2000 JTR(SC) 563
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2000(2) Supreme 294
SUPREME COURT OF INDIA
(From Allahabad High Court)
K.T. Thomas and D.P. Mohapatra, JJ.
United India Insurance Co. Ltd. -Appellant
versus
Rajendra Singh & Ors. etc. -Respondents
Civil Appeal No. 2087 of 2000
(Arising out of SLP (C) No. 8479 of 1999)
With
Civil Appeal No. 2088 of 2000
(Arising out of SLP (C) No. 9666 of 1999)
Decided on 14-3-2000
Counsel for the Parties :
For the Appellant : Vishnu Mehra, B.K. Satija, Advocates.
For the Respondents : A.V. Palli, Atul Sharma and Mrs. Rekha Palli, Advocates.
IMPORTANT POINTS
1. Remedy to move for recalling the order passed by an Accident Claims Tribunal, on the basis of the newly discovered facts amounting to fraud of high degree, cannot be foreclosed and no Court or tribunal can be regarded as powerless to recall its own order if it is convinced that the order was wangled through fraud or misrepresentation of such a dimension as would affect the very basis of the claim.
2. Fraud and justice never dwell together.
Act Referred :CONSTITUTION OF INDIA : Art.136, Art.226
(A) The exercise of the extraordinary jurisdiction under Article 136 of the Constitution of India is pertinent when substantial questions of law are involved, and the inherent powers under Article 226 of the Constitution of India are invoked to ensure that the process of justice is not subverted. These provisions read with the principles embedded in the Code of Civil Procedure, specifically Sections 151, 152, and 153, contemplate that no court or tribunal shall be powerless to set aside an order that has been obtained by fraud, as fraud unravels every judicial act and offends the solemnity of the judicial process. The present case directly engages with this framework, where the high degree of fraud alleged against the adjudicating forum necessitates the invocation of these constitutional and statutory safeguards to prevent a grave miscarriage of justice and to restore the integrity of the adjudication process.
(B) Fraud vitiates every judicial act and a decree or award obtained by fraud is a nullity; courts possess inherent power to set aside orders procured by fraud; a party resisting a claim at the first instance may not be aware of the fraud, and post-award discovery of fraud opens the door for judicial review through the writ jurisdiction of High Courts and the Supreme Court; tribunals must consider merits if new facts indicative of fraud are raised, and cannot mechanically refuse to act.
Facts of the case:
Two claimants obtained separate awards from a Motor Accident Claims Tribunal against the owner of a vehicle and its insurer based on identical facts of an accident, after the insurer had made an interim no-fault liability payment. Subsequently, a report from the police alleged that the injuries occurred under entirely different circumstances, revealing a potential fraud. When the insurer sought to recall the awards, the Tribunal and the High Court declined to intervene, citing lack of statutory power, compelling the insurer to approach this Court by Special Leave.
Findings of Court:
The lower courts erred in refusing to examine the grave allegation of fraud; the High Courts writ jurisdiction cannot be so constrained as to leave the insurer without remedy; and the awards cannot stand when they are allegedly the product of a sophisticated fraud played upon the tribunal and the court.
Issues:
Whether a party that discovers, after the passing of an award, that it was obtained by fraud has any effective legal remedy against the award; whether tribunals and High Courts are duty-bound to examine allegations of fraud even if the party resisted the claims initially; and whether the inherent powers under the Constitution and the Code of Civil Procedure can be denied in such a situation.
Ratio Decidendi:
Courts and tribunals are not estopped from setting aside their own orders when they are obtained by fraud; the remedy of review is not foreclosed by the doctrine of res judicata or limitation when a new and serious allegation of fraud affecting the very basis of the claim is raised; the judicial process must retain the flexibility to correct itself to prevent injustice, and the failure of the lower courts to consider the merits warranted this Courts intervention.
Result:
The appeals are allowed, the impugned orders are set aside, the awards are quashed, and the Tribunal is directed to re-examine the claims after giving the insurer a reasonable opportunity to substantiate its allegations and the claimants an opportunity to rebut them.
