1. The State of Uttar Pradesh – Intervener, has taken out this application seeking to be impleaded as party Respondent in Company Application No.346 of 2019 in Company Petition No.999 of 2020, whereby this Court had allowed the Respondent No.2 – secured creditor to sell the assets of the Respondent No.1 Company in liquidation in consultation with the Official Liquidator.

2. The application arises in the backdrop of the following facts :

2.1 M/s. Synthetics and Chemicals Ltd. (M/s. Synthetics) is the company incorporated under the Companies Act, 1956. At the instance of M/s. Synthetics, the State of Uttar Pradesh – Intervener, had acquired a large parcel of land admeasuring 1380.23 acres, situated at Bareilly – Uttar Pradesh (the subject land) for the purpose of setting up synthetics rubber factory, under Section 41 of the Land Acquisition Act, 1894.

2.2 The Intervener had entered into an agreement with M/s. Synthetics on 19 June 1960. The acquisition of the subject land was subject to the terms of the said agreement which, inter alia, provided for the use of the land by M/s. Synthetics and the rights of the Intervener, in case of default, including right of re-entry. A Deed of Transfer was also executed on 29 April 1961. The Intervener asserts, in exercise of the power conferred under Clause 3 (d) of the Agreement dated 19 June 1960 M/s. Synthetics was directed to transfer 100 acres land for the public purpose i.e. establishment of BSF battalion. Accordingly, possession of 100 acres of land came to be delivered to the Collector under Possession Deed dated 22 July 1982. Another parcel of land admeasuring 9.3746 H was acquired for development of National Highway No.24 – (Muradabad Bareilly Section).

2.3 The Intervener asserts, M/s. Synthetics had no right to create any mortgage over the subject land in favour of any bank or financial institution in accordance with the terms of the Agreement dated 19 June, 1960. The Intervener, however, came across a possession notice dated 29th March 2018 under Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act,) 2002, published on dated 4 April 2018, at the instance of secured creditor.

2.4 The Intervener, aggrieved by the possession notice under Section 13(4) of the SARFAESI Act, 2002 issued by the secured creditor, filed Securitisation Application (SA) No.150 of 2018 before the Debt Recovery Tribunal (DRT), Lucknow, for setting aside possession notice dated 29 March 2018. It was, inter alia, contended that no security interest was created in favour of the alleged secured creditor and the action was in gross violation of the provisions of the SARFAESI Act, and Security Interest Rules, 2002.

2.5 Upon the Intervener making further inquiries, it transpired that the instant Petition for winding up of M/s. Synthetics had been instituted. By an order dated 28 June 2018, this Court ordered M/s. Synthetics to be wound up and appointed the Official Liquidator, High Court as a Liquidator of M/s. Synthetics – Respondent No.1 with all powers under the Companies Act, 1956. An application was filed for impleading the Official Liquidator – High Court, Bombay, as a party Respondent in Securitisation Application No.150 of 2018 filed before the DRT, Lucknow.

2.6 The Intervener avers, on 11 March 2019, when SA No.150 of 2018 was listed before the DRT, a submission was made on behalf of Alchemist - the secured creditor, that the secured creditor was not proceeding under the provisions of SARFAESI Act, 2002 and, thus, there was no cause of action for SA No.150 of 2018 before the DRT.

2.7 In view of the said statement, the Intervener - the applicant in SA, did not press the SA, and, thus, the said SA No.150 of 2018 came to be disposed of.

2.8 Alleging that without disclosing the pendency of SA No.150 of 2018 and the interest of the Intervener in the subject land, the secured creditor had fraudulently moved Company Application (L) No.647 of 2018 seeking a direction that the Official Liquidator, attached to the High Court, be directed to take possession / control of all the assets of M/s. Synthetics ( in liqn.).

2.9 By an order dated 28 November 2018, this Court allowed the said Company Application (L) No.647 of 2018 and, by consent of the parties to the Company Petition, the sale notice issued by the Recovery Officer, DRT, was set aside and it was directed that the sale of the said property shall be conducted through the office of the Official Liquidator. However, the aid order dated 28 November 2018 was not brought to the notice of the DRT in SA No.150 of 2018.

2.10 After the disposal of SA No.150 of 2018, upon the statement made on behalf of the Secured creditor that it was not proceeding under the SARFAESI Act, 2002, the secured creditor, the Intervener alleges, again clandestinely preferred Company Application No.346 of 2019, inter alia, praying for the direction that the sale of the assets of the company in liquidation, including the subject property, be conducted under the SARFAESI Act, 2002 and the said order dated 28 November 2018 be modified in view of the decision of the secured creditor to proceed under the provisions of the SARFAESI Act, and, to that extent, discharge the Official Liquidator from his duties.

