Regarding fraudulent transactions and GPA sales what the law says

In Lourdu Mari David and Ors. vs. Louis Chinnaya Arogiaswamy and Ors. Reported in (1996) 5 SCC 589 the Supreme Court observed: "It is settled law that the party who seeks to avail of the equitable jurisdiction of a court and specific performance being equitable relief, must come to the court with clean hands. In other words the party who makes false allegations does not come with clean hands and is not entitled to the equitable relief."

THE STATE OF ANDHRA PRADESH & ANOTHER V. T.SURYACHANDRA RAO, (2006) 1 LW 547 at pg.551 wherein the Honourable Supreme Court has observed as follows: " "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 includes 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. 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 enures 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 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 principles and any affair tainted with fraud cannot be perpetuated or saved by the application of any equitable doctrine including res judicata

A.V.PAPAYYA SASRTY AND OTHERS V. GOVT. OF A.P. AND OTHERS, (2007) 4 SUPREME COURT CASES 221, wherein it is observed that 'Fraud vitiates all judicial acts whether in rem or inpersonam and that the Judgment, decree or order obtained by fraud has to be treated as non est and nullity, whether by Court of first instance or by the final Court and that it can be challenged in any Court, at any time, in appeal, revision, writ or even in collateral proceedings.'

S.P.CHENGALVARAYA NAIDU V. JAGANNATH AND OTHERS, AIR (81) 1994 SUPREME COURT 853, wherein it is held as follows:- 'The courts of law are meant for imparting justice between the parties. One who comes to the Court, must come with clean hands. It can be said without hesitation 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 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 fraud on the court as well as on the opposite party.'

RAM CHANDRA SINGH V. SAVITRI DEVI AND OTHERS, (2003) 8 SCC 319 at pg. 322 wherein it is inter alia held that '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 perpetuated or saved by the application of any equitable doctrine including res judicata.'


A sale of immovable property is a contract, which gives an individual civil right to the buyer, if such sale is in accordance with entrenched common law principles. The Indian Contract Act, 1872, Specific Relief Act and Transfer of Property Act, essentially deal with, among others - the contract of sale. The Indian Evidence Act, the Registration Act and the Stamp Act form the trinity of procedural and adjutant law in respect of sale whereas the three Acts referred to before form the trinity of substantive law of contract of sale.


Chapter II of TP Act contains two parts. Part-A deals with ''Transfer of property whether movable or immovable' (Sections 5 to 34). Part-B deals with ''Transfer of immovable property' (Sections 38 to 53-A). A transfer as defined by Section 5 of TP Act is conveyance of property by one living person to one or more living persons or to him in present or in future. Section 6 of TP Act declares that property of any kind may be transferred except the transfer of property, which is prohibited by TP Act. Clauses (a) to (h) under Section 6 of TP Act, deal with some of prohibited transfers. Clause (h) lays down that "no transfer can be made (i) insofar as it is opposed to the nature of the interest affected thereby, or (ii) for an unlawful object, or consideration within the meaning of Section 23 of the Indian Contract Act, 1872, or (iii) to a person legally disqualified to be transferee." Section 7 of TP Act enumerates that every person entitled to transferable property or authorized to dispose of transferred property, not his own, can transfer the property provided he is competent to do so. Section 8 of TP Act deals with 'operation of transfer'. It is to the effect that a transfer of property passes forthwith to the transferee of the interest, which the transferor is then capable of passing in the property and legal incidents thereof. When such transfer is completed as per Sections 10 and 11 of TP Act, any restriction contained in the transfer deed disentitling the transferee from operating or disposing of his interest in the property would be void and when the interest is created absolutely in the transferee with a condition that such transferee can enjoy subject to conditions, the transferee can ignore such conditions. As per Section 4 of TP Act, all the provisions relating to contract in the TP Act shall be taken as part of the Indian Contract Act and Section 54 (Paragraphs 2 and 3), Sections 59, 107 and 123 of TP Act shall be read as supplemental to the Registration Act.

