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Shripadgouda Venkangouda Aparanji Vs. Govindgouda Narayangouda Aparanji - Court Judgment

LegalCrystal Citation
Decided On
Case NumberFirst Appeal No. 305 of 1937
Reported inAIR1941Bom77; (1940)42BOMLR1185
AppellantShripadgouda Venkangouda Aparanji
RespondentGovindgouda Narayangouda Aparanji
DispositionAppeal dismissed
.....on court by both parties to suit-pari delicto-whether either party can have decree set aside for fraud-award decree and consent decree, difference between-indian evidence act (i of 1872), section 44-'obtained by fraud or collusion.';where both parties to a suit practise fraud on court and obtain a collusive decree, it is not open to either of them to impeach the judgment of the court on the ground that it was collusively procured.;the defendant filed a suit against the plaintiff on a promissory-note. before the hearing of the suit both the parties asked the court to refer the matter in dispute to arbitration. the matter was referred to an arbitrator who made his award, and the court passed a decree upon it. the defendant thereafter sought to execute the decree. the plaintiff sued to..........decree, should be set aside on account of that deception. the underlying assumption is that an award decree is on the same footing as a consent decree, and as a consent decree could be set aside on any of the grounds invalidating a contract, the award decree could be similarly treated. now, it seems to me, without expressing any opinion as to the alleged misrepresentation or fraud, that a decree obtained upon an award given after hearing the parties by an arbitrator duly selected by them, could not be treated on the same footing as a consent decree. the two are radically different. the court's power in recording compromises cannot be used for disturbing an agreement between the parties. on proof of the compromise, the court is bound to record the adjustment, unless it is unlawful,.....

Wassoodew, J.

1. This appeal arises from an action instituted by the plaintiff-appellant in the Court of the First Class Subordinate Judge at Dharwar to set aside, on the ground of fraud and false representation, a decree upon an award passed in Suit No. 53 of 1931 between the parties on April 1, 1932. That decree was passed by the same Court in which it is now challenged. The former suit was instituted by the defendant to recover Rs. 12,000 with interest upon a promissory-note executed in his favour on April 22, 1930. The plaintiff, who was the defendant in that suit, had filed a written statement in which he contended inter alia that he was liable to pay only Rs. 2,000, a debt due from the family and contracted by his eldest brother Pralhad in his lifetime while he was the manager of the family, that the balance of the claim was fraudulent, and that the promissory-note was obtained by fraud, misrepresentation and undue influence. After that defence was filed and before the hearing commenced, both the parties asked the Court to refer the matter in dispute to arbitration, and accordingly it was so referred to one Narsingrao, a friend of the parties and also a distant relative of the plaintiff, for the determination of the dispute, Upon that reference the arbitrator made his award, and after hearing the parties the decree now impeached was passed by the Court. The arbitrator refused interest to the defendant and granted instalments to the debtor-plaintiff. The plaintiff's allegations of fraud and false representation, which form the basis of the suit for setting aside the decree, are fully set out in the plaint and the plaintiff's statement.

2. After stating that the claim was false and fraudulent inasmuch as there was no consideration for the promissory-note and that the defendant had represented to the plaintiff that by passing a promissory-note to him (defendant) the plaintiff's other creditors could be coerced into accepting a lesser amount in satisfaction of their debt, for they would by suing the plaintiff be subjecting their claim to a decree which could be paid off rateably out of his assets, the plaint proceeds to say as follows:-

The defendant further represented to him (plaintiff) that the mere taking of promissory-notes was not sufficient to threaten other creditors and that if a decree were obtained (on the promissory-notes) it would be effective and that the other creditors could be asked to adjust their debts by giving remissions and that (in this way) his property could be shielded and that no loss to the plaintiff would be caused. By such representation and without giving the plaintiff any opportunity to secure independent advice in the matter, and by fraudulent misrepresentation and undue influence the defendant got the plaintiff to consent to the arbitration and got from him the necessary documents and got one Narsingrao Nadagouda, a relation and a friend of his, to act as arbitrator in the case. The arbitrator also without making any inquiry passed an award in accordance with the wishes of the defendant.