2.11 The Intervener alleges, the secured creditor deliberately did not implead the State of Uttar Pradesh as a party to the said Company Application, actively concealing the fact that the State of Uttar Pradesh had an interest in the subject land and had raised objection to the possession notice by filing SA No.150 of 2018 before the DRT, Lucknow and that on the portion of the subject land, there were defence installations and highway and that the State of Uttar Pradesh had withdrawn the SA on the basis of the statement made by the secured creditor that it would not proceed under SARFAESI Act.

2.12 Eventually, in Company Application No.346 of 2019, by an order dated 19 October 2020, this Court directed the Court Receiver, DRT, to handover possession of the subject land to the secured creditor, permitted the secured creditor to conduct the sale of the subject land in consultation with the Official Liquidator and deposit the sale proceeds with the Official Liquidator, within one week of receiving the same, with liberty to apply to the Company Court to pay over to it the share of the sale proceeds.

2.13 The Intervener alleges, the aforesaid order was obtained by the secured creditor by resorting to suppressio veri, which is equivalent to suggestio falsi. The said order prejudicially affects the interest of the Intervener. Therefore, the said order dated 19 October 2020 passed in Company Application No.346 of 2019 be recalled and /or modified.

3. The application was resisted by the secured creditor by filing an affidavit in reply. The application was stated to be wholly misconceived and also an abuse of process of law, as such an application is not maintainable in the proceeding i.e. CA 346 of 2019 which has already been disposed of. If the Intervener is aggrieved by the order dated 19 October 2020 whereby the said Company Application No.346 of 2019 came to be disposed, the Intervener ought to have challenged the said order in an appropriate proceeding. The tenability of the application was also questioned on the ground that the essential challenge being to the power of the secured creditor to realize the security, such challenge can only lay before the authorities constituted under the SARFAESI Act, 2002 as the jurisdiction of civil courts and tribunals has been ousted. In the same vein, it was contended the Company Court’s jurisdiction being limited, this Court may not entertain the instant application.

4. Contesting the claim of the Intervener that it is the owner of, or has an interest in, the subject property, the secured creditor asserted that pursuant to the agreement dated 19 June 1960 and Deed of Transfer dated 29 April 1961, M/s. Synthetics became the sole and absolute owner of the subject property. M/s. Synthetics was running a plant in the suit property till the year 2000, and for the said purpose, it had raised financial facilities from various financial institutions and banks and had, in the process, created security interest over the subject premises in the capacity of the owner thereof. Therefore, the contention of the Intervener that M/s. Synthetics could not have created security interest in the subject property is legally unsustainable.

5. The secured creditor also contested the claim of the Intervener that it could resort to the provisions contained in clause (3) of the Agreement dated 19 June 1960 and re-enter the suit property for the alleged breach of the terms of the said agreement.

6. On the core contention of the alleged fraud in obtaining the order dated 19 October 2020 to realize the security by sale of the assets of M/s. Synthetics ( in liqn.), including the subject land, the secured creditor contended that the statement was made before the DRT, Lucknow in SA No.150 of 2018, that it would not proceed under the SARFAESI Act before the lenders agreed in a JLM to sell the property under the agsis of SARFAESI Act, 2002. Thus, SA No.150 of 2018 was disposed of as withdrawn on 11 March 2019 in view of the then prevailing circumstances. However, the secured creditor asserts, the DRT Receiver failed to take steps and, therefore, the secured creditor was constrained to move Company Application (L) No.647 of 2018 and Company Application No.346 of 2019 as the creditors of the company ( in liqn. ), in the JLM meeting, decided to pursue their remedies under the SARFAESI Act.

7. The secured creditor contends, that it is entitled to enforce its security under the SARFAESI Act, untethered. Where the secured creditor decides to get out of the liquidation proceedings and realize the security interest by sale of the property of the borrower, a party, like the intervener, was neither a necessary nor a proper party. Therefore, the allegations of fraud on account of the alleged non-disclosure of the interest of State of Uttar Pradesh, non impleadment of the secured creditor as a party to Application No.346 of 2019 and non-disclosure of the proceedings in SA No.150 of 2018 and the outcome thereof, do not constitute any fraudulent act on the part of the secured creditor by any stretch of imagination.

