 23, it is stated :

"The true and only sound principle to be derived from the cases
represented by Slim v. Croucher is this : that a representation is
D fraudulent not only when the person making it knows it to be false,
but also when, as Jessel, M.R., pointed out, he ought to have
known, or must be taken to have known, that it was false. This
is a sound and intelligible principle, and is, moreover, not
inconsistent with Derry v. Peek. A false statement which a person
E ought to have known was false, and which he must therefore be
taken to have known was false, cannot be said to be honestly
believed in. "A consideration of the grounds of belief', said Lord
Herschell, "is no doubt an important aid in ascertaining whether
the belief was really entertained. A man's mere assertion that he
believed the statement he made to be true is not accepted as
F conclusive proof that he did so."

· In Bigelow on Fraudulent Covey~nces at page I, it is stated :

"If on the facts the average man would have intended wrong, that
G is enough."

It was further opined :
-·
"This conception of fraud (and since !t is not ~~e wri~er' s, he may
speak of it without diffidence); steadily kept in view, will render
H the administration of the law less ·difficult, ~rrather will ~ctlce its
R.C. SINGH v. SAVITRI DEVI [SINHA, J.] 553

administration more effective. Further, not to enlarge upon the last A
m~tter, it will do away with much of the prevalent confusion in
regard to 'moral' fraud, a confusion which, in addition to other
things, often causes lawyers to take refuge behind such convenient
and indeed useful but often obscure language as 'fraud upon the
law'. ·What is fraud upon the law? Fraud can be committed only B
against a being capable of rights, and 'fraud .upon the law'
darkens counsel. What is really aimed at in most cases by this
obscure contrast between moral fraud and frauJ upon the law,
is a contrast between fraud in the individual's intention to commit
the wrong and fraud as seen in the obvious tendency of the act C
in question."

Recently this Court by an order dated 3rd September, 2003 in Ram
Preeti Yadav v. UP. Board of High School & Intermediate Education &
Ors., reported in JT (2003) Supp. 1 SC 25 held :
D
"Fraud is a conduct either by letter or words, which induces the
other person, or authority to take a definite determinative stand
as a response to the conduct of former either by words or letter.
Although negligence is not fraud but it can be evidence on fraud.
(See Derry v. Peek, (1889) 14 AC 337). E
In Lazarus Estate v. Ber/y, [1956] I All ER 341, the Court
of Appeal stated the law thus :

" I cannot accede to this argument for a moment "no Court
in this land will allow a person to keep an advantage which F
he has obtained by fraud. No judgment of a Court, on order
of a Minister, can be allowed to stand if it has been obtained
by fraud. Fraud unravels everything". The Court is careful
not to find fraud unless it is distinctly pleaded and proved;
but once it is proved it vitiates judgments contracts and all G
transactions whatsoever."

In S.P. Changalvaraya Naidu v. Jagannath, [1994] 1 SCC
1 this Court stated that fraud avoids all judicial acts, ecclesiastical
or temporal." H
554 SUPREME COURT REPORTS [2003] SUPP. 4 S.C.R.
A An act of fraud on court is always viewed seriously. A collusion or
conspiracy with a view to deprive the rights of the others in relation to
a property would render the transaction void ab initio. Fraud and deception
are synonymous.

B In Arlidge & Parry on Fraud, it is stated at page 21

"Indeed, the word sometimes appears to be virtually synonymous
with "deception", as in the offence (now repealed) of obtaining
credit by fraud. It is true that in this context fraud" included certain
kinds of conduct which did not amount to false pretences, since
c the definition referred to an obtaining of credit "under false
pretences, or by means of any other fraud". In Jones, for example,
a man who order a meal without pointing out that he had no
money was held to be guilty of obtaining credit by fraud but not
of obtaining the meal by false pretences: his conduct, though
D fraudulent, did not amount to a false pretence. Similarly it has
been suggested that a charge of conspiracy to defraud may be used
where a "false front" has been presented to the public (e.g. a
business appears to be reputable and creditworthy when in fact
it is neither) but there has been nothing so concrete as a false
E pretence. However, the concept of deception (as defined in the
Theft act 1968) is broader than that of a false pretence in that (inter
alia) it includes a misrepresentation as to the defendant's intentions;
both Jones and the "false front" could now be treated as cases of
obtaining property by deception."
F
Although in a given case a deception may not amount to fraud, fraud
is anathema to all equitable principles and any affair tainted with fraud
cannot be perpetuated or saved by the application of any equitable doctrine
including res-judicata.

