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HIGH COURT OF DELHI
JUDGMENT
NETHERLAND INDIA COMMUNICATION ENTERPRISES LTD & ANR. .....Petitioners
Through: Mr. Debashish Moitra, Ms. Shailendra Ojha, Mr. Jaidev Sharma, Advs.
Through: Mr. Sushil D. Salwan, Sr. Adv. with Ms. Shagun Bhargava, Adv. for R-1
HON'BLE MR. JUSTICE HARISH VAIDYANATHAN SHANKAR
1. The present Writ Petition is filed impugning Order dated 16.05.2025[1] passed by the learned Debt Recovery Appellate Tribunal-I, Delhi[2], whereby the application seeking condonation of delay in filing the Appeal, against the judgment dated 09.03.2010 passed by learned Debt Recovery Tribunal-I, Delhi[3], before it was rejected, which led to the Appeal to be dismissed on the ground of being time-barred. The said Appeal was filed on 27.10.2023, being Appeal No.360 of 2023 arising out of O.A. No.13 of 2007, along with application being I.A. No.875 of 2023 seeking condonation of delay Impugned Order DRAT of more than 13 years in filing the said Appeal.
2. Being a trivial controversy here, an elaborate exposition of the factual matrix involved would not be required. The issue in brief is whether or not an Appeal which has been admittedly filed more than 13 years after passing of the Impugned Order therein could have been entertained by the learned DRAT as against the expressed stipulation of statute meaning thereby Section 20 of the Recovery of Debts and Bankruptcy Act, 1993[4], and on the principle that stands espoused by the Hon’ble Supreme Court in various judgments that “Fraud Vitiates Everything”.
CONTENTIONS OF THE PETITIONERS:
3. The first contention of the Petitioners is that the judgement dated 09.03.2010 of the learned DRT was a result of fraud that was played upon the Court and, resultantly, the same is a nullity and, the Appeal against the Judgment, which was a nullity, would not be barred by limitation and would thus be maintainable requiring a determination of the said Appeal on merits.
4. It is the contention of the Petitioners that the loan which was advanced by Respondent No.1-Bank to the Appellant was based on collusion between one Mr. G.S. Saluja, being Respondent No.2 herein and Respondent No.1-Bank.
5. It is further contended by the Petitioners that the said loan was based on a Board Resolution dated 08.01.2004, which was unauthorised, as it was limited only for the purposes of Domestic Working Capital, whereas the loan was granted for Export Credit. Moreover, the Petitioners submit that the Export Credit as granted was RDB Act for the purpose of garment exports to manufacturers only, and the Petitioners herein are not manufacturers, thereby disentitling them from any loan for garment export.
6. It is further submitted by Petitioners that the loan transaction is a fraudulent transaction from its very inception, and any enforcement of such a transaction is a nullity in the eyes of the law, being void ab initio.
7. Learned counsel for the Petitioners further contends that the fraud is apparent from the documents, being the Bill of Exchange dated 18.03.2004, the Loan Sanction Letter and the alleged concealed documents.
8. Learned counsel for the Petitioners thereafter relies upon the judgment passed by the Hon’ble Supreme Court in the case of A.V. Papayya Sastry & Ors vs Government of A.P. & Ors[5]., and in particular paragraphs Nos. 21-27, which are reproduced herein below:
24. 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.
25. 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).
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 utilised as an engine of oppression by dishonest and fraudulent litigants.
27. In S.P. Chengalvaraya Naidu v. Jagannath [(1994) 1 SCC 1] 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 is 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.”
9. Learned counsel for the Petitioners also relies upon the judgment passed by the Hon’ble Supreme Court in the case of S.P. Chengalvaraya Naidu vs. Jagannath[6], and in particular paragraphs Nos. 5 and 6, which read as under: “5. The High Court, in our view, fell into patent error. The short question before the High Court was whether in the facts and circumstances of this case, Jagannath obtained the preliminary decree by playing fraud on the court. The High Court, however, went haywire and made observations which are wholly perverse. We do not agree with the High Court that “there is no legal duty cast upon the plaintiff to come to court with a true case and prove it by true evidence”. 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. 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 courtprocess 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.