(A) The exercise of the extraordinary jurisdiction under Article 136 of the Constitution of India is pertinent when substantial questions of law are involved, and the inherent powers under Article 226 of the Constitution of India are invoked to ensure that the process of justice is not subverted. These provisions read with the principles embedded in the Code of Civil Procedure, specifically Sections 151, 152, and 153, contemplate that no court or tribunal shall be powerless to set aside an order that has been obtained by fraud, as fraud unravels every judicial act and offends the solemnity of the judicial process. The present case directly engages with this framework, where the high degree of fraud alleged against the adjudicating forum necessitates the invocation of these constitutional and statutory safeguards to prevent a grave miscarriage of justice and to restore the integrity of the adjudication process.
(B) Fraud vitiates every judicial act and a decree or award obtained by fraud is a nullity; courts possess inherent power to set aside orders procured by fraud; a party resisting a claim at the first instance may not be aware of the fraud, and post-award discovery of fraud opens the door for judicial review through the writ jurisdiction of High Courts and the Supreme Court; tribunals must consider merits if new facts indicative of fraud are raised, and cannot mechanically refuse to act.
Facts of the case:
Two claimants obtained separate awards from a Motor Accident Claims Tribunal against the owner of a vehicle and its insurer based on identical facts of an accident, after the insurer had made an interim no-fault liability payment. Subsequently, a report from the police alleged that the injuries occurred under entirely different circumstances, revealing a potential fraud. When the insurer sought to recall the awards, the Tribunal and the High Court declined to intervene, citing lack of statutory power, compelling the insurer to approach this Court by Special Leave.
Findings of Court:
The lower courts erred in refusing to examine the grave allegation of fraud; the High Courts writ jurisdiction cannot be so constrained as to leave the insurer without remedy; and the awards cannot stand when they are allegedly the product of a sophisticated fraud played upon the tribunal and the court.
Issues:
Whether a party that discovers, after the passing of an award, that it was obtained by fraud has any effective legal remedy against the award; whether tribunals and High Courts are duty-bound to examine allegations of fraud even if the party resisted the claims initially; and whether the inherent powers under the Constitution and the Code of Civil Procedure can be denied in such a situation.
Ratio Decidendi:
Courts and tribunals are not estopped from setting aside their own orders when they are obtained by fraud; the remedy of review is not foreclosed by the doctrine of res judicata or limitation when a new and serious allegation of fraud affecting the very basis of the claim is raised; the judicial process must retain the flexibility to correct itself to prevent injustice, and the failure of the lower courts to consider the merits warranted this Courts intervention.
Result:
The appeals are allowed, the impugned orders are set aside, the awards are quashed, and the Tribunal is directed to re-examine the claims after giving the insurer a reasonable opportunity to substantiate its allegations and the claimants an opportunity to rebut them.
Fraud - Cited as settled law that a judgment obtained by playing fraud on court is a nullity and can be challenged in any court.
InherentPower - Cited to establish that courts have inherent power to set aside an order obtained by fraud.
Fraud - Cited for the principle that fraud unravels everything and no judgment obtained by fraud can stand.
Fraud - Reference to paragraph number citing S.P. Chengalvaraya Naidu case on nullity of fraudulently obtained judgments.
JUDGMENT
Thomas, J.-Leave granted.
2. If what the appellant-Insurance Company now says is true, then a rank fraud had been played by two claimants and wangled two separate Awards from a Motor Accident Claims Tribunal for a bulk sum. But neither the Tribunal nor the High Court of Allahabad, before which the Insurance Company approached for annulling the awards, opened the door but expressed helplessness even to look into the matter and hence the Insurance Company has filed these appeals by Special leave.
3. "Fraud and justice never dwell together". (Frans at jus nunquam cohabitant) is a pristine maxim which has never lost its temper over all these centuries. Lord Denning observed in a language without equivocation that "no judgment of a Court, no order of a Minister can be allowed to stand if it has been obtained by fraud, for, fraud unravels everything" (Lazarus Estate Ltd. v. Beasley1).
