United India Insurance Co.Ltd Vs Sayona Colors Pvt. Ltd - It is a settled principle that fraud vitiates all solemn acts, and no person can be permitted to take advantage of his own wrong. In S.P. Chengalvaraya Naidu v. Jagannath, this Court held that a judgment or decree obtained by playing fraud is a nullity in the eyes of law. Similarly, in A.V. Papayya Sastry v. Government of Andhra Pradesh, it was reiterated that fraud vitiates all judicial acts, whether in rem or in personam.

  SCI (2026.03.17) in United India Insurance Co.Ltd Vs Sayona Colors Pvt. Ltd [2026 INSC 287, CIVIL APPEAL NO. 6100 OF 2024] held that;-

• It is a settled principle that fraud vitiates all solemn acts, and no person can be permitted to take advantage of his own wrong. In S.P. Chengalvaraya Naidu v. Jagannath (1994) 1 SCC 1 :1993 SCC OnLine SC 318, this Court held that a judgment or decree obtained by playing fraud is a nullity in the eyes of law. Similarly, in A.V. Papayya Sastry v. Government of Andhra Pradesh (2007) 4 SCC 221 : 2007 SCC OnLine SC 317, it was reiterated that fraud vitiates all judicial acts, whether in rem or in personam.

• Applying the aforesaid principles, we are of the considered view that once it is established that the claim itself is founded on fraud, the entire edifice of the claim collapses and no relief can be granted. Quantification of loss cannot override the foundational requirement of a genuine and bona fide claim.

Excerpts of the Order;

Heard learned counsel for the parties.

# 2. The appellant-Insurance Company is aggrieved by the order dated 04.12.2023 passed by the National Consumer Disputes Redressal Commission [For short, “NCDRC”], New Delhi in Consumer Complaint No. 171 of 2012, whereby the complaint was partly allowed and the appellant was directed to pay a sum of Rs.3,33,63,642/- (Rupees Three Crores Thirty Three Lakhs Sixty Three Thousand Six Hundred and Forty Two) along with interest at the rate of 6% per annum from 08.07.2012, within a period of six weeks, failing which, the rate of interest would stand enhanced to 9% for the same period, and Rs.50,000/- (Rupees Fifty Thousand) was directed to be paid towards litigation costs.

# 3. The learned counsel appearing for the appellant submitted that the claim made by the respondent is fraudulent, being founded on a deliberate act of sabotage resulting in a fire in the respondent’s godown. It was contended that the fire incident occurred on 25.03.2011, which the respondent attributed to a short circuit, pursuant to which a claim of Rs. 28,20,65,797/- (Rupees Twenty Eight Crores Twenty Lakhs Sixty Five Thousand Seven Hundred and Ninety Seven) was raised for the alleged loss.

# 4. It was further submitted that the timing and quantum of insurance coverage assume significance. Initially, the respondent had obtained an insurance policy for Rs. 15,00,00,000/- (Rupees Fifteen Crores), which was enhanced to Rs. 19,00,00,000/- (Rupees Nineteen Crores) on 07.03.2011. In addition, another policy for Rs. 17,00,00,000/- (Rupees Seventeen Crores) was obtained for the period from 28.11.2010 to 27.11.2011. The fire incident occurred shortly thereafter on 25.03.2011, raising serious doubt regarding the bona fides of the claim.

# 5. The learned counsel further submitted that upon investigation, the surveyor opined that the fire was not caused by a short circuit, but appeared to a deliberate human act. This conclusion was further supported by an independent expert opinion obtained from Truth Labs.

# 6. It was also contended that the respondent claimed the existence of substantial stock allegedly procured shortly prior to the incident and after enhancement of the insurance coverage. However, upon verification, the agencies shown to have supplied the said material, were found to be either non-existent at the given addresses or were not engaged in the trade of the goods claimed to have been supplied.

# 7. It was further urged that the respondent relied upon a report of the Gujarat Forensic Science Laboratory (GFSL) which indicated the presence of ethyl alcohol, an inflammable substance. According to the appellant, the sample sent namely, parts of the switchboard, had already been burnt, thereby rendering the sample itself unreliable; therefore, the said GFSL report cannot be treated as conclusive.

# 8. It was submitted that a holistic evaluation of all attending circumstances is necessary to determine whether the fire was accidental or deliberate. In the present case, the proximity of procurement of material to the incident, enhancement of insurance coverage, and the discovery that the alleged suppliers lacked the capacity to supply such goods cumulatively establish that the claim is not genuine.

# 9. On the aspect of quantification, the learned counsel submitted that the surveyor’s assessment of loss of Rs. 3,33,63,642/- (Rupees Three Crores Thirty Three Lakhs Sixty Three Thousand Six Hundred and Forty Two) merely reflects the extent of physical damage to the godown and cannot be treated as an admission of liability. It was contended that if the loss itself is consequence of a deliberate and fraudulent act, no claim under the policy would be maintainable, irrespective of the extent of damage. Accordingly, it was prayed that the impugned order passed by the NCDRC be set aside.

# 10. Per contra, the learned counsel appearing for the respondent submitted that during the subsistence of the insurance coverage, an accidental fire occurred on 25.03.2011 in the respondent’s godown due to a short circuit. The incident was duly intimated to the appellant on the same day and was also recorded with the local police. It was contended that the respondent suffered a loss of Rs.28,20,65,797/- (Rupees Twenty Eight Crores Twenty Lakhs Sixty Five Thousand Seven Hundred and Ninety Seven) that the GFSL report conclusively establishes that the fire was accidental in nature.

# 11. In response to a query raised by this Court regarding the authenticity of the alleged suppliers, the learned counsel for the respondent submitted that the claim was made based on the actual supplies, and affidavits of such suppliers had been placed on record. However, it was submitted that the respondent had not independently verified the actual existence or credentials of such suppliers.