6. The facts of the present case leave no manner of doubt that Jagannath obtained the preliminary decree by playing fraud on the court. 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 get an advantage. Jagannath was working as a clerk with Chunilal Sowcar. He purchased the property in the court auction on behalf of Chunilal Sowcar. He had, on his own volition, executed the registered release deed (Ex. B-15) in favour of Chunilal Sowcar regarding the property in dispute. He knew that the appellants had paid the total decretal amount to his master Chunilal Sowcar. Without disclosing all these facts, he filed the suit for the partition of the property on the ground that he had purchased the property on his own behalf and not on behalf of Chunilal Sowcar. Nonproduction and even non-mentioning of the release deed at the trial is tantamount to playing fraud on the court. We do not agree with the observations of the High Court that the appellants-defendants could have easily produced the certified registered copy of Ex. B-15 and non-suited the plaintiff. A litigant, who approaches the court, is bound to produce all the documents executed by him which are relevant to the 1994 (1) SCC 1 litigation. If he withholds a vital document in order to gain advantage on the other side then he would be guilty of playing fraud on the court as well as on the opposite party.”
CONTENTIONS OF THE RESPONDENTS:
10. Per Contra, learned Senior Counsel for Respondent No.1-Bank commences his defence in the present Petition by contending that the present Petition is in fact infructuous as the amount, as decreed by the learned DRT, has already been released and resultantly nothing survives.
11. Learned Senior Counsel for the Respondent No.1-Bank further contends that the present Petition is completely misconceived and lacks bona fides as the Petitioners herein have admittedly been involved in other proceedings, including arbitration proceedings, and have maintained a distance from the proceedings before the learned DRT thereafter.
12. Learned Senior Counsel for the Respondent No.1-Bank also contends that the present Petition and the Appeal before the learned DRAT lacked in bona fides since the Petitioners had participated in the original proceedings before the learned DRT in O.A. No. 13 of
2007. He states that not only did the Petitioners appear before the learned DRT but also filed their written statement/reply; however, they chose thereafter not to proceed with it, and hence, they were proceeded ex parte vide Order dated 25.07.2008.
13. It is further the contention of the learned Senior Counsel for the Respondent No.1-Bank that the Petitioners were well aware of the Judgement dated 09.03.2010, considering the Petitioners joined in the recovery proceedings before the learned Recovery Officer on various dates, being 12.7.2010, 13.08.2010, 16.11.2010. 6.1.2011 and 18.3.2021.
14. Learned Senior Counsel would further contend that the Petitioners herein are clearly guilty of acquiescence as they have chosen to participate in the recovery process and also filed the affidavit of assets as well as an undertaking. He, therefore, contends that the Petitioners have not only accepted the final order but also acknowledged their liability.
15. Learned Senior Counsel would further contend that the Petitioners have the capacity to pay as they are a beneficiary of Rs. 40 crores in a recently concluded arbitration proceeding.
16. The further contention of the learned Senior Counsel is that the Petitioners have, in their balance-sheet of the year ending 31.03.2004, made entries to the tune of the loan amount of Rs.39,98,979/- being due and payable to the Bank and relies upon the judgment passed by learned Single Judge of this Court in the case of Shahi Exports Pvt. Ltd. vs. CMD Buildtech Pvt. Ltd.7, thereby submitting that in light of the said judgement, the entry made would tantamount to acknowledgement of debt.
17. It is further the contention of the learned Senior Counsel that the Petitioners had been the recipients of legal notices and also intimations regarding various actions that had been taken by the Respondent No.1-Bank, and yet chose to remain silent.
18. Learned Senior Counsel would further rely upon the written statements/reply filed by the Petitioners before the learned DRT to contend that the Petitioners were well aware of the alleged fraud having been perpetrated upon them as early as 2004.
