"FRAUD" AS INTERPRETED BY HON'BLE APEX COURT

Posted by Legal Articles on April 26th, 2021

Fraud is defined in Contract Act, 1872 in Sec. 17 as follows: "Fraud means and includes any of the following acts committed by a party to contract, or with his connivance, or by his agent, with intent to deceive another party thereto or his agent, or to induce him to enter into the contract-

(1)   the suggestion, as a fact, of that which is not       true, by one who does not believe it to be    true;

(2)   the active concealment of a fact by one having    knowledge or belief of the fact;

(3)   a promise made without any intention of      performing it;

(4)   any other act fitted to deceive;

(5)   any such act or omission as the law specifically    declares to be fraudulent.

Explanation.- Mere silence as to fact likely to affect the willingness of a person to enter into a contract is no fraud, unless the circumstances of the case are such that, regard being had to them, it is the duty of the person keeping silence to speak, or unless his silence is in itself, equivalent to speech."

Hon'ble Apex Court has interpreted and ruled the following;

1)    By "fraud" is meant an intention to deceive;        whether it is from any expectation of         advantage to the party himself or from the ill    will towards the other is immaterial. The         expression "fraud" involves two elements,    deceit and injury to the person deceived. Injury is something other than economic loss,     that is, deprivation of property, whether         movable or immovable or of money and it will     include any harm whatever caused  to any person in body, mind, reputation or such   other. In short it is a non-economic or non-   pecuniary loss. A benefit or advantage to the deliver, will almost always call loss or     detriment to the deliver, but no       corresponding  loss to the deceived, the    second condition is satified.

Indian Bank v. Satyam Febres (India) Pvt.Ltd.

AIR 1996 SC 2592.

2)    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.

S.P.Changaivaraya Naidu v. Jagannath

AIR 1994 SC 853

3)    "Fraud" vitiates every solemn act. Fraud and        justice bever dwell together. Fraud is a       conduct either by letter or words, which        includes the other person or authority to take         a definite determinative stand as a response        to the conduct of the fromer either by words   or letter. Misrepresentation itself amounts to       fraud. However innocent misrepresentation      may also give reason to claim relief against         fraud. A fraudulent misrepresentation is called         deceit. It is a fraud in law if a party makes         representations, which he knows to be false,       and injury ensures there from although the     motive from which the representations   proceeded may not have been bad. An act of         fraud  on court is always viewed seriously. A        collusion or conspiracy with a view to deprive       the rights of 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 principles and any affair tainted         with fraud cannot be perpetrated or saved by      the application of any equitable doctrine      including res judicata.

Ram Chandra Singh v. Savitri Devi & Ors.

(2003) 8 SCC 319.

4)    "Fraud"is proved when it is shown that a false         representation has been made (i) knowingly,       (ii) without belief in its truth, or (iii) recklessly, careless whether it be true or false.

Roshan Deen v. Preeti Lal 2002(1) LLJ 465

Ram Preeti Yadav v. U.P.Board of High school and international Education   AIR 2003 SC 4268

 Ashok Leyland Ltd. v. T.N.and Anr.  2004 (3) SCC 1.

5)    Suppression of a material document would also amount to a fraud on the court.

Gowrishankar v. Joshi Amba Shankar Family Trust AIR 2003 (2) SCR 949.

6)    "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 the former either        by words or letter. Although Negligence is not         fraud but it can be evidence on fraud;

Ram Preeti Yadav v. U.P.Board of High school and international Education   AIR 2003 SC 4268

7)    No judgement of a Court, no order of a Minister can be allowed to stand if it has been obtained by fraud. Fraud unravels everything.

Lord Denning in Lazarus Estate Ltd. v. Beasley

(1956) 1 QB 702.

8)    A decree obtained by playing fraud on the    court is a  nullity and that such a decree could        be challenged at any time in any proceedings.    

A.V.Papayya v. Government of A.P. (2007) 4 SCC 221.

9)    If a judgement obtained by playing fraud on         the court is a nullity and is to be treated as        non est   by every court, superior or inferior, it would  be starnge logic to hear that an         enquiry into the question whether a       judgement was secured  by playing fraud on    the court by not disclosing the necessary      facts relevant for the adjudication of the         controversy before the court is      impermissible.  From the above judgement, it     is clear that  such examination is permissible.         Such  a principle is required to be applied with         greater emphasis in the realm of public law jurisdiction as the mischief resulting from such      fraud has larger dimension affecting the larger      public interest.

Union of India v. Ramesh Gandhi (2012) 1 SCC 476.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

10)  Other important decisions of Hon'ble Apex Court;

Harjas Rai Makhija (D) thr. L.R. v. Pushparani Jain and Ors.  2017(2) SCC 797.

Meghmala and Ors.  v   G. Narsimha Reddy and Ors. 2010 (8) SCC 383.

written and compiled by ;

Dharmendra Parikh (Advocate)

D Parikh & Associates (Law Firm)

www.dpassociates.org