# 12. We have considered the rival submissions and perused the material available on record.

# 13. It is evident from the record that the present case involves a fraudulent insurance claim. The respondent enhanced the insurance coverage and procured an additional policy in close proximity to the incident, which raises serious doubt regarding the bona fides of the claim.

# 14. In this context, the Truth Labs Report establishes, through GC-MS analysis of fire debris, the presence of hydrocarbon residues consistent with kerosene in the area identified as the seat of the fire (Zones IX A and X A). Significantly, such traces were absent in samples collected from areas away from the origin of the fire. That apart, the presence of kerosene, a known fire accelerant, at the seat of the fire clearly indicates that it was introduced externally to initiate the fire, thereby ruling out an accidental cause and pointing toward deliberate arson for gain. Further, forensic examination of the electrical infrastructure such as power supply wires, switchboards, and lighting systems, revealed no evidence of short circuit or electrical malfunction. The absence of overheating, annealing, or bead formation in the wiring conclusively negates an electrical cause.

# 15. Additionally, the conduct of the respondent reinforces the inference of fraud. There was delay in furnishing samples and subsequent reliance on fabricated analytical reports, indicating a clear attempt to mislead the investigation. Thus, the forensic report concludes that the fire was the result of deliberate human intervention, with a strong likelihood of it being engineered for unlawful gain.

# 16. The Surveyor’s report corroborates the above conclusions. It reveals material discrepancies between the VAT returns submitted by the Suppliers of the respondent and those filed with the Commercial Taxes Department. The alleged suppliers, in whose names’ invoices were produced to substantiate the claim, were found to be non-existent or unrelated to the claimed transactions, and the invoices produced were evidently fabricated. Notably, the respondent failed to rebut these findings with credible material.

# 17. The investigation further discloses manipulation of accounts and records with a view to inflate the claim. Both the forensic and Surveyor reports unequivocally establish violation of policy conditions, warranting repudiation.

# 18. In view of the above, it stands conclusively established that the fire was not accidental but was the result of a deliberate and orchestrated act of arson.

# 19. Despite these categorical findings, the NCDRC proceeded to allow the claim in part merely on the premise that a fire incident had occurred. Such an approach is legally unsustainable, as it disregards the overwhelming evidence of fraud and deliberate misconduct on the part of the respondent.

# 20. It is a settled principle that fraud vitiates all solemn acts, and no person can be permitted to take advantage of his own wrong. In S.P. Chengalvaraya Naidu v. Jagannath (1994) 1 SCC 1 :1993 SCC OnLine SC 318, this Court held that a judgment or decree obtained by playing fraud is a nullity in the eyes of law. Similarly, in A.V. Papayya Sastry v. Government of Andhra Pradesh (2007) 4 SCC 221 : 2007 SCC OnLine SC 317, it was reiterated that fraud vitiates all judicial acts, whether in rem or in personam.

# 21. Applying the aforesaid principles, we are of the considered view that once it is established that the claim itself is founded on fraud, the entire edifice of the claim collapses and no relief can be granted. Quantification of loss cannot override the foundational requirement of a genuine and bona fide claim.

# 22. There is no concept of partial or equitable relief in cases tainted by fraud. Courts and adjudicatory fora cannot grant compensation merely because some loss is shown to have occurred, when the claim itself is vitiated by fraudulent conduct. An insurance contract cannot be used as an instrument of unjust enrichment. The NCDRC therefore, fell into error in awarding Rs.3,33,63,642/- (Rupees Three Crores Thirty Three Lakhs Sixty Three Thousand Six Hundred and Forty two) towards the alleged loss sustained by the respondent.

# 23. In view thereof, we have no hesitation in holding that the respondent is not entitled to any amount under the policy, and the claim deserves to be rejected in toto.

# 24. Accordingly, the appeal is allowed. The impugned order passed by the NCDRC is set aside. The claim of the respondent stands repudiated. The appellant-Insurance company is absolved of any liability arising out of the said claim. The amount deposited by the appellant before the Registry of this Court shall be refunded to it, along with accrued interest, within a period of two weeks from today.

# 25. Before parting, we deem it appropriate to observe that fraudulent insurance claims involving staged incidents are not uncommon and have serious ramifications on the integrity of the insurance system and public confidence therein.

# 26. In view of the categorical finding of fraud committed in relation to the insurance claim by the respondent, we direct the Commissioner of Police, Ahmedabad, to constitute a Special Investigation Team (SIT) headed by an officer not below the rank of Deputy Commissioner of Police, to conduct a comprehensive investigation into the incident, including the persons involved in the alleged fraud. The investigation shall be completed within a period of three months from today and a report shall be submitted before this Court in a sealed cover. The Commissioner of Police, Ahmedabad, shall ensure full logistical and institutional support to the SIT and shall remain responsible for compliance with these directions.

# 27. The Registry is directed to list the matter on 21.07.2026 at 2.00 PM before the same Bench, treating it as a tied-up / part- heard. A copy of this order shall be communicated to the Commissioner of Police, Ahmedabad, forthwith. 

CIVIL APPEAL NO. 10019 OF 2024 In view of the order passed in Civil Appeal No. 6100 of 2024, of even date, the present appeal stands dismissed.

2. Pending application(s), if any, shall stand disposed of.

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AV Papayya Sastry Vs. Government of A.P. - "The principle of 'finality of litigation' cannot be pressed to the extent of such an absurdity that it becomes an engine of fraud in the hands of dishonest litigants".

Supreme Court (07.03.2007) in AV Papayya Sastry Vs. Government of A.P. [Appeal (civil)  5097-5099 of 2004] held that;

• It is thus settled proposition of law that a judgment, decree or order obtained by playing fraud on the Court, Tribunal or Authority is a nullity and non est in the eye of law. Such a judgment, decree or order by the first Court or by the final Court has to be treated as nullity by every Court, superior or inferior. It can be challenged in any Court, at any time, in appeal, revision, writ or even in collateral proceedings. 