3. It is also suggested that the defendant represented to the plaintiff that even if a decree were passed on the award, it would not be executed to the plaintiff's detriment. The plaint then proceeds to say that notwithstanding that representation after the decree was obtained, the defendant attached certain property of the plaintiff and applied for execution of the decree. Then the plaint winds up as follows:-

The plaintiff being alarmed by these proceedings asked the defendant to take lands for whatever sum that was found due to him on accounts being taken as promised by him. The defendant refused to render such account and so betrayed his real intention of recovering the full amount of the decree by bringing to sale the whole of his properties. In this way, the plaintiff came to know about the defendant's fraudulent intention.

4. Now, upon that statement, apart from the allegations that the claim made by the defendant in the former proceedings was false and that the promissorynote upon which that claim was based was obtained by fraud and misrepresentation and without consideration, the plea in substance amounts to this: that both the plaintiff and the defendant had agreed to obtain the award with the object of depriving the plaintiff's creditors of their just dues, or bringing pressure upon them to reduce their claim, and that the consent of the plaintiff was procured by the defendant's assurance that the decree passed upon the award would not be enforced. In other words, the plaintiff alleges that the judicial proceedings were collusive, and that he consented to the order of reference and the decree upon the representation made to him by the defendant. The necessary implication is that that secret understanding between him and the defendant as well as the fact alleged, namely, that the arbitrator Narsingrao had agreed to give his award as the parties desired him to give, as a result of their collusion, was suppressed from the Court with a purpose. That purpose was evidently fraudulent for the object was to defeat the creditors of the plaintiff. There is not the slightest suggestion in the plaint that any material fact was suppressed from the plaintiff himself, and it is important and significant to note that the plaintiff's action is not founded on deceit either for damages or for injunction.

5. If, therefore, upon the pleadings, the fraud alleged was a fraud by the parties to the suit on the Court in obtaining an order of reference and the order making the award the decree of the Court, the question is whether such a collusive conduct in a judicial proceeding can be made the basis of an action to nullify a judgment of that Court, That aspect of the case does not seem to have been clearly appreciated in the Court below, which proceeded to consider the evidence led by the plaintiff as to the nature of the claim on the promissory-note and the agreement between the parties to refer the dispute to arbitration. The lower Court came to the conclusion that the promis- sory-note itself was for consideration, that the promissory-note and the decree were not obtained by fraud, and that the defendant was justified in recovering the amount of the decree. The question, whether the defendant agreed not to execute the decree, was also considered and decided against the plaintiff. Accordingly the plaintiff's suit was dismissed.

6. It is now well settled that a judgment or order obtained by fraud upon a Court binds no such Court, and its nullity may be alleged in any collateral proceeding without the necessity of setting it aside. [See Reg. v. Saddlers' Co. (1863) 10 H.L.C. 404 James L.J. in Flower v. Lloyd (1877) 6 Ch. D. 297 observed that ' in the case of a decree being obtained by fraud, there always was power, and there still is power, in the Courts of Law in this country to give adequate relief.' In Ex parte White v. Tommey (1853) 4 H.L. 313 the House of Lords discharged its own order as having been obtained by suppression and misrepresentation. The jurisdiction to set aside a decree has been recognized in Indian decisions. In Gopi Wdswdev Bhat v. Markande Narayan Bhat I.L.R. (1878) 3 Bom. 30 there was a collusive mortgage supported by a collusive decree, and Mr. Justice West remarked that ' if the ostensible sale or mortgage was really a mere colourable transaction, the vendee from the mortgagor may claim to have it disregarded, even though the fraud has been carried a stage further, so as to give to the sham mortgage the corroboration, of a decree which is then allowed to lay by unexecuted for several years.' In another case of Narayan Gop Habbu v. Pandurang Ganu I.L.R. (1881) 5 Bom. 685 the jurisdiction to set aside a collusive decree was not questioned; the Court however held that the allegation of collusion failed altogether.

