Fraud or Mistake; 5 Important Case Laws

Section 17 of Limitation Act, 1963 provides for effect of fraud or mistake which reads as under:­

17. Effect of fraud or mistake

(1) Where, in the case of any suit or application for which a period of limitation is prescribed by this Act ­

(a) the suit or application is based upon the fraud of the defendant or respondent or his agent; or

(b) the knowledge of the right or title on which a suit or application is founded is concealed by the fraud of any such person as aforesaid; or

(c) the suit or application is for relief from the consequences of a mistake; or

(d) where any document necessary to establish the right of the plaintiff or applicant has been fraudulently concealed from him, or the applicant has the period of limitation shall not begin to run until plaintiff or applicant has discovered the fraud or the mistake or could, with reasonable diligence, have discovered it; or in the case of a concealed document, until the plaintiff or the applicant first had the means of producing the concealed document or compelling its production:

Provided that nothing in this section shall enable any suit to be instituted or application to be made to recover or enforce any charge against, or set aside any transaction affecting, any property which ­

(i) in the case of fraud, has been purchased for valuable consideration by a person who was not a party to the fraud and did not at the time of the purchase know, or have reason to believe, that any fraud had been committed, or

(ii) in the case of mistake, has been purchased for valuable consideration subsequently to the transaction in which the mistake was made, by a person who did not know, or have reason to believe, that the mistake had been made, or

(iii) in the case of a concealed document, has been purchased for valuable consideration by a person who was not a party to the concealment and, did not at the time of purchase know, or have reason to believe, that the document had been concealed.

(2) Where a judgment­-debtor has, by fraud or force, prevented the execution of a decree or order within the period of limitation, the court may, on the application of the judgment-­debtor made after the expiry of the said period extend the period for execution of the decree or order:

Provided that such application is made within one year from the date of the discovery of the fraud or the cessation of force, as the case may be.

Case Laws on Fraud

1. Bal Gangadhar Tilak Vs Sh. Shriniwas Pandit, AIR 1915 PC 7

Wherein Hon’ble High Court of Bombay held as under:­

“General allegations, however strong, may be the words, in which they are stated, if unaccompanied by particulars are insufficient to amount to an averment of fraud of which any court ought to take notice.”

2. Karthiyayani Amma Vs Sudasundaram, 1994 (1) Ker LJ 843

Wherein Hon’ble High Court of Kerala held as under:­

“When the plaint itself does not contain proper allegations regarding fraud and no evidence is led to substantiate the same, the plaintiff would not be entitled to the benefit of Section 17.

3. Nakul Chandra Dutta Vs Ajit Kumar Chakraborty & Ors. AIR 1982 CAL 564,

Wherein Hon’ble Calcutta High Court held as under:­

“Mr. Dutt contends that the knowledge of the applicant about the sale of the property is attributable to the applicant at least with reference to these two letters. We are, however, unable to accept the contention. The letters at most indicate some hearsay knowledge about an intended purchase by Panchanan. There is nothing in these letters to suggest that the applicant had any knowledge of any Court sale. In the case of an application to set­aside a sale on the ground of fraud, under Order XXI Rule 90 of the Code, limitation runs not from the date when the applicant has some hearsay knowledge of the factum of sale, but when he has a clear and definite knowledge of the facts constituting the fraud.”

4. Pallav Sheth Vs. Custodian, (2001) 7 SCC 549

Wherein Hon’ble Supreme Court held as under:­

“The provisions of Section 17 embody fundamental principles of justice and equity, Viz. that a party should not be penalized for failing to adopt legal proceedings when the facts or the material necessary for him to do so have been willfully concealed from him and also that a party who has acted fraudulently, should not gain the benefit of limitation running in his favour by virtue of such fraud.”

5. Ahmed Ali Vs Emperor, MANU/WB/267/1925

Wherein Hon’ble High Court of Calcutta held as under:­

“The expression ‘intent to defraud’ (as it occurs in Section 463, Indian Penal Code), implies conduct coupled with intention to deceive and thereby to in jure; in other words ‘defraud’ involves two conceptions, namely, deceit and injury to the person deceived, that is, infringement of some legal right possessed by him but not necessarily deprivation of property.”