• 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. In fraud one gains at the loss of another. Even most solemn proceedings stand vitiated if they are actuated by fraud. Fraud is thus an extrinsic collateral act which vitiates all judicial acts, whether in rem or in personam. The principle of 'finality of litigation' cannot be stretched to the extent of an absurdity that it can be utilized as an engine of oppression by dishonest and fraudulent litigants.

• "The principle of 'finality of litigation' cannot be pressed to the extent of such an absurdity that it becomes an engine of fraud in the hands of dishonest litigants".

• Once leave to appeal has been granted and appellate jurisdiction of Supreme Court has been invoked the order passed in appeal would attract the doctrine of merger; the order may be of reversal, modification or merely affirmation.

• On an appeal having been preferred or a petition seeking leave to appeal having been converted into an appeal before Supreme Court the jurisdiction of High Court to entertain a review petition is lost thereafter as provided by Sub-rule (1) of Rule (1) of Order 47 of the C.P.C.

 

Excerpts of the order;

Now, it is well settled principle of law that if any judgment or order is obtained by fraud, it cannot be said to be a judgment or order in law. Before three centuries, Chief Justice Edward Coke proclaimed; "Fraud avoids all judicial acts, ecclesiastical or temporal".

• It is thus settled proposition of law that a judgment, decree or order obtained by playing fraud on the Court, Tribunal or Authority is a nullity and non est in the eye of law. Such a judgment, decree or order by the first Court or by the final Court has to be treated as nullity by every Court, superior or inferior. It can be challenged in any Court, at any time, in appeal, revision, writ or even in collateral proceedings. 

In the leading case of Lazarus Estates Ltd. v. Beasley, (1956) 1 All ER 341 : (1956) 1 QB 702 : (1956) 2 WLR 502, Lord Denning observed:

• "No judgment of a court, no order of a Minister, can be allowed to stand, if it has been obtained by fraud."

In Duchess of Kingstone, Smith's Leading Cases, 13th Edn., p.644, explaining the nature of fraud, de Grey, C.J. stated that though a judgment would be res judicata and not impeachable from within, it might be impeachable from without. In other words, though it is not permissible to show that the court was 'mistaken', it might be shown that it was 'misled'. There is an essential distinction between mistake and trickery. The clear implication of the distinction is that an action to set aside a judgment cannot be brought on the ground that it has been decided wrongly, namely, that on the merits, the decision was one which should not have been rendered, but it can be set aside, if the court was imposed upon or tricked into giving the judgment. It has been said; Fraud and justice never dwell together (fraus et jus nunquam cohabitant); or fraud and deceit ought to benefit none (fraus et dolus nemini patrocinari debent).

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. In fraud one gains at the loss of another. Even most solemn proceedings stand vitiated if they are actuated by fraud. Fraud is thus an extrinsic collateral act which vitiates all judicial acts, whether in rem or in personam. The principle of 'finality of litigation' cannot be stretched to the extent of an absurdity that it can be utilized as an engine of oppression by dishonest and fraudulent litigants.

In S.P. Chengalvaraya Naidu (dead) by LRs. V. Jagannath (dead) by LRs. & Ors. (1994) 1 SCC 1 : JT 1994 (6) SC 331, this Court had an occasion to consider the doctrine of fraud and the effect thereof on the judgment obtained by a party. In that case, one A by a registered deed, relinquished all his rights in the suit property in favour of C who sold the property to B. Without disclosing that fact, A filed a suit for possession against B and obtained preliminary decree. During the pendency of an application for final decree, B came to know about the fact of release deed by A in favour of C. He, therefore, contended that the decree was obtained by playing fraud on the court and was a nullity. The trial court upheld the contention and dismissed the application. The High Court, however, set aside the order of the trial court, observing that "there was no legal duty cast upon the plaintiff to come to court with a true case and prove it by true evidence". B approached this Court. Allowing the appeal, setting aside the judgment of the High Court and describing the observations of the High Court as 'wholly perverse', Kuldip Singh, J. stated: 

• "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".(emphasis supplied) 

The Court proceeded to state: 

• "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 he guilty of playing fraud on the court as well as on the opposite party".

The Court concluded:

•  "The principle of 'finality of litigation' cannot be pressed to the extent of such an absurdity that it becomes an engine of fraud in the hands of dishonest litigants".

In Indian Bank v. Satyam Fibres (India) Pvt. Ltd., (1996) 5 SCC 550 : JT 1996 (7) SC 135, referring to Lazarus Estates and Smith v. East Elloe Rural District Council, 1956 AC 336 : (1956) 1 All ER 855 : (1956) 2 WLR 888, this Court stated;

• "The judiciary in India also possesses inherent power, specially under Section 151 C.P.C., 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 behaviour. This power is necessary for the orderly administration of the Court's business".   (emphasis supplied) 

In United India Insurance Co. Ltd. v. Rajendra Singh & Ors., (2000) 3 SCC 581 : JT 2000 (3) SC 151, by practising fraud upon the Insurance Company, the claimant obtained an award of compensation from the Motor Accident Claims Tribunal. On coming to know of fraud, the Insurance Company applied for recalling of the award. The Tribunal, however, dismissed the petition on the ground that it had no power to review its own award. The High Court confirmed the order. The Company approached this Court.Allowing the appeal and setting aside the orders, this Court stated;

• "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.

• 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 degree, 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.