7. Those were cases where the collusive decree was impeached not by the parties to it but by innocent persons claiming under the parties to the judgment, or represented by them therein, or by strangers who were neither privies to nor representatives of the parties to the former suit. The question is whether, if fraud is practised by both the parties on the Court, either of them could impeach the judgment on the ground that it was collusively procured. Wharton in his Law Lexicon (15th Ed., p. 212) defines 'collusion' as ' uniting in the same play or game, and thus uniting for the purposes of fraud or deception,' and therefore implying ' an agreement or compact between two or more persons to do some act in order to prejudice a third person, or for some improper purpose.' He says, 'collusion in judicial proceedings Vis a secret agreement between two persons that the one should institute a Shit against the other, in order to obtain the decision of a judicial tribunal for some sinister purpose, and appears to be of two kinds: (1) When the facts put forward as the foundation of the sentence of the Court do not exist; (2) When they exist, but have been corruptly preconcerted for the express purpose of obtaining the sentence.' A decree obtained by collusion has been described in the well known argument in the Duchess of Kingston's case (1776) 20 Howell's St. Tr. 537, as fabula, non judidum, hoc est; in scend, non in foro, res agitur. [See Nistmini Dassi v. Nundo Loll Bose I.L.R. (1899) 26 Cal. 891 and Smdarmal v. Aranvayal Sabhapathy I.L.R. (1896) 21 Bom. 205, where the question as to what amounts to collusion has been considered,] There can be no doubt, in my opinion, that as between the parties such a decree would be binding. In Prudham v. Phillips (1775) 2 Amb. 763 Willes C.J. said that ' if both parties colluded it was never known that one of them could vacate it.' The authorities show that strangers could repudiate it. In that 'connection, I might refer to the provisions of Section 44 of the Indian Evidence Act. That Section says that 'any party to a suit or other proceeding may show that any judgment, order or decree which is relevant under Section s 40, 41 or 42, and which has been proved by the adverse party, was delivered by a Court not competent to deliver it, or was obtained by fraud or collusion.' The expression 'obtained by fraud ' in my opinion expressly refers to the fraud practised against the Court by any one party, or it may also imply a fraud against any party to the proceeding. The term 'collusion' is used apparently in a different sense, and I must confess that the language of the Section is so comprehensive that it might enable a party to the collusion to lead evidence of his own fraud. But the Indian Evidence Act lays down a rule of proof and assuming that a party was allowed to prove his own collusion, that would not abrogate the rule of larger equity which must guide the Court in granting relief.

8. In the case of Ahmedbhoy Hubibhoy v. Vulleebhoy Cassumbhay I.L.R. 1882 6 Bom. 703 the question of fraud as affecting the judgment of a Court was considered on general grounds, and numerous English authorities have been considered on the question as to what classes of persons would be affected by the judgment, such as (1) the parties and privies to it (2) the representatives of such privies and parties, and (3) strangers who are neither privies to nor representatives of the parties. The defendants, who were in the position of residuary legatees, were allowed to dispute a decree of 1876 obtained by the plaintiff against an administrator, on the ground that the decree represented a private debt due by the administrator to the plaintiff, and had been obtained by fraud and collusion, That, was clearly a case where the representatives of the parties to the suit challenged the decree on the ground of the fraud of the representatives. On similar principles Courts have allowed a minor to challenge a decree obtained against him on account of the fraud of his guardian [see Cursandas Natha v. Ladkavaku I.L.R. (1897) 19 Bom. 571 and Maharaj Bhanudas v. Krishnabai : (1926)28BOMLR1225 ]. There are other cases of Indian Courts where the same principle was affirmed. In Pran Nath Roy v. Mohesh Chandra Moitra I.L.R. (1897) Cal. 546 the plaintiff who had unsuccessfully attempted to set aside an ex parte decree under Section s 108 and 311 of Act XIV of 1882, and who had not appealed against the order under Section 108, was held not to be disentitled to sue to have the decree set aside on the ground of fraud. In Nistarini Dassi v. Nundo Lall Bose the authorities were reviewed by Stanley J. There a preliminary objection was taken that the High Court had no jurisdiction to set aside a decree of the Alipore Court passed upon an award to which the consent of the plaintiff, a pardanashin lady, had been fraudulently obtained, and that the relief sought would be in the nature of a bill of review filed in the Alipore Court. The objection was held to be unsustainable. In applying the rule in Reg. v. Saddlers' Co. (1863) 10 H.L.C. 404 Stanley J. said (p. 908) matters not whether the impeached judgment has been pronounced by an inferior tribunal or by the highest Court of Judicature in the realm; in all cases alike it is competent for every Court, whether superior or inferior, to treat as a nullity any judgment which can be clearly shown to have been obtained by manifest fraud.

