State Bank of India vs JSSI Hydraulics Pvt.Ltd.

ORDER

“IA-3762/2024: Mr. Sumant Batra, Ld. Sr. Counsel appearing for the RP submitted that the SRA could furnish the performance bank guarantees one after the other which could be found fake. According to him, one may plea alibi for one of such lapse by passing the blame on others but for repeated act of procuring forged documents and using the same for its benefit, the SRA cannot be absolved of liability. Per contra Mr. Sunil Fernandes, Ld. Counsel appearing for SRA submitted that the crucial date was 04.07.2024, when the SRA acquired knowledge about the fact that PBG was forged and thereafter on 23.07.2024, an amount of Rs. 1.5 crores was deposited in the CIRP account of the Corporate Debtor. Mr. Sumant Batra, Ld. Sr. Counsel submitted that having come to know about the performance bank guarantee being forged the FIR was lodged by RP on 03.07.2024 and it was only thereafter the aforementioned amount could be deposited. It is also the submission of Mr. Sunil Fernandes, Ld. Counsel that after 04.07.2024 no act of fraud or forgery could be committed. In any case, Mr. Sumant Batra, Ld. Sr. Counsel appearing for the RP seeks to produce certain judgments to buttress his plea that in the circumstances espoused in the application, the Resolution Plan need to be recalled. Mr. Sunil Fernandes, Ld. Counsel appearing for the SRA also seeks an adjournment to take instructions from his client before making further submissions in the matter. Let the application be listed for hearing on 27.11.2024.”

“36B. Request for resolution plans.

…..

(4A) The request for resolution plans shall require the resolution applicant, in case its resolution plan is approved under sub-section (4) of section 30, to provide a performance security within the time specified therein and such performance security shall stand forfeited if the resolution applicant of such plan, after its approval by the Adjudicating Authority, fails to implement or contributes to the failure of implementation of that plan in accordance with the terms of the plan and its implementation schedule.”

“20.

…..

(ii)

The Performance Guarantee/FD shall be renewed in the name of and kept alive by the “Monitoring Committee of the Corporate Debtor” till the Resolution Plan is fully implemented.”

“12.

The details of the Payment Schedule as per Form H are extracted below:

“24.

What would be the effect of suppression of earlier proceedings has been considered by this Court in S.P. Chengalvaraya Naidu [S.P. Chengalvaraya Naidu v. Jagannath, (1994) 1 SCC 1]. The Court observed thus : (SCC p. 5, paras 5-6)

“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 court-process 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 (Ext. 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. Non-production 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 Ext. 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 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.”

25.

Again in A.V. Papayya Sastry v. State of A.P. [A.V. Papayya Sastry v. State of A.P., (2007) 4 SCC 221] , this Court observed thus : (SCC pp. 231-32, paras 21-26)

“21.

Now, it is well-settled principle of law that if any judgment or order is obtained by fraud, it cannot be said to be a judgment or order in law. Before three centuries, Chief Justice Edward Coke proclaimed: ‘Fraud avoids all judicial acts, ecclesiastical or temporal.’

22.

It is thus settled proposition of law that a judgment, decree or order obtained by playing fraud on the court, tribunal or authority is a nullity and non est in the eye of the law. Such a judgment, decree or order—by the first court or by the final court—has to be treated as nullity by every court, superior or inferior. It can be challenged in any court, at any time, in appeal, revision, writ or even in collateral proceedings.

23.

In the leading case of Lazarus Estates Ltd. v. Beasley [Lazarus Estates Ltd. v. Beasley, (1956) 1 QB 702 : (1956) 2 WLR 502 : (1956) 1 All ER 341 (CA)] Lord Denning observed : (All ER p. 345 C) ‘… No judgment of a court, no order of a Minister, can be allowed to stand if it has been obtained by fraud.’

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.”

26.

As observed, there is an essential distinction between mistake and trickery. In the present case, it is sought to be argued on behalf of the respondent-plaintiffs that the averment in Para 15 of the plaint was with regard to a lis on the basis of the agreement. It is submitted that the earlier suit was not based on the agreement and as such, there was no suppression. We find the argument to be unsustainable. We are of the view that such a statement was made as a trickery so as to obtain the judgment by misleading the court.”

“33. Initiation of liquidation.—

…..

(3)

Where the resolution plan approved by the Adjudicating Authority under section 31 or under sub-section (1) of section 54L, is contravened by the concerned corporate debtor, any person other than the corporate debtor, whose interests are prejudicially affected by such contravention, may make an application to the Adjudicating Authority for a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1).”

“33. Initiation of liquidation.—

…..

(4)

On receipt of an application under sub-section (3), if the Adjudicating Authority determines that the corporate debtor has contravened the provisions of the resolution plan, it shall pass a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1).”