19. Learned Senior Counsel for the Respondent No.1-Bank would, 2013 SCC OnLine Del 2535 therefore, submit that the proposition that “Fraud Vitiates Everything” cannot be applicable when, despite having knowledge of the fraud having been played, a litigant chooses to remain silent and not act against such fraud. In support of his contentions, learned Senior Counsel for the Petitioners would rely upon the judgment of the Hon’ble Supreme Court in the case of Saranpal Kaur Anand vs. Praduman Singh Chandhok[8]. ANALYSIS:
20. We have heard the learned counsel appearing on behalf of the parties and perused the Impugned Order as well as the entire record annexed with the Petition.
21. We are afraid that we cannot agree with the contentions of the learned counsel for the Petitioners. We agree with the conclusion drawn by the learned DRAT for the following reasons:
(i) While it is trite law that “Fraud Vitiates Everything”, the same cannot and should not, however, be permitted to be used as a defence for continued inaction or indulgence. It would, in fact, be against the principles for which the laws of limitation are brought into play.
(ii) Section 20 of the RDB Act permits a period of 30 days within which an Appeal has to be preferred from the date of the Order passed by learned DRAT, however, in the present case, the Petitioners have chosen to sleep over their rights for a period of more than 13 years, when there is absolutely no prudent reason or justification given for such inordinate delay on the part of the Petitioners for preferring the Appeal before the learned DRAT.
22. We are of the view that the recent judgment of the Hon’ble Supreme Court in the case of Pathapati Subba Reddy (Died) By L.Rs. and Others v Special Deputy Collector (LA)9, more particularly paragraphs 23, 25 and 26, squarely cover the issue pertaining to limitation in the present case. Relevant paragraphs of Pathapati Subba Reddy (supra) are reproduced herein for the sake of convenience:-
23. In Basawaraj v. Special Land Acquisition Officer[8], this Court held that the discretion to condone the delay has to be exercised judiciously based upon the facts and circumstances of each case. The expression „sufficient cause‟ as occurring in Section 5 of the Limitation Act cannot be liberally interpreted if negligence, inaction or lack of bona fide is writ large. It was also observed that even though limitation may harshly affect rights of the parties but it has to be applied with all its rigour as prescribed under the statute as the courts have no choice but to apply the law as it stands and they have no power to condone the delay on equitable grounds.
25. This Court in the same breath in the same very decision vide paragraph 15 went on to observe as under:
2024 SCC OnLine SC 513 tantamounts to showing utter disregard to the legislature.” (emphasis supplied)
23. We are also of the view that limitation in respect of any action, wherein the benefit of its extension is sought for, has to be circumscribed by the date from when the knowledge of such an event occasioning the extension of limitation would come into play, as held by the Hon’ble Supreme Court in various judgments including the judgment of Saranpal Kaur Anand (supra), P. Radha Bai vs. P. Ashok Kumar10, and Ramesh B. Desai & Ors. vs. Bipin Vadilal Mehta & Ors11. Relevant extracts of Saranpal Kaur Anand (supra), wherein the underlying principles are discussed, state as follows: “11. The general principle, which also manifests itself in Section 17 of the Limitation Act, is that every person is presumed to know his own legal right and title in the property, and if he does not take care of his own right and title to the property, the time for filing of the suit based on such a right or title to the property is not prevented from running against him. The provisions of Section 17(1) embody fundamental principles of justice and equity viz. that a party should not be penalised for failing to adopt legal proceedings when the facts or the documents have been wilfully concealed from him and also that a party who had acted fraudulently should not be given the benefit of limitation running in its favour by virtue of such frauds. [Pallav Sheth v. Custodian, (2001) 7 SCC 549] However it is important to remember that Section 17 does not defer the starting point of limitation merely because the defendant has committed a fraud. Section 17 does not encompass all kinds of frauds, but specific situations covered by clauses (a) to (d) to Section 17(1) of the Limitation Act. Sections 17(1)(b) and (d) encompass only those fraudulent documents or acts of concealment of documents which have the effect of suppressing knowledge entitling the party to pursue his legal remedy. Once a party becomes aware of antecedent facts necessary to pursue legal proceedings, the period of limitation commences. [P. Radha Bai v. P. Ashok Kumar, (2019) 13 SCC 445: (2018) 5 SCC (Civ) 773]
12. Therefore in the event the plaintiff makes out a case that falls within any or more of the four clauses to subsection (1) to Section 17 of the Limitation Act, the period of limitation for filing of the suit shall not begin to run until the plaintiff or applicant has discovered the fraud/mistake or could with reasonable diligence have discovered it or if the document is concealed till the plaintiff has the means of producing the concealed document or compelling its production a fortiori.