• 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".  (emphasis supplied) 

Mr. Venugopal, no doubt, contended that when the order passed by the earlier Division Bench was not interfered with by this Court and SLPs were dismissed, it was not open to the High Court thereafter to entertain recall-applications and grant the relief of recalling of earlier orders. According to him, such an exercise of power was unlawful and abuse of process of law. In this connection, our attention has been invited by the learned counsel to a decision of this Court in Abbai Maligai Partnership Firm & Anr. v. K. Santhakumaran & Ors., (1998) 7 SCC 386 : JT 1998 (6) SC 396. In that case, after dismissal of Special Leave Petition by this Court, review petition was entertained by the High Court and earlier judgment was recalled. When the matter reached this Court, setting aside the order passed by the High Court, the Court observed: "The manner in which the learned Single Judge of the High Court exercised the review jurisdiction, after the special leave petitions against the self-same order had been dismissed by this court after hearing learned counsel for the parties, to say the least, was not proper. Interference by the learned single Judge at that stage is subversive of judicial discipline. The High Court was aware that SLPs against the orders dated 7.1.87 had already been dismissed by this court. This High Court, therefore, had no power or jurisdiction to review the self same order, which was the subject matter of challenge in the SLPs in this court after the challenge had failed. By passing the impugned order on 7.4.1994, judicial propriety has been sacrificed. After the dismissal of the special leave petitions by this court, on contest, no review petitions could be entertained by the High Court against the same order. The very entertainment of the review petitions, in the facts and circumstances of the case was an affront to the order of this Court. We express our strong disapproval and hope there would be no occasion in the future when we may have to say so. The jurisdiction exercised by the High Court, under the circumstances, was palpably erroneous. The respondents who approached the High Court after the dismissal of their SLPs by this court, abused the process of the court and indulged in vexatious litigation. We strongly depricate the manner in which the review petitions were filed and heard in the High Court after the dismissal of the SLPs by this court." (emphasis supplied) 

The respondents, on the other hand, placed reliance upon Kunhayammed & Ors. v. State of Kerala & Anr., (2000) 6 SCC 359 : JT 2000 (9) SC 110, wherein this Court had an occasion to consider the application of the doctrine of merger to orders passed by this Court while exercising jurisdiction under Article 136 of the Constitution. The Court there observed that exercise of jurisdiction by this Court under Article 136 is in two stages; (i) granting of a special leave to appeal; and (ii) hearing of appeal. The Court went on to observe that the doctrine of merger does not apply to first stage i.e. at the stage of granting of special leave to appeal. It applies only at the second stage of hearing of appeals. The Court in the light of above position, laid down the following principles:

• (i) Where an appeal or revision is provided against an order passed by a court, tribunal or any other authority before superior forum and such superior forum modifies, reverses or affirms the decision put in issue before it, the decision by the subordinate forum merges in the decision by the superior forum and it is the latter which subsists, remains operative and is capable of enforcement in the eye of law.

• (ii) The jurisdiction conferred by Article 136 of the Constitution is divisible into two stages. First stage is upto the disposal of prayer for special leave to file an appeal. The second stage commences if and when the leave to appeal is granted and special leave petition is converted into an appeal.

• (iii) Doctrine of merger is not a doctrine of universal or unlimited application. It will depend on the nature of jurisdiction exercised by the superior forum and the content or subject-matter of challenge laid or capable of being laid shall be determinative of the applicability of merger. The superior jurisdiction should be capable of reversing, modifying or affirming the order put in issue before it. Under Article 136 of the Constitution the Supreme Court may reverse, modify or affirm the judgment-decree or order appealed against while exercising its appellate jurisdiction and not while exercising the discretionary jurisdiction disposing of petition for special leave to appeal. The doctrine of merger can therefore be applied to the former and not to the latter.

• (iv) An order refusing special leave to appeal may be a non-speaking order or a speaking one. In either case it does not attract the doctrine of merger. An order refusing special leave to appeal does not stand substituted in place of the order under challenge. All that it means is that the Court was not inclined to exercise its discretion so as to allow the appeal being filed.

• (v) If the order refusing leave to appeal is a speaking order, i.e. gives reasons for refusing the grant of leave, then the order has two implications. Firstly, the statement of law contained in the order is a declaration of law by the Supreme Court within the meaning of Article 141 of the Constitution. Secondly, other than the declaration of law, whatever is stated in the order are the findings recorded by the Supreme Court which would bind the parties thereto and also the court, tribunal or authority in any proceedings subsequent thereto by way of judicial discipline, the Supreme Court being the apex court of the country. But, this does not amount to saying that the order of the court, tribunal or authority below has stood merged in the order of the Supreme Court rejecting special leave petition or that the order of the Supreme Court is the only order binding as res judicata in subsequent proceedings between the parties,

• (vi) Once leave to appeal has been granted and appellate jurisdiction of Supreme Court has been invoked the order passed in appeal would attract the doctrine of merger; the order may be of reversal, modification or merely affirmation.

• (vii) On an appeal having been preferred or a petition seeking leave to appeal having been converted into an appeal before Supreme Court the jurisdiction of High Court to entertain a review petition is lost thereafter as provided by Sub-rule (1) of Rule (1) of Order 47 of the C.P.C.

In Kunhayammed, Abbai Maligai was considered and it was observed that in the facts and circumstances of that case, this Court did not approve the order passed by the High Court. The Court noted that in Abbai Maligai, this Court did not consider the doctrine of merger. According to the Court, a careful reading of Abbai Maligai "brings out the correct statement of law and fortifies us in taking the view" as taken. [see also S. Shanmugavel Nadar v. State of T.N. & Anr., (2002) 8 SCC 361 : JT 2002 (7) SCC 568].

• The matter can be looked at from a different angle as well. Suppose, a case is decided by a competent Court of Law after hearing the parties and an order is passed in favour of the applicant/plaintiff which is upheld by all the courts including the final Court. Let us also think of a case where this Court does not dismiss Special Leave Petition but after granting leave decides the appeal finally by recording reasons. Such order can truly be said to be a judgment to which Article 141 of the Constitution applies. Likewise, the doctrine of merger also gets attracted. All orders passed by the courts/authorities below, therefore, merge in the judgment of this Court and after such judgment, it is not open to any party to the judgment to approach any court or authority to review, recall or reconsider the order. 