4. For a High Court in India to say that it has no power even to consider the contention that the awards secured are the by products of stark fraud played on a Tribunal, the plenary power conferred on the High Court by the Constitution may become a mirage and people s faith in the efficacy of the High Courts would corrode. We would have appreciated if the Tribunal or at least the High Court had considered the plea and found them unsustainable on merits, if they are meritless. But when the Courts pre-empted the Insurance Company by slamming the doors against them, this Court has to step in and salvage the situation.
5. Facts are these: One Rajendra Singh and his son Sanjay Singh (first respondent in the respective appeals) filed two separate claim petitions before the Motor Accident Claims Tribunal, Bulandsahar (for short the Tribunal ) in 1994 praying for awarding compensation in respect of an accident which happened on 9.11.1993. The claimants put forth-identical averments regarding the accident which are in substance the following :
Rajendra Singh, the father was travelling on the pillion of a two wheeler motorcycle which was then ridden by his son Sanjay Singh and an Ambassador Car (DL 2C-9793) driven by Jai Prakash collided with the motorcycle of the claimants and caused injuries to both of them. The ambassador car was owned by the second respondent.
6. Rajendra Singh made a claim for more than Rs. 4 lacs and Sanjay Singh s claim was even above that (Rs. 5.5. lacs). As the ambassador car was, at the relevant time, covered by a policy of Insurance with the appellant Company, the claimants made the appellant Company also a party in the claim proceedings before the Tribunal. Though the owner of the Car as well as the Insurance Company resisted the claims on the premise that there was no negligence on the part of the driver of the Car, the Tribunal found the driver guilty of negligent driving. Hence, the owner was held vicariously liable for the damages payable to the injured claimants. Accordingly, two awards were passed on 15.1.1998, one in favour of Rajendra Singh in a sum of Rs. 3,55,000/- and the other in favour of Sanjay Singh in a sum of Rs. 1,52,000/-. Both the awards were to carry interest at the rate of 12% annum from the date of claim. An interim order was passed already for covering "no fault liability" and we are told that the amount towards that had been paid by the appellant Company.
7. The award became final as neither the owner of the ambassador car nor the Insurance Company filed any appeal thereon. Thus far, there was no problem for the awardees. Hardly four months elapsed after passing the awards, a gentleman visisted the Divisional Office of the appellant Company at Ghaziabad and delivered the photocopy of a report prepared by the Assistant Sub-Inspector of Police, Subzi Mandi, Police Station, Delhi on 9.11.1993 in which contained a narration that Sanjay Singh and Rajendra Singh received the injuries in a different circumstance at a different place altogether (i.e. while they were operating their own tractor, it jutted into a ditch and in the jerk the occupants of the tractor slipped down and sustained injuries). The gentleman who delivered the said report to the company was prepared to disclose further details of the above accident only on a condition that his identity would be kept in anonymity.
8. On receipt of the said information, the Divisional Office of the appellant Company made frenetic inquiries and they came across statements attributed to the claimants and prepared by the Sub-Inspector of Police, Subzi Mandi Police Station, Delhi, on 9.11.1993. Such statements contained the narration that the injuries were sustained by Rejendra Singh and Sanjay Singh in the accident which happened when the trailor trolly and slipped into the pit.
9. Almost immediately after obtaining the above information, the appellant Insurance Company moved the Tribunal with two petitions purportly under Sections 151, 152 and 153 of the Code of Civil Procedure in which the appellant prayed for recall of the awards dated 15.1.1998 on the revelation of new facts regarding the injuries sustained by the claimants. Those applications were resisted by the claimants solely on the ground that the Tribunal has no power of review except to correct any error in calculating the amount of compensation and hence the Tribunal cannot recall the awards. It appears that the Tribunal accepted the said stand of the claimants and dismissed the application for recalling the awards. It was in the above background that the appellant Insurance Company moved the High Court of Allahabad with a Writ petition for quashing the awards as well as the steps take pursuant thereto.
10. Learned Single Judge of the Allahabad High Court who dismissed the Writ petition as per a short order passed by him stated thus:
"Heard learned counsel for the petitioner. The present Writ petition has been filed against the order rejecting review application. There is no power of review in the Statute. Learned Counsel for the petitioner argues that fraud has been played. It is a question of fact, for which writ jurisdiction is not the proper forum. The petitioner may avail himself of such legal remedy as may be available to him. The writ petition is accordingly dismissed. There will be, however, no order as to costs."