13. “Diligence” as a word of common parlance means attention, carefulness, and persistence in efforts of doing
2006 (5) SCC 638 something. [P. Ramanatha Aiyar, The Major Law Lexicon (4th Edn., Lexis Nexis Publication)] This Court in Chander Kanta Bansal v. Rajinder Singh Anand [Chander Kanta Bansal v. Rajinder Singh Anand, (2008) 5 SCC 117], in reference to the proviso to Order 6 Rule 17 of the Code, defined “diligence” as: (SCC pp. 122-23, para 16)
14. The word “diligence” read with the word “reasonable” in the context of Section 17(1) of the Limitation Act is subjective and relative, and would depend upon circumstances of which the actor called upon to act reasonably, knows or ought to know. Vague clues or hints may not matter. Whether the plaintiff/applicant had the means to know the fraud is a relevant consideration. It is manifest that Section 17(1) of the Limitation Act does not protect a party at fault for failure to exercise reasonable diligence when the circumstances demand such exercise and on exercise of which the plaintiff/applicant could have discovered the fraud. When the time starts ticking subsequent events will not stop the limitation. The time starts running from the date of knowledge of the fraud/mistake; or the plaintiff/applicant when required to exercise reasonable diligence could have first known or discovered the fraud or mistake. In case of a concealed document, the period of limitation will begin to run when the plaintiff/applicant had the means of producing the concealed document or compelling its production.”
24. As already mentioned hereinabove, in the event that the broad principle “Fraud Vitiates Everything” were applied without it being circumscribed at least by the knowledge of when it occurs, it would give rise to a situation in every given case where, if a person shows fraud, the principles of limitation would have to be inapplicable without considering the point of time at which knowledge of such fraud was acquired by a party, which would be antithesis of the principles laid in Section 17 of the Limitation Act, 1963.
25. We, thus, hold that there can be no general and broad-based applicability of the proposition that fraud would vitiate everything, making any act thereof a nullity without there being any limitations imposed on the same.
26. We now examine the documents that have been produced by the Petitioners.
27. A perusal of the reply filed before the learned DRT in the O.A. 13/2007 would clearly show that the Petitioners were aware of alleged fraud having been played upon it at least from the year 2004. There is, however, no explanation as to why there was no follow-up on the said reply in the form of either affidavits, evidence or any supportive documents.
28. Learned DRT concluded at paragraph No.7.[4] of the Judgement dated 09.03.2010 while dealing with the allegations of collusion, which reads as follows: “7.[4] The next objection raised by the defendant is that the whole of the amount of loan was used by Shri. G.S. Saluja in his personal business and that there is a direct collusion between the applicant bank and Shri G.S. Saluja. Shri G.S. Saluja is one of the Directors of the defendant No.1 and in case any bungling has been made, it is a dispute interse the Director. No evidence has been brought on record that there was collusion between the applicant bank and Shri G.S. Saluja for helping him in diverting the funds for his personal benefit. The defendants have not filed their own affidavit in support of the objection raised by them. The objection raised by the defendants is rejected.”
29. It is apparent that there was an abject failure on the part of the Petitioners to adduce any evidence in support of their allegations of fraud, resulting in the afore-quoted Order.