9. There is, however, clear authority of this Court on the question in issue in the judgment of Mr. Justice West in Chenvirappa v. Puttappa I.L.R. (1887) 11 Bom. 708. In that case the plaintiff had bought a house from a person and allowed the vendor to execute the conveyance in the name of the defendant. That was done with the object of protecting the property against the claims of the plaintiff's creditors. After the conveyance the plaintiff occupied the house, ostensibly as a tenant of the nominal purchaser for nominal rent. Later on thebe namidar or the nominal purchaser brought a suit against the plaintiff to recover possession of the house, and obtained an ex parte decree. He then applied for execution of the decree, but allowed the execution proceedings to drop. The plaintiff realising that the benamidar was intent on executing his decree for possession filed a suit for a declaration of his title to the house in question, and of his right to retain possession, alleging that the defendant was a mere benamidar, that the sale deed and the ex parte decree were sham and collusive transactions in fraud of the plaintiff's creditors, and that the nominal purchaser was merely a trustee or a transferee for his benefit. On the question arising as to the effect of the decree for possession it was held, upon the general principle of res judicata, that the plaintiff was estopped from raising the question of fraud in that suit and that he was bound by the decree in the defendant's favour although it was a collusive decree. The plaintiff could not get the judgment set aside which the defendant had obtained against him by his own contrivance even if the trust was enforceable in his favour for it arose ex turpi causa. In dealing with the remarks that 'a decree obtained by fraud and collusion could be impeached in a collateral proceeding', in The Queen v. The Wardens and Assistants of The Saddlers' Company (1861) 30 L.J.Q.B. 186, it was pointed out that the expression ' impeached in any collateral proceeding ' should be understood as ' impeached by one not a party to the fraudulent decree.' The learned Judge then proceeded to make the following observations (p. 721):-

In the present case the parties are the same; the proceeding is not collateral; is in direct contradiction to the decree, and proposes to avoid it by setting, one judgment up against another. This incongruity the law will not tolerate. See Castrique v. Behrens (1861) 30 L.J. Q.B. 163.

10. That is a clear authority for the proposition that a party to the decree cannot complain of any fraud practised by himself and another upon the Court. In other words, a party could not be permitted to take advantage of his own baseness or permitted to defeat a judgment by showing that in obtaining it he had practised an imposition on the Court. It would indeed be otherwise if one of the parties and the Court were deceived by the fraud of another. In such a case, as I have pointed out, the jurisdiction of the Court to set aside a decree cannot be denied provided the alleged fraud is established, and there is no excessive delay in bringing the action after the discovery of fraud.

11. But it is urged before us that inasmuch as the real intention of the plaintiff was fraudulently suppressed in obtaining his consent to the reference to arbitration, the real intention being to execute the decree, the decree obtained upon the award which was no better than a consent decree, should be set aside on account of that deception. The underlying assumption is that an award decree is on the same footing as a consent decree, and as a consent decree could be set aside on any of the grounds invalidating a contract, the award decree could be similarly treated. Now, it seems to me, without expressing any opinion as to the alleged misrepresentation or fraud, that a decree obtained upon an award given after hearing the parties by an arbitrator duly selected by them, could not be treated on the same footing as a consent decree. The two are radically different. The Court's power in recording compromises cannot be used for disturbing an agreement between the parties. On proof of the compromise, the Court is bound to record the adjustment, unless it is unlawful, and to pass a decree in terms thereof. In the matter of awards, the procedure is laid down, so far as the mofussil Courts are concerned, in the second schedule of the Civil Procedure Code. If the award is not challenged on any of the grounds in paragraph 15 of that schedule, the Court's business would be to record the award and pass judgment accordingly. The difference between a compromise decree and an award decree is this: that while the former is the result of the agreement of the parties with the Court's seal of approval, the award is the act of a Court or a tribunal set up by the parties of their own choice and is independent of the agreement of the parties. Moreover, if an award were irregular and offended against the provisions of the law, or if there were other grounds sufficient to invalidate it, the procedure to be followed to impeach the award would be the procedure laid down in the Code. We are not referred to any authority for the proposition that when an award is obtained by collusion of the parties and the arbitrator, the decree upon such an award could be impeached in an independent proceeding. The case of Raoji Naranji v. Ratansi Kanji (1929) I.L.R. 54 Bom. 696: is an authority to the contrary. Consequently on the grounds urged in the plaint it is difficult to grant the prayer for setting aside the decree. The argument that a collusive decree should be dealt with on the analogy of a transfer fraudulently effected under the provisions of Section 84 of the Indian Trusts Act is clearly not well founded.