• The above principle, however, is subject to exception of fraud. Once it is established that the order was obtained by a successful party by practising or playing fraud, it is vitiated. Such order cannot be held legal, valid or in consonance with law. It is non-existent and non est and cannot be allowed to stand. This is the fundamental principle of law and needs no further elaboration. Therefore, it has been said that a judgment, decree or order obtained by fraud has to be treated as nullity, whether by the court of first instance or by the final court. And it has to be treated as non est by every Court, superior or inferior.

Hence, the argument of Mr. Venugopal cannot be upheld. Even if he is right in submitting that after dismissal of SLPs, the respondent herein could not have approached the High Court for recalling its earlier order passed in April, 2000 and the High Court could not have entertained such applications, nor the recalling could have been done, in the facts and circumstances of the case and in the light of the finding by the High Court that fraud was committed by the land-owners in collusion with the officers of the Port Trust Authorities and Government, in our considered view, no fault can be found against the approach adopted by the High Court and the decision taken. The High Court, in our opinion, rightly recalled the order, dated April 27, 2000 and remanded the case to the authorities to decide the same afresh in accordance with law.

Mr. Venugopal also submitted that the Division Bench of the High Court in an order dated April 27, 2000 observed that the land being a garden land having fruit bearing trees which had been cultivated by a tenant, it did not fall within the description of 'urban land' or 'vacant land' within the meaning of Section 2(o) or 2(q) of the Ceiling Act and the said aspect had not been gone into at all by the State Government. The High Court thereafter considered the provisions of the Ceiling Act and held that the land was agricultural land and required to be excluded from the operation of the Ceiling Act.

As to the above, we may only observe that it was never the case of land-owners while filling a form under Section 6 of the Act that the provisions of the Act were not applicable to the land in question because the land was used for agriculture or horticulture purposes or that it was having fruit bearing trees. The exclusion or non- operation of the Act was sought only on the ground that the possession of the land had already been handed over to Port Trust Authorities in 1972 and hence the land cannot become subject matter of the Ceiling Act. In view of the above fact, in our opinion, the High Court was right in passing the impugned order directing the authorities to consider all aspects and pass an appropriate order in accordance with law. Last but not the least. We are exercising jurisdiction under Article 136 of the Constitution. It is discretionary and equitable in nature.? Clause (1) of the said Article confers very wide and extensive powers on this Court to grant special leave to appeal against any judgment, decree, determination, sentence or order in any cause or matter passed or made by any Court or Tribunal in India. The Article commences with a non- obstante clause, "Notwithstanding anything in this Chapter" (i.e. Chapter IV of Part V). These words are of overriding effect and clearly indicate the intention of the Framers of the Constitution that it is a special jurisdiction and a residuary power unfettered by any statute or other provisions of Chapter IV of Part V of the Constitution. It is extraordinary in its amplitude. Its limit, when it chases injustice, is the sky. Such power, therefore, may be exercised by this Court whenever and wherever justice demands intervention by the highest Court of the country.

Article 136, however, does not confer a right of appeal on any party. It confers discretion on this Court to grant leave to appeal in appropriate cases. In other words, the Constitution has not made the Supreme Court a regular Court of Appeal or a Court of Error. This Court only intervenes where justice, equity and good conscience require such intervention. In Baiganna v. Deputy Collector of Consolidation, (1978) 2 SCR 509 : (1978) 2 SCC 461; Krishna Iyer, J. pithily stated;

• "The Supreme Court is more than a Court of appeal. It exercises power only when there is supreme need. It is not the fifth court of appeal but the final court of the nation. Therefore, even if legal flaws may be electronically detected, we cannot interfere sans manifest injustice or substantial question of public importance". (emphasis supplied) [see also V.G. Ramachandran, 'Law of Writs'; Revised by Justice C.K. Thakker & Mrs. M.C. Thakker; Sixth Edn; Vol.2; pp.1440-1528] 

Keeping in view totality of facts and attending circumstances including serious allegations of fraud said to have been committed by the land-owners in collusion with officers of the respondent-Port Trust and Government, report submitted by the Central Bureau of Investigation (CBI), prima facie showing commission of fraud and initiation of criminal proceedings, etc. if the High Court was pleased to recall the earlier order by issuing directions to the authorities to pass an appropriate order afresh in accordance with law, it cannot be said that there is miscarriage of justice which calls for interference in exercise of discretionary and equitable jurisdiction of this Court. We, therefore, hold that this is not a fit case which calls for our intervention under Article 136 of the Constitution. We, therefore, decline to do so.

Before parting with the matter, we may state that all the observations made by us hereinabove have been made only for the purpose of deciding the legality and validity of the order passed by the High Court. We may clarify that we may not be understood to have expressed any opinion on merits of the matter one way or the other. Therefore, as and when the matter will be considered by the authorities in pursuance of the directions of the High Court, it will be decided on its own merits without being inhibited by the observations made by us in this judgment.

For the foregoing reasons, the appeals deserve to be dismissed and are accordingly dismissed with costs.

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Vineet Khosla Vs. Edelweiss Asset Reconstruction Company Ltd. & Ors. - It is thus settled proposition of law that a judgment, decree or order obtained by playing fraud on the Court, Tribunal or Authority is a nullity and non est in the eye of law.

 NCLAT (07.01.2022) in Vineet Khosla Vs. Edelweiss Asset Reconstruction Company Ltd. & Ors.  [Company Appeal (AT) (Ins) No. 1124 -1125 of 2020] held that;

• It is thus settled proposition of law that a judgment, decree or order obtained by playing fraud on the Court, Tribunal or Authority is a nullity and non est in the eye of law. Such a judgment, decree or order - by the first Court or by the final Court has to be treated as nullity by every Court, superior or inferior. It can be challenged in any Court, at any time, in appeal, revision, writ or even in collateral proceedings.

• 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. 

