Fraud :
Basic element of fraud is deceit. Section 17 of Contract Act states that fraud means making a suggestion, as a fact, which the person does not believe it to be true. Fraud also means active concealment of fact. Generally, ‘fraud’ means deceit, trickery or misrepresentation. Intention to evade duty is built into the words ‘fraud’ and ‘collusion’ – Cosmic Dye Chemical v. CCE 95 STC 604 = (1995) 6 SCC 117 = 75 ELT 721 (SC 3 member bench). In Dr. Vimla v. Delhi Administration AIR 1963 SC 1572 = 1963 Supp 2 SCR 585, it was observed that ‘defraud’ includes an element of deceit.
In UOI v. Jain Shudh Vanaspati 1996(86) ELT 460 (SC), it was observed, ‘Fraud, if established, unravels all’.
No Court in this land will allow a person to keep an advantage which he has obtained by fraud. No judgment of a Court, no order of a Minister, can be allowed to stand if it has been obtained by fraud. Fraud unravels everything. The Court is careful not to find fraud unless it is distinctly pleaded and proved; but once it is proved, it vitiates judgments, contracts and all transactions whatsoever. – Lazarus Estate v. Berly (1956) 1 All ER 341 (CA) – quoted with approval in Ram Preeti Yadav v. UP Board of High School and Intermediate Education 2003 AIR SCW 4912 = (2003) 8 SCC 311 = AIR 2003 SC 4268, where it was observed, ‘ In S P Chengalvaraya Naidu v. Jagannath AIR 1994 SC 853 = (1994) 1 SCC 1 = 1994 AIR SCW 243, this Court stated that fraud avoids all judicial acts, ecclesiastical or temporal’ – same view in CC v. Aafloat Textiles (2009) 235 ELT 587 (SC) * State of Uttar Pradesh v. Ravindra Kumar Sharma (2016) 4 SCC 791.
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. Suppression of a material document would also amount to a fraud on the Court – Ashok Leyland Ltd. v. State of Tamil Nadu 2004 AIR SCW 1001 = 2004(3) SCC 1 (SC 3 member bench) – same view in Derry v. Peek (1886-90) All ER 1 = (1889) 14 AC 337 (HL) * State of AP v. T Suryachandra Rao (2005) 6 SCC 149 = AIR 2005 SC 3110 * State of Orissa v. Harapriya Bisoi AIR 2009 SC 2991.
Suppression of a material document would also amount to fraud on Court – Gowrishankar v. Joshi Amba Shankar Family Trust 1996(3) SCC 310 = 1996 AIR SCW 2684 = AIR 1996 SC 2202
Concealment of relevant and material facts, which should have been declared before Arbitrator, is an act of fraud and is against public policy of India – – Fraud being of ‘infinite variety’ may take many forms – – Fraud, in the contemplation of a civil court of justice, may be said to include properly all acts, omissions, and concealments which involve a breach of legal or equitable duty, trust or confidence, justly reposed, and are injurious to another, or by which an undue or unconscientious advantage is taken of another – Venture Global Engineering v. Satyam Computer Services (2010) 8 SCC 660.
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 cheating intended to get an advantage – S P Chengalvaraya Naidu v. Jagannath AIR 1994 SC 853 = (1994) 1 SCC 1 = 1994 AIR SCW 243.
In CC v. Essar Oil Ltd. (2004) 172 ELT 433 (SC), all important case law on ‘fraud’ was discussed, and it was observed, “By ‘fraud’ is meant an intention to deceive; whether it is from any expectation of advantage to party itself or from the ill will towards other is immaterial. ‘Fraud’ involves two elements, deceit and injury to the person deceived. Injury will include any harm whatever cause to any person in body, mind, reputation or such others [see Dr. Vimla v. Delhi Administration AIR 1963 SC 1572 = 1963 Supp 2 SCR 585 and Indian Bank Association v. Satyam Fibres 1996(5) SCC 550 = 1996 AIR SCW 3228 = AIR 1996 SC 2592].
Misrepresentation itself amounts to fraud – Devendra Kumar v. State of Uttaranchal (2009) 9 SCC 363.
Fraus et jus nunquam cohabitant – Fraud and justice never dwell together – Meghmala v. G Narasimha Reddy (2010) 8 SCC 383.
However, mere silence is not fraud, unless it is the duty of the person to speak or silence itself is equivalent to speech.