12. As I have already remarked, if the implication of the statements in the plaint was that the defendant had failed to carry out his undertaking not to execute the decree, the cause of action for relief against the defendant's refusal to observe that undertaking would be entirely different. As I have said this is neither an action for injunction nor an action in damages for deceit. We were referred to a passage in the plaint which deals with an ancillary relief by way of injunction prohibiting the defendant from further executing his decree and it is suggested that this suit should be converted into a suit for an injunction restraining the defendant from executing further the decree on the ground that he has failed to observe his undertaking. The pleadings are not clear, and no issue was raised expressly upon a cause of action founded on breach of contract. With the exception of two witnesses who were casually asked questions about the alleged undertaking, the questions to the other witnesses were not directed to that point. Therefore we are reluctant to convert this suit into a suit for injunction. Consequently I do not think it desirable to express an opinion on the merits of the allegation in that respect. It is sufficient for me to say that the claim as based on the pleadings is not sustainable, and the appeal must therefore fail. Accordingly the appeal would be dismissed with costs.

John Beaumont, Kt., C.J.

1. I agree. The essence of the plaintiff's case is that a decree was obtained in favour of the defendant, which would have the effect of preventing the plaintiff's creditors from claiming his property, and that the defendant represented that he would not enforce that decree. The plaintiff alleges that by reason of that representation he consented to a reference of the defendant's claim on promissory-notes to arbitration, and agreed that the arbitrator should give an award in favour of the defendant, and that the award should be embodied in a decree of the Court. Now, that is really a case of obtaining a collusive decree. Both parties were in pari delicto. The plaintiff and the defendant each knew the facts, and both agreed that a bogus reference to arbitration should be made, and that a decree of the Court should be obtained on the award, and they deceived the Court by representing that the award was a genuine award, though in fact it was not. That is the plaintiff's case, and on that case, as I have said, the decree is a collusive decree. I know of no authority for the proposition that one party to such a decree can obtain relief by getting the decree set aside, and the case to which my learned brother has referred, Chenvirappa v. Puttappa I.L.R. (1887) 11 Bom. 708, is a direct authority against such a proposition. The only real complaint, when one analyses the pleading of the plaintiff as against the defendant, is that the defendant is not carrying out the bargain on which the decree was obtained, namely that the defendant would not execute it. But, if that is; the plaintiff's case, he is seeking the wrong remedy. There is no case for setting aside the decree; his only claim would be for an injunction to restrain the defendant from executing the decree in breach of his agreement or for damages. But such a claim is not made out in this suit, andnot issue was raised upon it, and the bulk of the evidence was not directed to that case. Therefore, it would not, I think, be right to give leave to amend the plaint by raising that case now.

2. The learned Judge in the Court below held against the plaintiff on merits, and I am certainly not suggesting that his judgment was wrong. It is not necessary, in our view, to go into the merits of the case on this appeal. The appeal must fail on the legal point that the plaintiff is not entitled to the remedy he seeks. If he has any case against the defendant for breach of agreement, he will have to bring it in a separate suit, and I express no opinion upon the question whether such a suit lies.

3. I agree that the appeal fails and must be dismissed with costs.

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