Delhi High Court: “Fraud Allegations Must Be Specific and Filed Within Limitation”; Sets Aside Trial Court Order and Rejects Suit Seeking to Nullify 2017 Decree as Time-Barred and Res Judicata

Court’s Decision

The Delhi High Court allowed the revision petition, setting aside the trial court’s order that had dismissed the petitioner’s application under Order VII Rule 11 CPC. The court rejected the respondents’ suit (CS No. 482/2019) that sought to declare a 2017 judgment null and void, holding that:

1. The suit was barred by limitation since the respondents had been aware of the alleged fraud since 2012 but only filed their suit in 2019.
2. The respondents failed to substantiate their allegations of fraud with specific pleadings, and the FSL report alone was insufficient evidence to establish forgery.
3. The principle of res judicata applied, as the respondents had already lost multiple legal challenges against the decree.
4. The judgment had attained finality, and the respondents could not reopen settled proceedings based on vague fraud allegations.

Accordingly, the revision petition was allowed, and the respondents’ suit was rejected.

Facts of the Case

The dispute stemmed from an Agreement to Sell dated 12.09.2011, where the petitioner entered into a contract with the respondents to purchase a property in Uttam Nagar, New Delhi.

• The petitioner initially paid Rs. 3.5 lakhs as earnest money and later paid an additional Rs. 4 lakhs, leading to a subsequent agreement dated 31.10.2011, where the respondents acknowledged a total payment of Rs. 7.51 lakhs.
• Since the property was in the name of the respondents’ mother, a sale deed was executed on 29.09.2011 in favor of the respondents to facilitate a bank loan.
• The petitioner took the loan and made payments via cheques, but the respondents allegedly demanded an additional Rs. 2.5 lakhs, leading to another agreement on 27.01.2012.
• However, the respondents failed to appear before the Sub-Registrar for the execution of the sale deed on 27.02.2012.
• Feeling defrauded, the petitioner lodged a police complaint (DD No. 34A, dated 06.03.2012), which later resulted in FIR No. 177/2013 under Sections 420/34 IPC.

Legal Proceedings

1. Criminal Case
   • During the investigation, the FSL report (27.11.2015 & 29.10.2017) allegedly revealed discrepancies in the respondents’ signatures.
   • Despite this, the Investigating Officer (IO) filed a closure report on 14.04.2018.
   • The petitioner filed a protest petition, and the Magistrate took cognizance under Sections 420/406 IPC.
2. Civil Suit for Specific Performance
   • In 2012, the petitioner filed CS (OS) No. 2751/2012 for specific performance of the agreements.
   • The respondents were served with summons on 13.12.2012, but failed to file a written statement within four years.
   • The case proceeded ex-parte, and the court passed a decree in favor of the petitioner on 15.11.2017, awarding a money decree of Rs. 12,70,100/- with 6% interest per annum.
   • The respondents challenged the decree through an Order IX Rule 13 CPC application, which was dismissed on 05.09.2018.
   • Their appeal (FAO No. 182/2019) was also dismissed in limine on 26.04.2019.
3. Respondents’ Suit for Declaration (2019)
   • In 2019, the respondents filed CS No. 482/2019, seeking to declare the judgment of 15.11.2017 null and void, claiming it was obtained by fraud.
   • The petitioner filed an application under Order VII Rule 11 CPC, arguing that the suit was barred by limitation and failed to disclose any cause of action.
   • The trial court dismissed the application, leading to this revision petition before the High Court.

Issues Before the Court

1. Whether the respondents’ suit seeking a declaration that the judgment was null and void was maintainable?
2. Whether the allegations of fraud were specific enough to warrant setting aside a final decree?
3. Whether the suit was barred by limitation?

Petitioner’s Arguments

• The trial court failed to consider that the FSL report was inconclusive, and its findings could not be used to challenge a civil decree.
• The respondents had knowledge of the agreements since 2012 but chose not to contest the case, leading to an ex-parte decree.
• The respondents’ application under Order IX Rule 13 CPC and FAO had already been dismissed, making the principle of res judicata applicable.
• The suit was barred by limitation under Article 123 of the Limitation Act, 1963, as the respondents delayed their challenge until 2019.

Respondents’ Arguments

• The suit was maintainable as fraud vitiates everything, and courts have inherent powers to set aside judgments obtained by fraud.
• The FSL report confirmed forgery, proving that the agreements were fabricated.
• Res judicata did not apply, as fraud overrides procedural finality.
• The limitation period should be calculated from the date of discovery of fraud in 2018, when the FSL report became part of the closure report.

Analysis of the Law

The court relied on precedents to assess the validity of fraud claims:

1. Indian Bank v. Satyam Fiber (1996) 5 SCC 550 – Courts have inherent power to set aside judgments obtained by fraud.
2. Ram Chander Singh v. Savitri Devi (2003) SC – If a decree is obtained by fraud, res judicata does not apply.
3. S. Gopal Reddy v. State of A.P. (1996) 4 SCC 596 – Expert opinions (FSL reports) are not substantive evidence.
4. State of Karnataka v. J. Jayalalitha (2017) 6 SCC 263 – Expert opinions require corroboration.
5. Jalapathi Reddy v. Baddam Pratapa Reddy (2019) 14 SCC 220 – Courts cannot rely solely on expert opinions.

Court’s Reasoning

1. The respondents failed to contest the case in time, despite being served with summons in 2012.
2. The decree was a money decree, not for specific performance, and the respondents never claimed that they did not receive the money.
3. The respondents failed to provide specific details of fraud, and the FSL report alone was insufficient.
4. The suit was time-barred, as the cause of action arose in 2012, but the suit was filed in 2019.

Conclusion

The trial court erred in dismissing the Order VII Rule 11 CPC application. Since the suit was barred by limitation and lacked specific averments of fraud, the Delhi High Court rejected the respondents’ suit and allowed the revision petition.

Implications of the Judgment

• Fraud allegations must be specific and substantiated with direct evidence, not just expert opinions.
• Courts will not entertain frivolous challenges to settled decrees, reinforcing judicial finality.
• Failure to contest a case in a timely manner will lead to irreversible legal consequences.
• Limitation periods will be strictly enforced, and claims cannot be revived years later under the guise of new discoveries.

This judgment upholds the importance of procedural discipline in litigation and ensures that parties cannot misuse fraud allegations to undo settled legal disputes.

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