G In Smt. Shrisht Dhawan v. Mis. Shaw Brothers, AIR (1992) SC 1555,
it has been held that :

"Fraud and collusion vitiate even the most solemn proceedings in
any civilized system of jurisprudence. It is a concept descriptive
H of human conduct."
R.C. SINGH v. SAVITRI DEVI [SINHA, J.] 555

In S.P. Chengalvaraya Naidu v. Jagannath, [1994] 1 sec 1 this A
Court in no uncertain terms observed :

" ... The principle of "finality of litigation" cannot be passed 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 B
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-pr9cess
a convenient lever to retain the illegal gains indefinitely. We have C
no hesitation to say that a person whose case is based on
falsehood, has no right to approach the ·Court. He can be
summarily thrown out at any stage of the litigation .... 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 D
to gain by another's loss. It is a cheating intended to get an
advantage... 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 E
fraud on the Court as well as on the opposite party."

In Indian Bank v. Satyam Fibres (India) Pvt. Ltd., [1996] 5 SCC 550,
this Court after referring to Lazarus Estates (supra) and other cases
observed that 'since fraud affects the solemnity, regularity and orderliness
of the proceedings of the Court it also amounts to an abuse of the process F
of the Court, that the Courts have inherent power to set aside an order
obtained by practising fraud upon the Court, and that 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".

It was further held :
G

"The judiciary in India also possesses inherent power, specially
under Section 151 CPC, to recall its judgment or order if it is
obtained by fraud on Court. In the case of fraud on a party to the
suit or proceedings, the Court may direct the affected party to file H
556 SUPREME COURT REPORTS [2003] SUPP. 4 S.C.R.

A a separate suit for setting aside the decree obtained by fraud,
Inherent powers are powers, which are resident in all Courts,
especially of superior jurisdiction. These powers spring not from
legislation but from the nature and the constitution of the tribunals
or Courts themselves so as to enable them to maintain their
B dignity, secure obedience to its process and rules, protect its
officers from indignity and wrong and to punish unseemly
behaviour. This power is necessary for the orderly administration
of the Court's business."

In Chittaranjan Das v. Durgapore Project Limited & Ors., [99 CWN
c 897], it has been held :
"Suppression of a material document which affects the condition
of service of the petitioner, would amountto fraud in such matters,
Even the principles of natural justice are not required to be
D 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
E wo'uld be bound thereby."
.
Keeping in view the aforementioned principles, the questions raised
in these appeals are required to be considered. The High Court observe·i
that the application of intervention filed by the appellant purported to be
F under Order XXVI, Rules 13 and 14(2) and Order XX, Rule 18 was not
maintainable as they do not confer any power to court for setting aside a
preliminary decree on the ground that it was obtained by practising fraud.
But once the principles aforementioned are to be given effect to, indisputably
the court must be held to have. jnherent jurisdiction in relation thereto.

G In Manohar La/Chopra v. Rai Bahadur Rao Raja Seth Hirala/, AIR
·,
~ J (1962) SC 527, the law is stated in the following terms:
',• !, ,.
"The Code of Civil Procedure is undoubtedly not exhaustive: it
does. n6t lay down·rules for guidance in respect of all situations
H · · nor does it seek: to provide rules for deCisioil of all conceivable
R.C. SINGH v. SAVITRI DEVI [SINHA, J.] 557
cases which may arise. The civil courts are authorized to pass such A
orders as may be necessary for the ends of justice, or to prevent
abuse of the process of court, but where an express provision is
made to meet a particular situation the Code must be observed,
and departure therefrom is not permissible."
.
In Sharda v. Dharrnpal, [2003] 4 SCC 493, a three-Judge Bench, of
B
which both of us are parties, held that directing a person to undergo a
medical test by a matrimonial court is implicit stating :

"Even otherwise the Court may issue an appropriate direction so
as to satisfy himself as to whether apart from treatment he requires C
adequate protection inter alia by way of legal aid so that he may
not be subject to an unjust order because of his incapacity.
Keeping in view of the fact that in a case of mental illness the
Court has adequate power to examine the party or get him
examined by a qualified doctor. We are of the· opinion that in an D
appropriate case the Court may take recourse to such a procedure
even at the instance of the party to the !is.

Furthermore, the Court must be held to have the requisite
power even under Section 151 of Code of Civil Procedure to issue
such direction either suo motu or otherwise which, according to E
him, would lead to the truth."

Once it is· held that a judgment_ and decree has been ~.btained 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 F
serious error in referring to the earlier orders pass~d 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 impug~ed judgment dated 10.12.1?98 cannot
be sustained.

So fai as the order dated 10.5.1999 passed in Civil Review No. 245/ G
1998 is conceme<l, suffice it to say tiiat the· High court should have
considered the 'que~tion as to whether. the right of the auction purc4aser
could have'been set at naught by reason of a consent order passed in his
absence. The appellant was not a party in the First Appeal, He was also
not a party to the compromise. H·
558 SUPREME COURT REPORTS (2003] SUPP. 4 S.C.R.