• In fraud one gains at the loss of another. Even most solemn proceedings stand vitiated if they are actuated by fraud. Fraud is thus an extrinsic collateral act which vitiates all judicial acts, whether in rem or in personam. 

• The principle of 'finality of litigation' cannot be stretched to the extent of an absurdity that it can be utilized as an engine of oppression by dishonest and fraudulent litigants.

• Hon’ble Supreme Court in the aforesaid Judgments has settled the principle that every Court/Tribunal has power to recall the order obtained by practicing fraud. 

 

Excerpts of the order;

Ld. Adjudicating Authority (National Company Law Tribunal, New Delhi, Principal Bench) vide order dated 15.10.2020 allowed the Application CA No. 121 of 2020 in IB 866(PB)/2018 and directed for liquidation of the Corporate Debtor M/s Margra Industries Ltd. and vide order dated 10.11.2020 dismissed the Suspended Director’s Application CA No. 307 of 2020 seeking recall of the admission order dated 15.03.2019, against these orders the Appeals are filed.

# 2. Brief and relevant facts of these Appeals are that Ld. Adjudicating Authority vide order dated 15.03.2019 admitted the Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) filed by the Edelweiss Asset Reconstruction Company Ltd. (R-1) against the M/s Margra Industries Ltd. (Corporate Debtor) and Mr. Rajendra Kr. Girdhar was appointed as Interim Resolution Professional (IRP) and moratorium was declared in terms of the Section 14 of the IBC. The Admission order was challenged by the Suspended-director (Vineet Khosla) of the Corporate Debtor before this Appellate Tribunal in CA (AT) (Ins) No. 441 of 2019. The Appeal was dismissed on merits vide order dated 06.09.2019.

# 3. On receipt of claims and their verification/collation, the Committee of Creditors (COC) was constituted by the IRP on 24.04.2019. The CoC in its first meeting held on 30.04.2019 resolved for appointment of IRP Rajendra Kumar as RP. During the process of CIRP the Expression of Interest (EOI) was issued thrice with the extended period sought from the Adjudicating Authority. During the extended period Mr. RP Khosla had submitted its EOI on 10.08.2019, however, the same had been found ineligible and non-compliant with the requirements of the invitation of EOI. The CIRP period was ended on 22.09.2019. However, RP has filed the Application for extension of CIRP period by 90 days beyond 180 days. The same was allowed vide order dated 11.10.2019 and CIRP period extended upto22.12.2019. In extended period M/s Sarvesh Export Pvt. Ltd. submitted a resolution plan on 21.11.2019 and corrigendum to a resolution plan on 20.12.2019, however, the same was found non-compliant to the requirements of the Request for Resolution Plan and provisions of IBC by the RP.

# 4. The CoC in its 09th meeting held on 21.12.2019 after discussions concluded that there are no other avenues left but to explore the liquidation process for Corporate Debtor. Accordingly, resolutions were passed by the CoC with 92.29% voting share. Therefore, in accordance with Regulation 27 of the Insolvency and Bankruptcy Board of India (Corporate Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP Regulations), the RP had appointed two registered valuers to determine the liquidation value of the Corporate Debtor in accordance with Regulation 35 of CIRP Regulations.

# 5. RP had submitted the estimated liquidation value of assets of the Corporate Debtor based on the valuation reports obtained from valuers, is approximately Rs. 18,40,85,597/-. Thereafter, RP filed an Application CA No. 121 of 2020 under Section 33(1) for issuance of direction of liquidation of the Corporate Debtor Company i.e. M/s Margra Industries Ltd. On 15.10.2020 the Application was allowed by ordering liquidation of the Corporate Debtor and Mr. Paramjeet Singh Bhatia was appointed as Liquidator.

# 6. Before passing of the order of Liquidation on 02.01.2020 the Appellant “Suspended Director” moved an Application seeking recall of admission order dated 15.03.2019 on the ground that the claim is barred by limitation. Ld. Adjudicating Authority held that limitation issue is a question of fact and law. This issue should have been raised at the time of admission or at least in the Appeal before the Appellate Tribunal. Moreover, the matter now is pending for completion of liquidation of Corporate Debtor. Now the Admission order on the ground of limitation cannot be recalled. Thus, by the impugned order dated 10.11.2020 the Application is dismissed.

# 7. Being aggrieved with the order of liquidation and dismissal of Application for recall of admission order, the Appellant has filed present Appeals.

Submission in CA (AT) (Ins) No. 1125 of 2020.

# 8. Ld. Sr. Counsel for the Appellant submitted that the Adjudicating Authority is competent to recall its admission order dated 15.03.2019. The same is obtained by playing fraud and misrepresentation that the Application under Section 7 of IBC is within limitation. Ld. Adjudicating Authority has failed to consider this aspect of the matter.

# 9. Ld. Sr. counsel for the Appellant cited the Judgment of Hon’ble Supreme Court in the case of United India Insurance Co. Ltd. Vs. Rajendra Singh &Ors. AIR 2000 SC 1165 and AV Papayya Sastry Vs. Government of A.P. AIR 2007 SC 1546 and argued that every court/tribunal has power to recall its order which is obtained by practicing fruad.

# 11. It is also submitted that the issue of limitation goes to the root of the jurisdiction of the Adjudicating Authority to decide a time barred claim. The Adjudicating Authority by virtue of Section 3 of limitation Act, was duty bound to dismiss the Petition even if the objection had not been raised by the Appellant.

