Fraud, a fraud is an act of deliberate deception with the design of securing something by taking unfair advantage of another. It is a deception in order to gain by another's loss. It is a cheating intended to got an advantage, S.P. Chengalvaraya Naidu v. Jagannath, AIR 1994 SC 853 (855): (1994) 1 SCC 1.
A term used in a variety of meanings. At Common Law, fraud is actionable under the heading of deceit (q.v.).
A knowing misrepresentation of the truth or con-cealment of a material fact to induce another to act to his or her detriment, Black's Law Dictionary, 7th Edn., p. 670.
In equity and upon the equitable principles which are now applicable in any Court of law, fraud may be described as an infraction of the rules of fair dealing. For the action at law intention and representation (q.v.) are material. In equity an act or its consequences to the person aggrieved may be of greater importance than the intention of the defendant or any representation made to the plaintiff, and the same may be said of acts which have been stigmatised as fradulent by statute. In Patrick v. Lyon, 1933 Ch 786, it was held that an offence under s. 275 of the (English) Companies Act, 1929, required a proof of fraud while a contravention of the law under s. 265 did not necessarily imply moral blame.
It is impossible to lay down a definition completely comprehending fraud, and no rule can, from the very nature of the subject, be invariable. fraud is infinite: 'Crescit in orbe dolus'; and were the Courts to prescribe the limits of their equitable relief against fraud, or to define the species of evidence receivable in support of it, their decrees would be continually eluded; to afford complete protection new principles must be created to meet new species of fraud.
Concealed fraud. In the case of a designed fraud, whereby any person is, by concealment of material facts, prevented from asserting his title to land or rent, the limitation of time (12 years) within which he may sue in equity for the land or rent runs from the time at which such fraud was r might with reasonable diligence have been first known or discovered; see (English) Real Property Limitation Act, 1833 (3 & 4 Wm. 4, c. 27), s. 26; Vane v. Vane, (1873) LR 8 Ch 383; Lawrance v. Lord Norreys, (1890) 15 App Cas 210; see also LACHES.
Constructive fraud. Such acts or contracts as, though not originating in any actual evil design or contrivance to perpetrate fraud or injury upon others, yet, by their tendency to deceive or mislead, or to violate public or private confidence, or to injure the public interests, are equally reprehensi-ble with positive fraud, and therefore equally prohibited.
Thus, to prevent injustice and shut out inducement to wrong, certain transactions are held to be fradulent, as contrary to general policy, or to fixed legal principles; as marriage-brokerage bonds, and contracts in restraint of trade. Other transactions again, growing out of a special confidential or fiduciary relation between the parties, are watched with special jealousy, because they afford the means of taking advantage of or exercising undue influence over others; such are transactions between parent and child, attorney and client, principal and agent, guardian and ward, trustee and cestui que trust, partners, etc. Others are of a mixed character, combining the ingredients of the preceding with others of a peculiar nature; but they are chiefly prohibited because they operate as a fraud upon the private rights, interests, duties, or intentions of third parties; or compromise the private interests, rights, or duties of the parties themselves, such as secret composition deeds, voluntary conveyances, etc., 1 St. Eq. Jur. 213. For instances of acts which have been declared to be or treated as fradulent by statute, see MISFEASANCE; PROSPECTUS; WINDING-UP; FRADULENT PREFERENCE; FRAUDULENT CONVEYANCES; PASSING OFF.