A The consent order, as is well-known, is an agreement between the
parties with the seal of the Court superadded to it. The appellant herein
in the Review Application categorically stated that the parties to the appeal
had suppressed the auction sale as also the confirmation thereof. The effect
of the events appearing subsequent to the filing of First Appeal resulting
B in creating subsequent to the filing of First resulting in creation of a third
party right was bound to be taken into consideration by the High Court.
A third party right cannot be set at naught by consent. The High
Court, therefore, was required to consider the contention of the appellant
in their proper perspective. The High Court, in our opinion, was
C obligated to address itself on these questions for the purpose of reviewing
its order.

In Dwarka Prasa_d Agarwal (D) By Lrs. and Another v. B.D. Agarwal
and Others, (2003] 6 SCC 230, it was observed :

"Several issues of grave importance were required to be addressed
D by the High Court. The High Court sought to take a short cut in
holding that the said compromise was not binding upon Dwarka
Prasad Agarwal and thereby no writ was issued. The consequence
of recording of the said compromise was tell-tale. Not only
pursuant thereto or in furtherance consequence ofrecording of the
E said compromise was tell-tale. Not thereof the Registrar of
Newspapers, New Delhi, passed an order dated 3.9.1992; it was
construed to be a judgment of the High Court which had been
taken aid of by the respondents herein for the purpose of
withdrawal of suits wherein varimas disputed questions of facts
F and law including the genuineness or otherwise of the agreements
were in question and required adjudication. The High Court was
also required to address itself, more so while disposing of the
review application, as to whether the purported settlement on the
grounds raised by the appellants herein, was a lawful one. Without
any application of mind, the High Court proceeded to hold that
G
the agreement was lawful. It did not pose unto itself the right
question so as to enable himself to arrive at a finding of fact
resulting in correct answer thereto and, thus, the same would
amount to a misdirection in law."

H It was further observed :
R.C. SINGH v. SAVITRI DEVI [SINHA, J.] 559

"It is now well-'iettled that an order passed by a court without A
jurisdiction is a nullity. Any order passed or action taken pursuant
thereto or in furtherance thereof would also be nullities. In the
instant case, as the High Court did not have any jurisdiction to
record the compromise for the reasons stated hereinbefore and in
particular as no writ was required to be issued having regard to B
the fact that public law remedy could not have been resorted to,
the impugned orders must be held to be illegal and without
jurisdiction and are liable to be set aside. All orders and actions
taken pursuant to or in furtherance thereof must also be declared
wholly illegal and without jurisdiction and consequently are liable C
to be set aside. they are declared as such."

It will bear repetition to state that any order obtained by practising
fraud on court is also non-est in the eyes of law.

It is true that pursuant to or in furtherance of the consent order, the D
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 E
enforcing a preliminary decree of mortgage, it cannot take also recourse
to recover the decretal amount from the judgment-debtors at the expenses
of the auction purchaser.

In such an event also, the Court may have to find out a remedy which
would be just and equitable. F
The High Court furthermore failed to notice the principle 'actus
curiae neminem gravabit'.

In Rajesh D. Darbar & Others v. Narasingrao Krishnaji Kulkarni &
Ors., JT (2003) 7 SC 209, this Court noticed : G
"The courts can take notice of the subsequent events and can
mould the relief accordingly. But there is a rider to these well
established principles. This can be done only in exceptional
circumstances, some of which have been highli~hted above. This H
560 SUPREME COURT REPORTS (2003] SUPP. 4 S.C.R.

A equitable principle cannot, however, stand on the way of the court
adjudicating the rights already vested by a statute. This well
settled position need not detain us, when the second point urged
by the appellants is focused. There can be no quarrel with the
proposition as noted by the High Court that a party cannot be
made to suffer on account of an act of the Court. There is a well
B
recognised maxim of equity, namely, actus curiae neminem
gravabit which means an act of the court shall prejudice no man.
This maxim is founded upon justice and good sense which serves
a safe and certain guide.forthe administration of law. The other
maxim is, lex non cogit ad.impossibilia,. i.e. the law does not
c compel a man to do that what he cannot possibly perform. The
applicability of the abovesaid maxims has been approved by this
Court in Raj Kumar Dey and Ors. v. Tarapaqa Dey and Ors.,
[1987] 4 SCC 398; Gursharan Singh v. New Delhi Municipal
Committees, [1996] 2 SCC 459 and Mohammed Gazi v. State of
D MP. and Ors., [2000] 4 SCC 342."

For the reasons aforementioned, we are of the opm1on 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
E of the observations inade hereinbefore.-• These 'appeals 'are•allowed. -No
+-.,;.. ·r; _.,. J; :J':;-1·_· .. t !""tf,.i ... ·. _,, .q i p~·,;· ~ t,

B.S. - 1) "',Appeals.allowed:

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