(underlining supplied)
11. Thus the Tribunal refused to open the door to the appellant Company as the High Court declined to exercise its writ jurisdiction which is almost plenary for which no statutory constrictions could possibly be imposed. If a party complaining of fraud having been practised on him as well as on the court by another party resulting in a decree, cannot avail himself of the remedy of review or even the writ jurisdiction of the High Court, what else is the alternative remedy for him? Is he to surrender to the product of the fraud and thereby became a conduit to enrich the imposter unjustly? Learned Single Judge who indicated some other alternative remedy did not unfortunately spell out what is the other remedy which the appellant Insurance Company could pursue with.
12. No one can possibly fault the Insurance Company for persistently pursuing the matter up to this court because they are dealing with public money. If they have discovered that such public fund, in a whopping measure, would be knocked off fraudulently through a fake claim, there is full justification for the Insurance Company in approaching the Tribunal itself first. At any rate the High Court ought not have refused to consider their grievances. What is the legal remedy when a party to a judgment or order of court later discovered that it was obtained by fraud?
13. In S.P. Chengalvaraya Naidu (dead) by LRs. v. Jagannath (dead) by LRs. & Ors.2 the two Judges Bench of this Court held :
"Fraud avoids all judicial acts, ecclessiatical or temporal"-observed Chief Justice Edward Coke of England about three centuries ago. It is the settled proposition of law that a judgment or decree obtained by playing fraud on the court is a nullity and non est in the eyes of law. Such a judgment/decree-by the first court or by the highest court-has to be treated as a nullity by every court, whether superior or inferior. It can be challenged in any court even in collateral proceedings.."
14. In Indian Bank v. Satyam Fibres (India) Pvt. Ltd.3 another two Judges bench, after making reference to a number of earlier decisions rendered by different High Courts in India, stated the legal position thus :
"Since fraud affects the solemnity, regularity and orderliness of the proceedings of the Court and also amounts to an abuse of the process of Court, the Courts have been held to have inherent power to set aside an order obtained by fraud practised upon that Court. Similarly, 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."
15. It is unrealistic to expect the appellant company to resist a claim at the first instance on the basis of the fraud because appellant company had at that stage no knowledge about the fraud allegedly played by the claimants. If the Insurance Company comes to know of any dubious concoction having been made with the sinister object of extracting a claim for compensation, and if by that time the award was already passed, it would not be possible for the company to file a statutory appeal against the award. Not only because of bar of limitation to file the appeal but the consideration of the appeal even if the delay could be condoned, would be limited to the issues formulated from the pleadings made till then.
16. Therefore, we have no doubt that the remedy to move for recalling the order on the basis of the newly discovered facts amounting to fraud of high degrees, cannot be foreclosed in such a situation. No court or tribunal can be regarded as powerless to recall its own order if it is convinced that the order was wangled through fraud or misrepresentation of such a dimension as would affect the very basis of the claim.
17. The allegation made by the appellant Insurance Company, that claimants were not involved in the accident which they described in the claim petitions, cannot be brushed aside without further probe into the matter, for, the said allegation has not been specifically denied by the claimants when they were called upon to file objections to the applications for recalling of the awards. Claimants then confined their resistance to the plea that the application for recall is not legally maintainable. Therefore, we strongly feel that the claim must be allowed to be resisted, on the ground of fraud now alleged by the Insurance Company. If we fail to afford to the Insurance Company an opportunity to substantiate their contentions it might certainly lead to serious miscarriage of justice.
18. In the result, we allow these appeals, set aside the impugned orders and quash the awards passed by the Tribunal in favour of the claimants. We direct the Tribunal to consider the claims put forth by the claimants afresh after affording a reasonable opportunity to the appellant Insurance Company to substantiate their allegations. Opportunity must be afforded to the claimants also to rebut the allegations.
19. We make it clear that while disposing of the claims afresh the Tribunal shall not be trammeled by any of the observations, if any, made by us on the merits of the allegations.
Appeals allowed. Awards quashed. Tribunal directed to reconsider claims.
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