Unless and until, a person is competent to contract and entitled to transfer the property, a valid transfer of property cannot take place (Sections 5 and 7 of TP Act). As a necessary corollary, if the transfer of property is by a person without title or such transfer is opposed to nature of interest or for an unlawful object or consideration within the meaning of Section 23 of the Contract Act or transferee is legally disqualified to be transferee, title in the property does not pass to the transferee (Sections 6(h) and 8 of TP Act and Section 23 of the Contract Act).

Section 23 of the Indian Contract Act, 1872 (hereinafter referred to as 'the Contract Act') is applicable to the present controversy. It lays down that an agreement is void if it deviates the provisions of any law. It further lays down that consideration or object of an agreement is lawful unless it is forbidden by any law or is fraudulent or involves or implies injury to the person or property of another, or the Court regards it as immoral or opposed to public policy. Therefore, such a document, in every ones view, is a fraudulent document within the meaning of Section 23 of the Contract Act and as such, cannot be registered.

REGISTRATION ACT 1908 PROVISIONS:-

32. Persons to present documents for registration
Except in the cases mentioned in 24[sections 31, 88 and 89], every document to be registered under this Act, whether such registration be compulsory or optional, shall be presented at the proper registration office-
(a) by some person executing or claiming under the same, or, in the case of a copy of a decree or order, claiming under the decree or order, or
(b) by the representative or assignee of such a person, or
(c) by the agent of such a person, representative or assign, duly authorised by power-of-attorney executed and authenticated in manner hereinafter mentioned.


33. Power-of-attorney recognisable for purposes of section 32
(1) For the purposes of section 32, the following powers-of-attorney shall alone be recognised, namely:-
(a) if the principal at the time of executing the power-of-attorney resides in any part of 18[India] in which this Act is for the time being in force, a power-of-attorney executed before and authenticated by the Registrar or Sub-Registrar within whose district or sub-district the principal resides;
(b) if the principal at the time aforesaid 25[resides in any part of India in which this Act is not in force], a power-of-attorney executed before and authenticated by any Magistrate;
(c) if the principal at the time aforesaid does not reside in 18[India], a power-of-attorney executed before and authenticated by Notary Public, or any court, Judge, Magistrate, 26[Indian] Consul or vice-consul, or representative 27[***] of the Central Government:
PROVIDED that the following persons shall not be required to attend at any registration-office or court for the purpose of executing any such power-of-attorney as is mentioned in clauses (a) and (b) of this section, namely-
(i) persons who by reason of bodily infirmity are unable without risk or serious inconvenience so to attend;
(ii) persons who are in jail under civil or criminal process; and
(iii) persons exempt by law from personal appearance in court.
5[Explanation: In this sub-section "India" means India, as defined in clause (28) of section 3 of the General Clauses Act, 1897.]
(2) In the case of every such person the Registrar or Sub-Registrar or Magistrate, as the case may be, if satisfied that the power-of-attorney has been voluntarily executed by the person purporting to be the principal, may attest the same without requiring his personal attendance at the office or court aforesaid.
(3) To obtain evidence as to the voluntary nature of the execution, the Registrar or Sub-Registrar or Magistrate may either himself go to the house of the person purporting to be the principal, or to the jail in which he is confined, and examine him, or issue a commission for his examination.
(4) Any power-of-attorney mentioned in this section may be proved by the production of it without further proof when it purports on the face of it to have been executed before and authenticated by the person or court hereinbefore mentioned in that behalf.


81. Penalty for incorrectly endorsing, copying, translating or registering documents with intent to injure

Every registering officer appointed under this Act and every person employed in his office for the purposes of this Act, who, being charged with the endorsing, copying, translating or registering of any document presented or deposited under its provisions, endorses, copies, translates or registers such document in a manner which he knows or believes to be incorrect, intending thereby to cause or knowing it to be likely that he may thereby cause injury, as defined in the Indian Penal Code, to any person, shall be punishable with imprisonment for a term which may extend to seven years, or with fine, or with both.


