A.V. Papayya Sastry & Ors vs Government Of A.P [(2007) 4 SCC 211]

Judgments obtained through fraudulent means are Non-Est in eyes of the law.

Facts in Brief:

The present case has a long history beginning in the early 1970s. The appellants were the owners of 18 acres of land in the village of Kancharapalem, Vishakapatnam. The Vishakapatnam Port Trust (VPT for short) intended the acquisition of land for public purposes and henceforth sent a demand letter to the district collector requesting the acquisition of 45 acres of land in the Village of Kancharapalem. Ahead of time possession was granted by the appellant to the VPT of the land through private negotiations and the state was requested to take the proper procedure for the acquisition of land under the Land Acquisition Act, 1894. The land acquisition was approved by both the VPT and the Government of India. A preliminary notification under Section 4 of the Land Acquisition Act, 1894 was issued on 10 Aug 1973.

In 1976 Government of Andhra Pradesh introduced the Ceiling Act which applied to the whole Vishakapatnam Urban Agglomeration. The appellants contended that the possession of the land was handed over to the VPT ahead of time before the act was even in place and hence, the provisions wouldn’t be applicable to their land. The land was declared as ‘non-surplus land’ by the competent authority. Again, The Government issued a notification invoked under Section 4 of the Land Acquisition Act on 12th Oct 1973 however an award wasn’t finalized. As per the  VPT who clarified in a letter dated 19th December 1985 that possession was never given to the VPT ahead of time as the tenant who lived on the land was still living there.

The landowners filed a writ petition in the HC of Andhra Pradesh directing the State authority to finalize the process under the Land Acquisition Act and for the passing of an award during the time for which the petitions are pending a revision was allowed and which passed an order that stated that the appellant had no surplus land. Hence, another petition was filed challenging the legality of that order. In which the single judge held that the order was illegal and set it aside.

The state authorities subsequently in 2001 filed a recall application alleging that fraud had been committed by the landowners (Appellants) and that material facts were suppressed. The allegation by the State authorities was that the possession of the land was never given to the VPT yet the owners claimed that the possession was delivered in 1972. The High Court ordered an inquiry by the CBI which found that fraudulent means was used by the appellant in the case and hence the High Court allowed the Recall applications.

The appellants have challenged the order passed by the High Court.

Issues Raised

The Primary issue dealt with in the case was whether a judgment or an order obtained through a Court by fraudulent means or by suppression of material fact Binding or not?

Rule of Law

Section 4, Land Acquisition Act, 1894.

Section 34, The Urban Land (Ceiling and Regulation) Act, 1976.

Section 11, Code of Civil Procedure, 1908.

Section 151, Code of Civil Procedure, 1908.

Article 141 of the Indian Constitution.

Judgment Analysis

The bench comprised of Justice C.K Thakker and Justice L. Singh Panta, first looked at the contention presented by the counsel K.K Venugopal for the appellants, he argued that the VPT officers to protect themselves wrote a letter which stated that the possession was not handed over to the VPT as tenants were still living in those lands. The counsel argued that the letter cannot be the basis for initiating proceedings under the ceilings act. Further, he contended that the exercise of provisional power under Section 34 of the had to be exercised within a reasonable time and that a decade was not a reasonable time. The council contends that the Single Judge Bench of the High Court was correct in;

“(1)to complete land acquisition proceedings and pass award; and

(2) exercise of revisional powers after about thirteen years was wholly unwarranted.”

Then looking at the arguments made by the counsel for the State Authorities that they always believed that the advance possession of the land was given to the VPT however they were misled and The order passed under the Ceiling Act stating that the ‘surplus land’ owners did not own was based on that view. The state argued that the legal possession was with the appellants all this time and the state relied upon the letter by the officers of the VPT. Therefore the matter required some investigation

Thereafter, the court ordered a CBI inquiry which exposed that indeed fraud was committed by the landowners. 

