Fraud and Res-judicata

The expression “fraud”, what it means and once proved to have been committed by the party to the Lis against his adversary then its effect on the judicial proceedings was succinctly explained by this Court in Ram Chandra Singh vs. Savitri Devi & Ors., in the following words: “Fraud as is well known 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 the former either by word or letter.

It is also well settled that misrepresentation itself amounts to fraud. Indeed, innocent 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 ensues therefrom 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 49 cannot be perpetuated or saved by the application of any equitable doctrine including res judicata.”

Similarly, how the leading authors have dealt with the expressions “fraud”, “misrepresentation”, “suppression of material facts” with reference to various English cases also need to be taken note of. This is what the learned author – “Kerr” in his book “Fraud and Mistake” has said on these expressions.

While dealing with the question as to what constitutes fraud, the learned author said,

“What amounts to fraud has been settled by the decision of House of Lords in Derry vs. Peek (f) where lord Herscheel said “fraud is proved when it is shown that a false representation has been made

(1) knowingly or

(2) without belief in its truth or

(3) recklessly, careless whether it be true or false.” (See Kerr on Fraud and Mistake- Seventh Edition. 50 Page 10/11).

The author has said that, Courts of Equity have from a very early period had jurisdiction to set aside Awards on the ground of fraud, except where it is excluded by Statute. So also, if the Award was obtained by fraud or concealment of material circumstances on the part of one of the parties so as to mislead the Arbitrator or if either party be guilty of fraudulent concealment of matters which he ought to have declared, or if he willfully mislead or deceive the Arbitrator, such Award may be set aside. (See – Kerr on Fraud and Mistake – Seventh Edition – pages 424, 425)

The author said that, if a man makes a representation in point of fact, whether by suppressing the truth or suggesting what is false, however innocent his motive may have been, he is equally responsible in a civil proceeding as if he had while committing these acts done so with a view to injure others or to benefit himself. It matters not that there was no intention to cheat or injure the person to whom the statement was made. (See – Kerr on Fraud and Mistake – Seventh Edition, page 7)

This rule of law is applicable not only between the two individuals entering into any contract but is also applicable between an individual and a company and also between the two companies. (See- Kerr on Fraud and Mistake – Seventh Edition, page 99).

The author said that this principle is also not limited to cases where an express and distinct representation by words has been made, but it applies equally to cases where a man by his silence causes another to believe in the existence of a certain state of things, or so conducts himself as to induce a reasonable man to take the representation to be true, and to believe that it was meant that he should act upon it, and the other accordingly acts upon it and so alters his previous position. (See – Kerr on Fraud and Mistake – Seventh Edition, page 110).

 The author said that where there is a duty or obligation to speak, and a man in breach of that duty or obligation holds his tongue and does not speak and does not say the thing which he was bound to say, if that be done with the intention of inducing the other party to act upon the belief that the reason why he did not speak was because he had nothing to say, there is a fraud (See- Kerr on Fraud and Mistake-Seventh Edition, page 110).

Venture Global Engineering LLC Vs. Tech Mahindra Ltd. & ANR Etc-01/11/2017