83. Registering officer may commence prosecutions

(1) A prosecution for any offence under this Act coming to the knowledge of a registering officer in his official capacity may be commenced by or with the permissions of the Inspector-General, 31[***] the Registrar or the Sub-Registrar, in whose territories, district or sub-district, as the case may be, the offence has been committed. (2) Offences punishable under this Act shall be triable by any court or officer exercising powers not less than those of a Magistrate of the second class.

KARNATAKA STAMP ACT PROVISIONS


33. Examination and impounding of instruments.- (1) Every person having by law or consent of parties authority to receive evidence, and every person in charge of a public office, except an officer of police, before whom any instrument, chargeable in his opinion, with duty, is produced or comes in the performance of his functions, shall, if it appears to him that such instrument is not duly stamped, impound the same.
(2) For that purpose every such person shall examine every instrument so chargeable and so produced or coming before him, in order to ascertain whether it is stamped with a stamp of the value and description required by the law in force in the 1[State of Karnataka]1 when such instrument was executed or first executed:


34. Instruments not duly stamped inadmissible in evidence, etc.- No instrument chargeable with duty shall be admitted in evidence for any purpose by any person having by law or consent of parties authority to receive evidence, or shall be acted upon, registered or authenticated by any such person or by any public officer, unless such instrument is duly stamped:
Provided that,—
(a) any such instrument not being an instrument chargeable 1[with a duty not exceeding fifteen naye paise]1 only, or a mortgage of crop [Article 1[35]1 (a) of the Schedule] chargeable under clauses (a) and (b) of section 3 with a duty of twenty-five naye paise shall, subject to all just exceptions, be admitted in evidence on payment of the duty with which the same is chargeable, or, in the case of an instrument insufficiently stamped, or the amount required to make up such duty, together with a penalty of five rupees, or, when ten times the amount of the proper duty or deficient portion thereof exceeds five rupees, of a sum equal to ten times such duty or portion;
1. Substituted by Act 29 of 1962 w.e.f. 1.10.1962.
(b) where a contract or agreement of any kind is effected by correspondence consisting of two or more letters and any one of the letters bears the proper stamp, the contract or agreement shall be deemed to be duly stamped;
(c) nothing herein contained shall prevent the admission of any instrument in evidence in any proceeding in a Criminal Court, other than a proceeding under Chapter XII or Chapter XXXVI of the Code of Criminal Procedure, 1898;
(d) nothing herein contained shall prevent the admission of any instrument in any Court when such instrument has been executed by or on behalf of the Government, or where it bears the certificate of the 1[Deputy Commissioner]1 as provided by section 32 or any other provision of this Act 2[and such certificate has not been revised in exercise of the powers conferred by the provisions of Chapter VI]2.

KARNATAKA STAMP SCHEDULE ARTICLE PROVISIONS

Art. 41. Power of Attorney - (as defined by Section 2(1)(p) not being a proxy-
(a) when executed for the sole purpose of procuring the registration of one or more documents in relation to a single transaction or for admitting execution of one or more such documents; 1[One hundred rupees]
(b) when authorizing one person or more to act in a single transaction other than the case mentioned in clause (a); 1[One hundred rupees]
(c) when authorizing not more than five persons to act jointly and severally in more than one transaction or generally; 2[One hundred rupees]

1. Substituted for the words "ten rupees" and "twenty rupees" by Act No. 7 of 2000, w.e.f. 1.4.2000.
2. Substituted by Act No. 10 of 1990, w.e.f. 1.4.1990.

(d) when authorizing more than five but not more than ten persons to act jointly and severally in more than one transaction or generally; 1[Two hundred rupees]

2 (e) when given for consideration or when coupled with interest and authorizing the attorney to sell any immovable property; The same duty as a conveyance [under Art. No. 20(1)] on consideration or on market value of the property (which is the subject matter of such power of attorney) whichever is higher..