30. Furthermore, it is important to examine the nature of the allegations of fraud themselves. A perusal of the reply would show that the same are quite vague and imprecise, and in our respectful opinion, do not pass the test of being sufficiently descriptive of the alleged fraud as committed. It is a well-established principle of law that while allegations of fraud are easily made, they are difficult to substantiate with evidence. Courts have consistently held that fraud must be pleaded with a high degree of particularity in order to be entertained. Furthermore, this principle is laid under Order VI of the Code of Civil Procedure, 190812, which enlists the general rules of pleadings. Rule 4 thereof specifically mandates that in all cases where a party alleges misrepresentation, fraud, breach of trust, wilful default, or undue influence, the particulars of such allegations must be stated in detail. Order VI Rule 4 of the CPC reads as follows:-
31. We are also guided by the judgment of the Hon’ble Supreme Court in Electrosteel Castings Ltd. v. UV Asset Reconstruction Co. Ltd.13, wherein it has been held as follows: “7.2. However, it is required to be noted that except the words used “fraud”/“fraudulent” there are no specific particulars pleaded with respect to the “fraud”. It appears that by a clever drafting and using the words “fraud”/“fraudulent” without any specific particulars with respect to the “fraud”, CPC the plaintiff-appellant herein intends to get out of the bar under Section 34 of the Sarfaesi Act and wants the suit to be maintainable. As per the settled proposition of law mere mentioning and using the word “fraud”/“fraudulent” is not sufficient to satisfy the test of “fraud”. As per the settled proposition of law such a pleading/using the word “fraud”/“fraudulent” without any material particulars would not tantamount to pleading of “fraud”.
8. In Bishundeo Narain [Bishundeo Narain v. Seogeni Rai, 1951 SCC 447: 1951 SCR 548] in para 22, it is observed and held as under: (SCC p. 454) “22. … Now if there is one rule which is better established than any other, it is that in cases of fraud, undue influence and coercion, the parties pleading it must set forth full particulars and the case can only be decided on the particulars as laid. There can be no departure from them in evidence. General allegations are insufficient even to amount to an averment of fraud of which any court ought to take notice however strong the language in which they are couched may be, and the same applies to undue influence and coercion. See Order 6 Rule 4, Civil Procedure Code.”
32. There is also another aspect that while the Petitioners would canvass allegations of fraud, etc., there is, however, no denial of the fact that the Board Resolution dated 08.01.2004, which bears the signatures of Petitioner No.2 herein, was not a forged or fraudulent document. It is only alleged that the said Resolution was for the purposes of Domestic Working Capital, whereas the loan was granted for Export Credit.
33. We are of the view that assuming that the loan, as sanctioned, was in respect of export credit, as alleged, it is for the first time in the present Petition that such a contention has been raised. There is not a whisper about any of the details as has been sought to be raised, in the written statement/ reply filed by the Petitioners. This contention was not even taken by the learned counsel for the Petitioners before the learned DRT. What is also noticed is the fact that the said Mr. G.S. Saluja/ Respondent No.2 herein, against whom the allegations of collusion with Respondent No.1-Bank have been made, was, in fact, removed as a Director only in the year 2006, meaning thereby that even after the knowledge of fraud having been committed, as admitted in the reply, Mr. G.S. Saluja/Respondent No.2 continued as a Director of the Company for almost two years after the sanction of the loan. It is also apparent that the Petitioners herein did not even file any police complaint till as late as 03.10.2023.
34. In view of the foregoing discussion, we are of the firm view that the present Petition is completely misconceived and a gross abuse of the process of law; therefore, the same is rejected.
35. Accordingly, the present Petition, along with pending application(s), if any, is disposed of.
36. No order as to costs.
ANIL KSHETARPAL (JUDGE)
HARISH VAIDYANATHAN SHANKAR (JUDGE) AUGUST 7, 2025/rk/sm/va