TMI Blog2003 (10) TMI 610X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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. Appeal allowed. The matters may now be considered afresh by the High Court in the light of the observations made hereinbefore. - Appeal (civil) 8216 of 2003, C.A. No. 8217 of 2003 - - - Dated:- 9-10-2003 - KHARE, V.N. AND SINHA, S.B., JJ JUDGMENT S.B. Sinha, J. 1. Leave granted. 2. Effect of fraud on court is the primal question involved in these appeals which arise out of judgments and orders dated 10.12.1998 passed in CR No. 1520 of 1997 and dated 10.5.1999 passed in Civil Review No. 245 of 1998 by the High Court of Judicature at Patna. 3. Respondent No. 2 herein Arun Prakash Pandey (hereinafter called as 'the Mortgagor') had taken loan from State Bank of India, where for lands were mortgaged in favour of the Bank. He became a defaulter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the judgment dated 2.1.5.1992 by the High Court inter alia directing that the following remedy be taken recourse to by the appellant: "(a) to seek a partition by filing a separate suit for causing out a separate area from the share of Arun Prakash Pandey or (b) to file an application in the aforesaid partition suit for including the area purchased by him in the Takhta of Arun Prakash Pandey." 5. The appellant filed a Special Leave Petition there against which was marked as SLP(C) No. 8119/92 before this Court which was disposed 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 Special Leave Petition is disposed of as withdrawn." 6. The appellant contends that upon obtaining possession, he made the land cultivable where for he had spent a sum of about Rs. 2 lakhs. 7. The appellant herein, however, filed a Title Suit being No. 4/1994 inter alia for setting aside the decree passed in Partition Suit No. 17/1976 as also for setting aside the order in CR No. 1700 of 1990. 8. The appellant herein also filed an application in the said partition suit No. 17/76 inter alia on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come into force. The learned counsel would submit that although an appeal was preferred from the preliminary decree parsed in favour of the Bank, no stay having been granted, the property could be put on auction and even if there were certain mistakes on the part of the court, the appellant cannot suffer therefore. 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. 12. 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 22^nd 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 sale of the mortgaged properties in court auction. 13. The learned counsel would submit that such an order could not have 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 recours ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ef that it is true, is not fraudulent and does not render the person make it liable to an action of deceit. 20. 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 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 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 conclusive proof that he did so." 21. In Bigelow on Fraudulent Conveyances at page 1, it is stated : "If on the facts the average man would have intended wrong, that is enough. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ynonymous. 25. 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 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 ordered 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 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 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; bot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by a party or the Court itself commits a mistake which prejudices a party, the Court has the inherent power to recall its order". 30. It was further held: "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 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 dignity, secure obedience to its process and rules, protect its officers from indignity and wrong and to punish unseemly behavior. This power is necessary for the orderly administration of the Court's business." 31. In Chittaranjan Das v. Durgapore Project Limited and Ors. , It has been held: "Suppression of a material document which affects the condition of service of the petitioner, would amount to fraud in such matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 him would lead to the truth." 35. 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. 36. So far as the order dated 10.5.1999 passed in Civil Review No. 245/1998 is concerned, suffice it to say that 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 passed in his absence. The appellant was not a party in the First Appeal. He was also not a party to the compromise. 37. 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 Applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 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 to be set aside. They are declared as such." 40. It will bear repetition to state that any order obtained by practising fraud on court is also non-est in the eyes of law. 41. 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. 42. In such an event also, the Court may have to find out a remedy which would be just and equitabl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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