1(f) If relating to construction or development or sale of an immoveable property, including a multiunit house or building or unit of apartment or flat or portion of a multistoried building by a person having a stipulation that after construction or development, such property shall be held jointly or severally by that person and the owner or lessee, as the case may be, of such property, or that it shall be sold jointly or severally by them or that a part of it shall be held jointly or severally by them and the remaining part there of shall be sold jointly or severally by them.
Explanation I
1) The expression “Lease” shall mean a holder of a lease, for a period exceeding 30 years or more, or in perpetuity or does not purport to be for any definite term.
The expression “building” shall mean a building having more than one apartment or flat or office accommodation or portion of a multistoried building or both. One rupee for every one hundred rupees or part thereof on the market value of the property or the estimated cost of construction or proposed construction or development or proposed development of the property, as the case may be (which is the subject matter of such transfer under the agreement in accordance with the provision of section 28 of the K.S.Act, 1957) or on the consideration for such transfer whichever is higher.

Provided that, when proper stamp duty is paid under “clause (e), or clause (f) of the article 5, as the case may be, on such agreement or records thereof or memorandum of an agreement executed between the same parties and in respect of the same property, the stamp duty chargeable under these clauses shall be as per article 41(f)”.
1. Substituted by Act No. 10 of 1990, w.e.f. 1.4.1990.
2. Clause (e) substituted by Act No.9 of 2009 w.e.f. 1-4-2009

Description of Instrument Proper Stamp Duty
1 (eb) When given to person other than the father, mother, wife or husband, sons /daughters, brothers, sisters in relation to the executant authorizing such person to sell immovable property situated in Karnataka State. 2Seven rupees and fifty paise for every one hundred rupees or part thereof on the market value of the property which is the subject matter of power of attorney.
Provided that the duty paid on such instrument is adjustable towards the duty payable on the instrument of sale or transfer executed subsequently in favour of either the attorney holder or any other person.
(f) in any other case. 3 [Two hundred rupees.]

N.B. - The term "Registration" includes every operation incidental to registration under the Registration Act, 1908 (Central Act 16 of 1908).
Explanation - For the purposes of this Article more persons than one when belonging to the same firm, shall be deemed to be one person.
Act. 42. Protest of Bill or note, that is to say, any declaration in writing made by a Notary Public or other person lawfully acting as such, attesting the dishonor of a bill of exchange or promissory note. 4[Ten rupees.]
1. Substituted by Act No. 6 of 1999, w.e.f. 1.4.1999.
2.Substituted for the words” eight rupees” by Act No. 7 of 2006 w.e.f 1-4-2006
3. Substituted for the words "one hundred rupees" by Act No.9 of 2009 w.e.f. 1.4.2009.
4. Substituted for the words "five rupees" by Act No.10 of 1990 w.e.f. 1.4.1990.


If the title passed on is defective, the law gives the option to the purchaser to avoid such sale and sue for recovery of consideration and/or damages for breach and misrepresentation. In a situation there could also be a criminal charge against the spurious vendor for cheating under Indian Penal Code, 1860. Even in a case where the vendor has no title at all but the purchaser was made to believe that what is passed on is a valid title in the property demised under the instrument, the vendee has remedy in civil law as well as criminal law. This remedy, however, is not available to a purchaser who is negligent in not inspecting the title of the vendor and who does not insist upon such covenant or warranty. The principle of caveat emptor (let the purchaser beware), however, has no application if vendor has practised fraud to induce the purchaser to accept the offer of sale, ['A Selection of Legal Maxims': Herbert Broom; Tenth edn., (1939), Sweet and Maxwell, pp.528-529.]. In case of fraud, the vendor cannot maintain any action against the purchaser. The legal maxim 'ex dolo malo non oritur actio' applies and the vendor who knowingly committed an act declared by the law to be criminal cannot maintain action against the purchaser who refuses to take the title conveyed under the deed. The maxim 'dolus mains' vitiates all transactions effected by fraud, [Ibid pp. 497; 540.]. Insofar as the buyer is concerned, as observed by Herbert Broom in his compilation of Legal Maxims (p.540), he may abide by the contract induced by fraud and bring an action for deceit (i.e., cheating in Indian law), for the damages sustained by the fraud. The buyer may also rescind the contract returning the goods if already accepted and recover the price paid.