8. The acquisition of the portion of the subject land for establishment of BSF Battalion and for broadening the National Highway, according to the secured creditor, does not confer right in the Intervener to restrain the secured creditor from enforcing security interest. The endeavour on the part of the Intervener was to further delay the sale of assets of the company in liquidation to discharge the debts of the company in liquidation, including that of the workers.

9. I have heard Mr. Anil Singh, learned Senior Advocate appearing for the Applicant – Intervener, Mr. Venkatesh Dhond, learned Senior Advocate appearing for the applicant - Secured Creditor, Ms. Khushboo Soni, for ICICI Bank, Mr. Dhiraj Chavan, for the Court Receiver and Mr. Shanay Shah, for the Official Liquidator. With the assistance of the learned Counsel for the parties, I have perused the relevant pleadings and the material on record.

10. Few facts are rather uncontroverted. At the instance of M/s. Synthetics, the State of Uttar Pradesh had acquired the subject land under Section 41 of the Land Acquisition Act. An Agreement dated 19 June 1960, thus, came to be executed between the Governor of Uttar Pradesh and M/s. Synthetics. Upon acquisition, the company in liquidation was to establish synthetic rubber factory at the said site which was likely to prove useful to the public. It is incontestable that M/s. Synthetics was a running concern, at least till the year 2000. Out of 1380 acres of land, indisputably portions of land were acquired for BSF Battalion and broadening of National Highways. It seems, the company suffered financial doldrums and instant Company Petition No.999 of 2000 came to be instituted and admitted by an order dated 26 March 2018. Eventually, the company Petition came to be allowed vide order dated 28 June 2018 and the Official Liquidator, High Court, Bombay, came to be appointed as the Liquidator of M/s. Synthetics.

11. In the meanwhile, ICICI Bank claiming to be the secured creditor, had instituted a suit being Suit No.3821 of 1999 for recovery. Initially, the Court Receiver came to be appointed in respect of the properties of M/s. Synthetics. Upon transfer of the suit to DRT, pursuant to an order dated 26 April 2017, DRT appointed its Receiver in place of High Court Receiver.

12. The secured creditor, in the intervening period, purportedly moved under the SARFAESI Act, and issued the possession notice under Section 13(4) of the SARFAESI Act, 2002. Undisputedly, consequent to the said notice, the Intervener moved SA No.150 of 2018 before the DRT, Lucknow, to assail action initiated by the secured creditor under the SARFAESI Act. As noted above, pursuant to the statement made on behalf of the secured creditor, the said SA No.150 of 2018 came to be disposed of.

13. The controversy surrounds around the application preferred by the secured creditor seeking to replace the Receiver, DRT, quash the sale notice issued by the DRT and permit the sale of the company’s assets through the Official Liquidator and the order thereon dated 18 November 2018 and the subsequent order dated 10 October 2020 in Company Application No.346 of 2019, whereby the Recovery Officer, DRT, was directed to hand over possession of the Bareilly property within 8 weeks with permission to secured creditor to conduct sale of the properties at Bareilly, U.P.

14. Whether those orders, especially the latter one, are obtained by fraud, is the pivotal question

15. Mr. Singh, learned Senior Advocate for the Intervener urged with a degree of vehemence that the sequence of events and the perusal of the record indicate that the secured creditor had obtained the aforesaid orders by resorting to fraudulent practices. Mr. Singh submitted that the secured creditor suppressed the facts and proceedings before the DRT, Lucknow, as well as before this Court, which at the given point of time, were inconvenient and could have proved difficult in obtaining the reliefs which the secured creditor surreptitiously obtained.

16. Mr. Singh would urge that the secured creditor practiced fraud at three stages. Firstly, despite being a party to SA No.150 of 2018 and having filed reply therein in the month of August 2018, when the secured creditor filed Company Application (L) No.647 of 2018 on 24 November 2018, the secured creditor did not disclose, (i) the pendency of the Intervener’s SA No.150 of 2018 before the DRT, Lucknow, (ii) interest of the Intervener in the subject lands and (iii) that certain portions of the said land were acquired by and in possession of the defence installations and highways authority. Mr. Singh would urge that though the secured creditor had referred to the possession notice under Section 13(4) of the SARFAESI Act, dated 29 March 2018, yet it deliberately suppressed the subsequent developments with regard to the said notice in the form of challenge thereto in SA No.150 of 2018.

17. Mr. Singh would urge that it was incumbent upon the secured creditor to implead the Intervener – State of Uttar Pradesh as party Respondent in Company Application (L) No.647 of 2018 in which, eventually, by consent of the parties, the DRT Receiver’s sale notice was set aside and the sale of the assets of the company was permitted to be carried out by the Official Liquidator by an order dated 28 November 2018.