# 13. Per contra, Ld. Sr. Counsel for the Respondent No. 1 vehemently opposed the prayer and submitted that the Respondent No. 1 in its petition under Section 7 of IBC has mentioned true facts that DRT has passed a decree on settlement of parties and thereafter, issued recovery certificate and thereafter, time to time the Corporate Debtor has acknowledged the debt and in support the Respondent No. 1 has filed the documents. Therefore, it is incorrect to say that the Respondent No. 1 has played any fraud and obtained the admission order dated 15.03.2019. Therefore, Ld. Adjudicating Authority cannot recall its own order. Particularly, when the order dated 15.03.2019 is affirmed by this Appellate Tribunal vide order dated 06.09.2019. Thus, the order dated 15.03.2019 is merged with the Judgment of this Appellate Tribunal and now that order is not in existence. For this merger principle he placed reliance on the Judgments of Hon’ble Supreme Court in the case of Gojer Bros. Pvt. Ltd. Vs. Ratan Lal Singh Civil Appeal No. 128 of 1972, dated 01.05.1972 Para 9 and 11, Kunhayammed and Ors. Vs. State of Kerla and Ors. C.A. No. 12309 of 1996 Para 42 and 44(1) and Apya Captial Services Pvt. Ltd. Vs. Guardian Homes Pvt. Ltd. I.A. No. 2068 of 2021 in CA (AT) (Ins) No. 412 of 2020, dated 09.12.2021 Para 1, 10 to 13, 15.

# 14. It is also submitted that the powers under section 420 of the Companies Act, 2013 for rectifying any mistake apparent from the record or amend any order can be exercised within two years when the order against which no Appeal has been preferred. In this matter, the Appeal has already been decided by this Appellate Tribunal. Therefore, the Adjudicating Authority cannot exercise the powers under Section 420 of the Companies Act.

# 15. Ld. Sr. Counsel for the Respondent No. 1 also submitted that the Appellant has an efficacious remedy to challenge the Judgment of this Appellate Tribunal by which upheld the order of admission before the Hon’ble Supreme Court under Section 62 of the IBC. No reason has been assigned as to why the Appeal has not filed before the Hon’ble Supreme Court. The question of limitation is mixed question of law and fact and at this stage when the order of liquidation has been passed such issue of limitation cannot be legally entertained otherwise also the Application under Section 7 of IBC is filed within limitation.

# 20. Issue for consideration before us in these Appeals are that:

• (i) Whether the Adjudicating Authority is competent to recall the order of initiation of CIRP?

• (ii) Whether the liquidation order suffers from material irregularity?

Issue No. (i)  Whether the Adjudicating Authority is competent to recall the order of initiation of CIRP?

# 21. Admittedly, vide order dated 15.03.2019 the Adjudicating Authority ordered for initiation of CIRP against the Corporate Debtor. This order was affirmed by this Appellate Tribunal in CA (AT) (Ins) No. 441 of 2019 vide order dated 06.09.2019. Even in extended period of CIRP no resolution plan was received. Therefore, with the direction of CoC, the RP has filed an Application C.A. No. 121 of 2020 under Section 33(1) for liquidation of the Corporate Debtor. Ld. Adjudicating Authority vide order dated 15.10.2020 allowed the Application. Meanwhile, the Suspended director filed an Application CA No. 307 of 2020 seeking recall of the order dated 15.03.2019 i.e. order of initiation of CIRP. According to the Appellant the order dated 15.03.2019 obtained by fraud and misrepresentation as in the Petition the date of default was falsely made to get petition within limitation. Therefore, the order which is obtained by fraud can be challenged at any stage and the every court and tribunal has power to recall such order. In support they have cited the Judgment of Hon’ble Supreme Court in the case of United India Insurance Co. Ltd. Vs. Rajendra Singh & Ors. (Supra) and AV Papayya Sastry (Supra). Hon’ble Supreme Court in the subsequent Judgment has referred the earlier Judgment of United India Insurance Co. Ltd. and reiterated the same principle. Therefore, we are referring the relevant paras of subsequent Judgment i.e. AV Papayya Sastry (Supra) as under:- 

• # 22. It is thus settled proposition of law that a judgment, decree or order obtained by playing fraud on the Court, Tribunal or Authority is a nullity and non est in the eye of law. Such a judgment, decree or order - by the first Court or by the final Court has to be treated as nullity by every Court, superior or inferior. It can be challenged in any Court, at any time, in appeal, revision, writ or even in collateral proceedings.

• ……….

• 38. The matter can be looked at from a different angle as well. Suppose, a case is decided by a competent Court of Law after hearing the parties and an order is passed in favour of the applicant/plaintiff which is upheld by all the courts including the final Court. Let us also think of a case where this Court does not dismiss Special Leave Petition but after granting leave decides the appeal finally by recording reasons. Such order can truly be said to be a judgment to which Article 141of the Constitution applies. Likewise, the doctrine of merger also gets attracted. All orders passed by the courts/authorities below, therefore, merge in the judgment of this Court and after such judgment, it is not open to any party to the judgment to approach any court or authority to review, recall or reconsider the order. 

• 39. The above principle, however, is subject to exception of fraud. Once it is established that the order was obtained by a successful party by practicing or playing fraud, it is vitiated. Such order cannot be held legal, valid or in consonance with law. It is non-existent and non est and cannot be allowed to stand. This is the fundamental principle of law and needs no further elaboration. Therefore, it has been said that a judgment, decree or order obtained by fraud has to be treated as nullity, whether by the court of first instance or by the final court. And it has to be treated as non est by every Court, superior or inferior.

# 22. The Hon’ble Supreme Court has laid down the principle that Once it is established that the order was obtained by a successful party by practicing or playing fraud, it is vitiated. Such order cannot be held legal, valid or in consonance with law. It is non-existent and non est and cannot be allowed to stand. This is the fundamental principle of law and needs no further elaboration. Therefore, it has been said that a judgment, decree or order obtained by fraud has to be treated as nullity, whether by the court of first instance or by the final court. Thus, we have to consider whether the Financial Creditor i.e. Respondent No. 1 has obtained the order dated 15.03.2019 by practicing fraud. Hon’ble Supreme court in the same Judgment at Para 26 defined the fraud which is as under:- 

• 26. 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. In fraud one gains at the loss of another. Even most solemn proceedings stand vitiated if they are actuated by fraud. Fraud is thus an extrinsic collateral act which vitiates all judicial acts, whether in rem or in personam. The principle of 'finality of litigation' cannot be stretched to the extent of an absurdity that it can be utilized as an engine of oppression by dishonest and fraudulent litigants.