The legal maxims 'nemo dat quod non habet' and 'nemo plus juris ad alium transferre potest quam ipse habet' postulate that where property is sold by a person who is not the owner and who does not sell under the authority or consent of the real owner, the buyer acquires no title to the property than the seller had. The Indian law recognizes this principle in various provisions of various statutes which in pith and substance deal with Contracts, Transfer of property and Specific relief

The position of transferee under a fraudulent instrument of conveyance is different from the true owner of the title to the property in question. Section 31 of the Specific Relief Act provides one remedy, namely, cancellation of the instrument by showing to the Court that such instrument is void or voidable and that if such instrument is allowed to outstanding, it would cause serious injury. The injury referred to in Section 31 need not be with reference to the person i.e., the true owner of the title, but can as well encompass the property involved. Indeed, Sub-section (2) of Section 31 of the Specific Relief Act requires the Court trying a suit for cancellation of instrument to send a copy of the decree to the Registering Officer, who shall note on the copy of the instrument contained in the books of registration the fact of its cancellation. This would only show that the law is anxious to protect the title to the immovable property from all deceitful encumbrances. Should there be a fraudulent transfer or a transfer vitiated by misrepresentation and collusion between two unconcerned persons, does the law expects the true owner to file a suit only under Section 31 of the Specific Relief Act or to file a suit for declaration of his title again and again? That in all cases, the true owner of the. Immovable property cannot seek the remedy of cancellation under Section 31 is already discussed. If a person has enjoyed the property as a true owner for considerable length of time, merely because there is a fraudulent transfer of his property, by one incompetent person to another person, should any one compel the true owner to file a suit for declaration of title again and again? Does it not render the registration of the transfer of title, which he had obtained much earlier, useless, unfruitful and meaningless? Whether the present dispensation of law is in such ineffective state containing vacuum or is it the duty of every Court to interpret the existing statute law taking into consideration the phenomenal changes in the society and also fast changing values in the society to mould the existing policy in statute law so as to render fraudulent transfers ineffective without recourse to common law remedy?

As seen from the Statement of Objects and Reasons appended to the Registration Bill it was felt that registration of certain documents of transactions should be made compulsory so as to avoid conflicts in relation to various transactions. The purpose was to assure people that if a document evidencing transaction or conveyance is registered, no one can claim any interest by creating a forged or sham document. the object of registering a document is to give notice to the world that a document has been executed to prevent fraud and forgery and to secure a reliable and complete account of all transactions effecting the title to the property.


Rule 26 of Registration Rules

(i) Every document shall, before acceptance for registration, be examined by the Registering Officer to ensure that all the requirements prescribed in the Act and in these rules have been complied with, for instance,-
(a) that it has been presented in the proper office (Sections 28, 29 and 30);
(b) that the person is entitled to present it (Sections 32 and 40);
(c) that if it is a non-testamentary document and relates to immovable property, it contains a description of property sufficient to identify the same and fulfils the requirements of Rules 18 to 20.
(d) that if it is written in a language not commonly used in the district and not understood by the Registering Officer it is accompanied by a true translation into a language commonly used in the district and also by true copy (Section 19);
(e) that if it contains a map or plan, it is accompanied by true copies of such map or plan as required by Section 21(4);
(f) that if it contains no unattested interlineations, blanks, erasures or alterations, which in his opinion require to be attested as required by Section 20(1);
(g) that if the document is one other than a will it has been presented to within the time prescribed by Sections 23 to 26;
(h) that it bears the date of its execution and does not bear a date anterior to the date of purchase of stamp papers and the document is written on a date subsequent to the date of representation;
(i) that if the date is written in any document other than a will presented for registration after the death of the testator according to both the British and the Indian calendars, these dates tally; and
(j) that if the presentant is not personally known to the Registering Officer, he is accompanied by such identifying witnesses with whose testimony the Registering Officer may be satisfied.

(ii) If there are any informalities in presentation of a nature which can be remedied, for instance, non-compliance of the requirements mentioned in Clauses (a) to (f), (h), (i) and (j) of Sub-rule (i) or this rule, the Registering Officer shall give the party such information as may be necessary and return the fees and the document with a view to the document being presented again in due form. The action of the Registering Officer shall be confined to advice and he shall not himself alter the document in any way.