Fraud and collusion vitiate even the most solemn proceedings in any civilised system of jurispru-dence. It is a concept descriptive of human conduct. Michael Levi likes a fraudster to Milton's sorcerer, Comus who exulted in his ability to, 'wing me into the easy-hearted man and trap him into snares'. It has been defined as an act of trickery or deceit. In Webster's Third New International Dictionary fraud in equity has been defined as an act or omission to act or concealment by which one person obtains an advantage against conscience over another or which equity or public policy forbids as being prejudicial to another. In Black's Legal Dictionary, fraud is defined as an intentional perversion of truth for the purpose of inducing another in reliance upon it to part with some valuable thing belonging to him or surrender a legal right; a false representation of a matter of fact whether by words of by conduct, by false or misleading allegations, or by concealment of that which should have been disclosed, which deceives and is intended to deceive another so that he shall act upon it to his legal injury. In Concise Oxford Dictionary, it has been defined as criminal deception, use of false representation to gain unjust advantage; dishonest artifice or trick. According to Halsbury's Law of England, a representation is deemed to have been false, and therefore a misrepresentation, if it was at the material date false in substance and in fact. S. 17 of the Contract Act defines fraud as act committed by a party to a contract with intent to deceive another. From dictionary meaning or even otherwise fraud arises out of deliberate active role of representator about a fact which he knows to be untrue yet he succeeds in misleading the representee by making him believe it to be true. The representation to become fraudulent must be of the fact with knowledge that it was false. In a leading English case, Derry v. Peek, (1886-90) All ER 1: (1889) 14 AC 337: 5 TLR 625, what constitutes fraud was described thus: (All ER p. 22 B-C).
Fraud is proved when it is shown that a false representation has been made (i) knowingly, or (ii) without belief in its truth, or (iii) recklessly, careless whether it be true or false.
But fraud in public law is not the same as Fraud in private law. Nor can the ingredients which established fraud in commercial transaction be of assistance in determining fraud in Administrative Law. It has been aptly observed by Lord Bridge in Khawaji [Khawaja v. Secretary of state for Home Deptt., (1983) 1 All ER 765] that it is dangerous to introduce maxims of common law as to effect of fraud while determining fraud in relation to statutory law. In Pankaj Bhargava [Pankaj Bhargava v. Mohinder Nath, (1991) 1 SCC 556: AIR 1991 SC 1233] it was observed that fraud in relation to statute must be a colourable transaction to evade the provisions of a statute. 'If a statute has been passed for some one particular purpose, a court of law will not countenance any attempt which may be made to extend the operation of the Act to something else which quite foreign to its object and beyond its scope.' (Craies on Statute Law, 7th edn., p. 79) Present day concept of fraud on statute has veered round abuse of power or mala fide exercise of power. It may arise due to overstepping the limits of power or defeating the provision of statute by adopting subterfuge or the power may be exercised for extraneous or irrelevant considerations. The colour of fraud in public law or administrative law, as it is developing, is assuming different shades. It aries from a deception committed by disclosure of incorrect facts knowingly and deliberately to invoke exercise of power and procure an order from an authority or tribunal. It must result in exercise of jurisdiction which otherwise would not have been exercised, Shrisht Dhawan (Smt.) v. Shaw Bros., AIR 1992 SC 1555: (1992) 1 SCC 534.
Fraud is meant an intention to deceive, whether it is from any expectation of advantage to the party himself or form the ill towards the other is immaterial. The expression fraud involves two elements, deceit and injury to the person deceived, State of Andhra Pradesh v. T. Suryachandra Rao, AIR 2005 SC 3110.
Fraud and collusion vitiate even the most solemn proceedings in any civilized system of jurisprudence. It is a concept descriptive of human conduct, Bhaurao Dagdu Paralkar v. State of Maharashtra, AIR 2005 SC 3330.
Fraud, is a conduct either by letter or words, which induces the other person, or authority to take a definite determinative stand as a response to the conduct of former either by words or letter. Although negligence is not fraud but it can be evidence on fraud, Ram Preeti Yadav v. Uttar Pradesh, Board of High School and Intermediate Education, (2003) 8 SCC 311: AIR 2003 SC 4268 (4271).
Fraud, is false representation by one who is aware that it was untrue with an intention to mislead the other who may act upon it to his prejudice and to the advantage of the representor. It has been defined statutorily in s. 17 of the Contract Act
as including certain acts committed with connivance or with intent to deceive another, State of Maharashtra v. Budhi Kota, (1993) 2 SCC 567. (Contract Act, 1872, s. 17)