23. Now we have considered the allegations which are made in the Application filed by the Appellant whether it constitutes fraud.

• 9. That this very vital aspect escaping the attention of all the parties was, in great part, assisted by the false statement made by the petitioner/non-applicant in the list of dates (page C) of the prescribed form for invocation of the jurisdiction of this Hon’ble Tribunal, wherein, it was falsely set out that the cause of action arose on 05.04.2016, when it actually arose as far back on 24.09.2014.

• At the cost of reiteration, it is most respectfully submitted that the date stipulated in the List of Dates is contradicted by the date of default stated in Part IV – ‘Particulars of Financial Debt’ – the date of default has been stipulated by the Petitioner Company itself as 29.07.2000.

• 10. Whereas, by suppressing the fact that there was no legally binding communication between the Company and the Petitioner/non-applicant after the letter dated 14.03.2014 written by the Petitioner/non-Applicant to the Company, this act of fraud gained traction, resulting in this issue not coming to the fore earlier.

# 24. The substance of the aforesaid allegations that the Respondent No. 1 in the Petition (Application) u/s 7 of IBC falsely set out that the cause of action arose on 05.04.2016 when it actually arose as far back on 24.09.2014. The Financial Creditor in the Application Part IV particulars of Financial Debt at serial No. 2 mentioned the date of default as July, 29th 2000 in Part V at serial No. 2 particulars of an order of Court, Tribunal or Arbitral Tribunal adjudicating on the dispute, in this column it is mentioned the details how the DRT passed a decree on settlement of parties, thereafter, issued recovery certificate and thereafter time to time the Corporate Debtor has acknowledged the debt and the Respondent No. 1 has filed the documents to construe the acknowledgement. It is not shown by the Appellant that in reply to the Petition they have challenged the particulars mentioned in the Petition and documents filed alongwith Petition. However, the Respondent No. 1 in his Written Submissions filed before this Appellate Tribunal has clarified the dates when the Corporate Debtor had acknowledged the debt, which are as under:- . . . . 

# 25. The Appellant has failed to convince us that the Respondent No. 1 has committed any act of deliberate deception with the design of securing some unfair or undeserved benefit by taking undue advantage of another. The Appellant has not shown any false document which was filed in support of the Petition under Section 7 of the IBC. Thus, the Appellant has failed to make out a case that the Respondent No. 1 has obtained order dated 15.03.2019 by practicing fraud.

# 26. Hon’ble Supreme Court in the aforesaid Judgments has settled the principle that every Court/Tribunal has power to recall the order obtained by practicing fraud. The Appellant has miserably failed to prove that the Respondent No. 1 has obtained the order dated 15.03.2019 by practicing fraud. Therefore, Ld. Adjudicating Authority has rightly held that they no jurisdiction to recall the admission order dated 15.03.2019.

# 27. At this stage, we have only examined the legality of the impugned order whether Adjudicating Authority is competent to recall admission order. Therefore, it is not required to examine whether the Petition under Section 7 of the IBC is within limitation or not. However, Ld. Sr. Counsel has argued on this issue and submitted that the order of admission as well as the order of liquidation may be set aside and the matter may be remitted back to the Adjudicating Authority for examining whether the Section 7 Application is within limitation or not.

# 28. Admittedly, the Appellant has not raised the issue of limitation before the Ld. Adjudicating Authority at time of order of initiation of CIRP and in the Appeal filed by the Appellant challenging the order before this Appellate Tribunal. In this regard, it is argued on behalf of the Appellant that at that time it was not clear whether the provisions of Limitation Act would be applicable to IBC proceedings and the law of limitation is applicable to IBC proceedings was settled by the Hon’ble Supreme Court in the case of Gaurav Hargovindbahi Dave (Supra) decided on 18.09.2019.

# 29. We are unable to convince with the argument that Hon’ble Supreme Court on 18.09.2019 in the case of Jignesh Shah & Anr. (Supra) laid down that the provisions of Limitation Act would be applied to the IBC proceedings. Section 238-A of IBC inserted w.e.f. 06.06.2018 which provides that the provisions of Limitation Act shall, as far as may be, apply to the proceedings or Appeals before the Adjudicating Authority, the National Company Law Appellate Tribunal. Therefore, we find no force in the argument.

# 30. Admittedly, the issue of limitation is mixed question of fact and law, therefore, we are unable to convince with the argument of Ld. Sr. Counsel that such issue can be raised at any stage even before the Higher Court.

# 31. With the aforesaid discussion, we are of the view that in the facts of present case the Adjudicating Authority is not competent to recall the order of initiation of CIRP.

Issue No. (ii) Whether the liquidation order suffers from material irregularity?

# 32. Admittedly, in this matter even after extended period beyond 180 days no resolution plan had been received. Therefore, CoC with 92.29% voting share passed the resolution for liquidation of the Corporate Debtor. Therefore, the RP filed the Application before the Adjudicating Authority for order of Liquidation.

# 33. It is argued on behalf of the Appellant that before passing of the order of liquidation no opportunity of hearing has been given to the Appellant. The Appellant has not filed any objection before the Adjudicating Authority in regard to the Application filed by the RP for seeking order of liquidation. The order of liquidation can be set aside only when there is any material irregularity. The Appellant has failed to point out any material irregularity. Therefore, we find no ground to interfere in the order of liquidation.

# 34. It is informed that in compliance of the order of liquidation the factory premises of the Corporate Debtor has already been auctioned and possession has been handed over to the auction purchaser. With the aforesaid, we find no ground to interfere in the impugned orders. Thus, the Appeals are dismissed. However, no order as to costs.

Interim orders passed by this Appellate Tribunal are vacated.

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