It forms no part of a Registering Officer's duty to enquire into the validity of a document brought to him for registration or to attend to any written or verbal protest against the registration of a document based on the ground that the executing party had no right to execute the document; but he is bound to consider objections raised on any of the grounds stated below:
(a) that the parties appearing or about to appear before him are not thepersons they profess to be;
(b) that the document is forged;
(c) that the person appearing as a representative, assign or agent, has no right to appear in that capacity;
(d) that the existing party is not really dead as alleged by the party applying for registration; or


Though Rule 58 prohibits the Registering Officers from enquiring into validity of the document, Rule 26 read-with Rule 58 reveals that it is always permissible for the Registering Officer to examine the document presented for registration as to whether the person who presented the document is entitled to present, whether such person is known to the officer or has been properly identified by the identifying witnesses, and also examine the document with reference to the various provisions referred to hereinabove. If any objection is raised, the Registering Officer has to consider whether the parties appearing before him are not the parties they profess to be, whether the document is forged and whether the document is presented without proper authority by representative, and whether the executing party is dead or not. In case, the Registering Officer is not satisfied, he can refuse registration.

The question may also have to be examined from the point of view of administrative law. Needless to point out that administrative law, which also governs the exercise of power of judicial review by this Court is intended to see that all the public authorities, who are vested with powers discharge their duties and functions in accordance with rule of law, in a manner which is not illegal, irrational or improper. In post constitutional era, all the power exercised in the democratic governance flows from super statute i.e., the Constitution of India. There is no gain saying that all power is a trust and the trust should be discharged legally, fairly, impartially and with accountability. There is always presumption - though rebuttable; in law that all public functions are discharged for public good in accordance with law. If a public authority is induced to discharge the trust (exercise power) in a manner which is fraudulent, whether such public authority can recall/ revoke earlier fraudulent order? Insofar as the judicial authorities and Courts are concerned, it is now settled law that every Court in judicial hierarchy has inherent power to revoke an earlier order obtained by fraud.

Fraud is a conduct which induces another person or authority to take a definite determinative stand in response to such person's conduct by words or letter. In his treatise on the 'Law of Fraud and Mistake', Kerr describes the elements of fraud as consisting in one man's endeavour by deception to alter another man's general rights; or in one man's endeavouring by circumvention to alter general rights of another or in one man's endeavouring by deception to alter another man's particular rights. Fraud and dispensation of justice by any authority - be it judicial or executive; do not go together. One species of fraud is misrepresentation. When the man misrepresents about some animate thing or inanimate thing which is quite opposite to the reality, he would be committing fraud by misrepresentation. The effect of fraud on the person or the benefit derived by such person is a cipher. "Fraud unravels everything and no Court can allow a person to keep an advantage obtained by fraud nor judgment of a Court or an order of a public authority can be allowed to stand if the same is obtained by fraud".

In Shrisht Dhawan v. Shaw Brothers , the Supreme Court held as under: Fraud and collusion vitiate even the most solemn proceedings in any civilized system of jurisprudence. It is a concept descriptive of human conduct. Michael Levi likens a fraudster to Milton's sorcerer, Comus, who exulted in his ability to, 'wing me into the easy-hearted man and trap him into shares'. It has been defined as an act of trickery or deceit. In Webster's Third New International Dictionary fraud in equity has been defined as an act or omission to act or concealment by which one person obtains an advantage against conscience over another or which equity or public policy forbids as being prejudicial to another. In Black's Legal Dictionary, fraud is defined as an intentional perversion of truth for the purpose of inducing another in reliance upon it to part with some valuable thing belonging to him or surrender a legal right; a false representation of a matter of fact whether by words or by conduct, by false or misleading allegations, or by concealment of that which should have been disclosed, which deceives and is intended to deceive another so that he shall act upon it to his legal injury. In Concise Oxford Dictionary, it has been defined as criminal deception, use of false representation to gain unjust advantage; dishonest artifice or trick... From dictionary meaning or even otherwise fraud arises out of deliberate active role of representator about a fact which he knows to be untrue yet he succeeds in misleading the representee by making him believe it to be true. The representation to become fraudulent must be of fact with knowledge that it as false.