Now the primary issue that the Supreme Court dealt with whether the judgment, as per the report submitted by the CBI was obtained by fraud, would be recognizable by the Law. The bench made reference to the case of Lazarus Estate ltd. v. Beasley, (1956) 1 All ER 341, in which Lorde denning had stated: 

“No judgment of a court, no order of a Minister, can be allowed to stand if it has been obtained by fraud.”[1]

The Court then interpreted the meaning of a “Judgment obtained by fraud”, it stated that “Fraud may be defined as an act of deliberate deception with the design of securing some unfair or undeserved benefit by taking undue advantage of another.” 

The court elaborated that it was necessary not only to show that the court is ‘mistaken’ in passing the order in question but it must also be shown that the court was intentionally ‘misled’ by the successful part and drawing a difference between mistake and deceit, the difference is that for an order to be set aside the court must be in passing that order misled by the party in whose favor the litigation is decided.

The court relied on the judgment in S.P. Chengalvaraya Naidu (dead) by LRs. V. Jagannath (dead) by LRs. & Ors. (1994) 1 SCC 1, in this case, A in a deed relinquished all his rights in a property for C who sold it to B. By misleading the court was able to obtain a preliminary decree against B, however, B came to know about the fact, and before the final decree was passed he contended in the court that the preliminary decree has been obtained by fraud, the court however dismissed the contention. The matter was taken to the Supreme Court which set aside the order of the trial court and the High Court. Justice Kuldip Singh observed;

“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, who’s case is based on falsehood, has no right to approach the court. He can be summarily thrown out at any stage of the litigation”.[2]

Here the court also expanded that omission or suppression of material facts in litigation would also amount to fraud. Further, the Court referred to In Indian Bank v. Satyam Fibres (India) Pvt. Ltd., (1996) 5 SCC 550 which observed that u/s 151 of the Civil Procedure Code the Judiciary have an inherent power to overturn its order and declare them non-est if it so found it that they were obtained by fraud or mischief.

In the case of United India Insurance Co. Ltd. v. Rajendra Singh & Ors., (2000) 3 SCC 581, an award was won by fraudulent means from an insurance company however the Tribunal and the HC held the award, in that case, was valid, this court when approached by the insurance company set aside the order. This court stated that “No Court or tribunal can be regarded as powerless to recall its 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.” [3]

The counsel of the appellant argued that since the SLPs were rejected by this court that the respondent cannot approach the High Court for recalling of judgment as it was violative of Article 141 of the Constitution. To this contention, the court took upon the question of whether fraud would act as an exception to Article 141 and Doctrine of Merger and answer in affirmative. The Doctrine of Merger lays down that all orders passed by inferior courts and authority merge with the order passed by the superior court (in this case the Supreme Court) therefore, as a result, parties cannot approach any other forum for review, recall, or reconsideration of the order. In this case, however, the court was of the opinion that the above-mentioned doctrine which is enshrined in Article 141 of the Constitution wouldn’t be applicable when the orders or judgments are obtained by fraud and misrepresentation.

Conclusion

Fraud in litigation is one of the biggest problems that harm the integrity of the Indian Judiciary. The present case is one of the many examples of Fraud that plagues the Indian Judiciary, the case shows that the judiciary even the apex court is not infallible and that they too are prone to be misled and defrauded into giving wrong judgments. However, the Supreme Court, in this case, showed that finality of litigation cannot be used to take undue advantage of the judiciary and that the principle of finality of litigation and res judicata cannot be so broadly applied that it becomes a device of dishonest and fraudulent litigants and laid down that those principles would be exempted in the case where it is clear that fraudulent means have been deployed in obtaining an order or judgments and that such an exemption can be exercised at any stage of the litigation.

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References:

[1] (1956) 1 All ER 341

[2] (1994) 1 SCC 1

[3] (2000) 3 SCC 581

Other Sources:

1. A.V. Papayya Sastry & Ors vs Government Of A.P, (2007) 4 SCC 211
2. Lazarus Estate ltd. v. Beasley, (1956) 1 All ER 341
3. S.P. Chengalvaraya Naidu (dead) by LRs. V. Jagannath (dead) by LRs. & Ors. (1994) 1 SCC 1
4. Indian Bank v. Satyam Fibres (India) Pvt. Ltd., (1996) 5 SCC 550
5. United India Insurance Co. Ltd. v. Rajendra Singh & Ors., (2000) 3 SCC 581