In S.P. Chengalvaraya Naidu v. Jagannath , quoting Lord Edward Coke (that 'fraud avoids all judicial acts, ecclesiastical or temporal',) Supreme Court of India emphasised that the judgment or decree obtained by fraud on the Court is nullity and non est in the eye of law. It was also held that a decree/ judgment vitiated by fraud must be ignored treating it as nullity by every Court whether superior or inferior as "finality of litigation is not available when fraud is alleged". The following passage from the said judgment is relevant here. ....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 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-process a convenient lever to retain the illegal gains indefinitely. We have 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 to gain by another's loss. It is a cheating intended to get an advantage...

The principle is thus well settled that all the Courts and judicial forums in India have inherent power to recall or revoke the order passed earlier when it is shown that such order came to be passed by reason of fraud played on the Court. What is the effect of fraud in public administration when power is exercised by either administrative/executive authorities or statutory authorities? This was precisely the question considered by the Supreme Court in Indian Bank v. Satyam Fibres (India) Private Limited . While observing that the judiciary in India possesses inherent power under Section 151 of Code of Civil Procedure, 1908 (CPC), to recall its judgment or order obtained by fraud on the Court, the Apex Court ruled as under: This plea could not have been legally ignored by the Commission which needs to be reminded that the authorities, be they constitutional, statutory or administrative, (and particularly those who have to decide a lis) possess the power to recall their judgments or orders if they are obtained by fraud as fraud and justice never dwell together (Fraus et jus nunquam cohabitant). It has been repeatedly said that fraud and deceit defend or excuse no man (Fraus et dolus nemini patrocinari debent)...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.


It is thus law of the land that even administrative authorities have inherent powers to recall or revoke their own orders if such order was obtained by playing fraud on such public authority. As a necessary corollary if something is done by public authority at the behest of a person who played fraud, the same public authority can nullify that was done as vitiated by fraud. As observed by the Supreme Court in Indian Bank (supra), inherent powers spring not from legislation but from the nature and conservation of the authorities, to enable them to maintain their dignity, secure obedience to process and ensure transparency. This Court is able to place its hands on two decisions of the Supreme Court, in which the administrative authorities rectified their earlier orders on the ground of fraud and the same received approval by the Supreme Court. These are District Collector and Chairman, Vizianagaram v. M. Tripurasundari Devi and Union of India v. M. Bhaskaran 1995 Supp (4) SCC 100. In District Collector and Chairman, Vizianagaram (supra), persons who are not qualified were appointed as clerks in the District Administration ignoring the claims of those who were qualified. The Supreme Court held that appointment of an unqualified person amounts to fraud and therefore, such appointments can be withdrawn. The relevant observations are as under: It must further be realized by all concerned that when an advertisement mentions a particular qualification and an appointment is made in disregard to the same, it is not a matter only between the appointing authority and the appointee concerned. The aggrieved are all those who had similar or even better qualifications than the appointee or appointees but who had not applied for the post because they did not possess the qualifications mentioned in the advertisement. It amounts to a fraud on public to appoint persons with inferior qualifications in such circumstances unless it is clearly stated that the qualifications are relaxable. No Court should be a party to the perpetuation of the fraudulent practice.


It is therefore axiomatic that in India, the judicial, quasi judicial and administrative authorities have inherent powers to recall their orders or proceedings at a latter point of time if it is shown that such order was obtained by playing fraud and misrepresentation. The question of applicability of law of limitation to exercise such inherent power by the administrative authorities does not arise because fraud unravels everything rendering a fraudulent order void and non-existent. To our mind, this principle in a different manner is also adumbrated in Section 21 of General Clauses Act, 1897 (Central Act No. X of 1897). Under the said provision, an authority who has power to issue, inter alia orders has also power to rescind such order. Further, the Rule 117 of Registration Rules permits the registration of cancellation deed in the same class of register book as that in which original document which it cancels has to be registered. It is clearly not possible to accept the submission that Registering Officer has no power to accept and register a cancellation deed cancelling the earlier sale deed. Such an interpretation would not subserve public interest and if the Registering Officer is not given such power, it would further harm public interest and public policy. Nobody can deny that in a civilized society regulated by rule of law, the person with valid title must have the liberty to enjoy his property and such liberty cannot be deprived of without proper procedure under law.


The person, who has ex facie right whether such right is registered or not can always approach the registering authority, with a request to cancel a sale deed, which was registered earlier by such registering authority by showing that subsequent registration was obtained by fraud by a person who is not entitled to transfer the property or that such transfer was registered by playing fraud on the owner or on the stranger. In the present statutory dispensation, namely Transfer of Property Act, Contract Act, Specific Relief Act and Registration Act, the Court does not see any prohibition operating on the exercise of inherent power by the registering authority to cancel the sale deed earlier registered, which is likely to cause prejudice to the true owner as well as to the entire public at large.

In Gujarat Bottling Co. Ltd. & Ors Vs. Coca Cola Co. & Ors it SC has held that:- "The grant of an interlocutory injunction during the pendency of legal proceedings is a matter requiring the exercise of discretion of the court. While exercising the discretion the court applies the following tests - (i) whether the plaintiff has a prima facie case; (ii) whether the balance of convenience is in favour of the plaintiff; and (iii) whether the plaintiff would suffer an irreparable injury if his prayer for interlocutory injunction is disallowed. The decision whether or not to grant an interlocutory injunction has to be taken at a time when the existence of the legal right assailed by the plaintiff and its alleged violation are both contested and uncertain and remain uncertain till they are established at the trial on evidence. Relief by way of interlocutory injunction is granted to mitigate the risk of injustice to the plaintiff during the period before that uncertainty could be resolved. The object of the interlocutory injunction is to protect the plaintiff gainst injury by violation of his right for which he could not be adequately compensated in damages recoverable in the action if the uncertainty were resolved in his favour at the trial. The need for such protection has, however, to be weighed against the corresponding need of the defendant to be protected against injury resulting from his having been prevented from exercising his own legal rights for which he could not be adequately compensated."

SC strongly disapproves of GPA sales

Strongly disapproving of the sale of immovable properties through general power of attorney (GPA), agreement to sell and will, the Supreme Court has declared that such sales of property are not only illegal, but also cause huge loss of revenue to the state exchequer, besides encouraging the real estate mafia and their musclemen to indulge in fraudulent sale of properties to more than one purchaser.

A bench comprising Justices R V Raveendran and J M Panchal also issued notices to the Union government and the states of Punjab, Haryana, Delhi, Uttar Pradesh and Maharashtra seeking details of the steps taken or proposed to be taken by the respective states to deal with the chaotic situation arising from such transactions.

The apex court, while directing the matter to be listed for hearing in the last week of August, has also directed the states to inform the court whether power of attorney sales (that is, transactions involving execution of sales agreement/GPA/will) instead of regular sales are prevalent in their respective states and sought the views of the respective state governments in respect of such transactions.

Justice Raveendran, writing a 13-page judgement for the bench noted, "whatever be the intention, the consequences are disturbing and far-reaching, adversely affecting the economy, civil society and law and order.

Firstly, it enables large-scale evasion of income tax, wealth tax, stamp duty, and registration fees, thereby denying the benefit of such revenue to the government and the public.

Secondly, such transactions enable persons with undisclosed wealth/income to invest their black money and also earn profit/ income, thereby encouraging circulation of wealth, and corruption.

This kind of transaction has disastrous collateral effects also. For example, when the market value increases, many vendors (who effected power of attorney sales without registration) are tempted to re-sale the property taking advantage of the fact that there is no registered instrument or record in any public office, thereby cheating the purchaser.

When the purchaser under such 'power of attorney sales' comes to know about the vendor section, he invariably tries to take the help of musclemen to sort out the issue and protect his rights.

On the other hand, real estate mafia many-a-times purchase properties which are already subject to power of attorney sales and then threaten the previous power of attorney sales purchasers from asserting their rights.

Either way, such power of attorney sales indirectly leads to growth of real estate mafia and criminalisation of real estate transactions."