18. The second count of fraud, according to Mr. Singh, was in the suppression of the aforesaid order dated 28 November 2018 whereby, with the consent of the parties, the subject lands were permitted to be sold through the Official Liquidator, before the DRT Lucknow on 11 March 2019, when a statement was made that the secured creditor did not wish to proceed under the SARFAESI Act. This statement on behalf of the Secured Creditor, Mr. Singh urged, made the Intervener to not press SA No.150 of 2018. Had the Intervener been made aware of the developments in the instant Petition, especially the order dated 28 November 2018, the Intervener would have assessed its position before withdrawing SA No.150 of 2018. The third act of fraud, on which a particular emphasis was laid by Mr. Singh, was that after having made a statement that the secured creditor would not proceed under the SARFAESI Act, and thereby induced the Intervener to withdraw the challenge to an action under the SARFAESI Act, the secured creditor clandestinely moved this Court with Company Application No.348 of 2019 seeking modification of the order dated 28 November 2018 and sought further directions for sale of the assets of the company (in liquidation), including the subject property, invoking the provisions of the SARFAESI Act. Mr. Singh would urge, in this application, the secured creditor deliberately suppressed the proceedings before the DRT, Lucknow in SA No.150 of 2018 and the withdrawal thereof in view of the statement on behalf of the secured creditor and the existence of defence installations and highway in portions of the subject land. All these events were actuated by a design to obtain favourable orders, submitted Mr. Singh.

19. Mr. Singh would urge that such suppression of vital facts constitutes an egregious fraud. Reliance was placed on the decisions of the Supreme Court in the case of Bhaskar Laxman Jadhav and Ors. V/s. Karmveer Kakasaheb Wagh Education Societyand Ors. (2013) 11 SCC 531 , [LQ/SC/2012/1105] A.V.Papayya Sastry and Ors. V/s. Govt. of A.P. and Ors. (2007) 4 SCC 221 , [LQ/SC/2007/301] Meghmala and Ors. V/s. Narasimha Reddy and Ors. (2010) 8 SCC 383 , [LQ/SC/2010/847] and Hamza Haji V/s. State of Kerala and Anr. (2006) 7 SCC 416 , [LQ/SC/2006/727 ;] and The State of Maharashtra and Adarsh Water Parks and Resorts Pvt. Ltd. V/s. Abdul Rashid Abdul Rehman Yusuf and Ors. IA 1575 of 2022.

20. Mr. Dhond, learned Senior Advocate for the secured creditor, stoutly countered the submissions on behalf of the Intervener. First and foremost, Mr. Dhond would urge, the instant application does not deserve to be entertained as it has been filed in a disposed of proceeding. If at all the State of Uttar Pradesh is aggrieved by order dated 19 October 2020, it was incumbent upon the Intervener to assail the legality of the said order in an appropriate proceeding. It was further submitted that in the instant application, the Intervener does not seek restoration of Company Application No.346 of 2019. In the absence of such prayer, the instant application does not deserve to be entertained.

21. Mr. Dhond made an endeavour to draw home the point that the Intervener has, otherwise, no interest in the subject property. Contesting the claim of the Intervener that it is the owner of the said property or that the title of the subject property had not vested in the company ( in liqn.), Mr. Dhond would urge that the Deed of Transfer clearly indicates that the subject property absolutely vested in the company ( in liqn.) and the Intervener had no subsisting title thereto. Therefore, the submission on behalf of the applicant that the company ( in liqn. ) could not have mortgaged the said land and created the security interest thereon, does not merit acceptance.

22. Thirdly, Mr. Dhond would urge, the Intervener despite having asserted title over the subject property had never taken any steps to repossess the subject property. Nor the Intervener had lodged any claim with the Official Liquidator. Fourthly, Mr. Dhond would urge, the Intervener has not assailed any of the orders passed by this Court in the suit instituted for recovery of money or in the Company Application. Without assailing those orders in the manner known to law, the Intervener cannot be permitted to seek recall or modification of the order dated 19 August 2020.

23. Mr. Dhond made a strenuous effort to demonstrate that the secured creditor had not committed any fraud. It was submitted that the Intervener was neither a necessary nor a proper party to the application made before the company court. The alleged suppression of facts and proceedings before the Company Court, before the DRT, Lucknow, and the facts and proceeding in SA No.150 of 2018, in Company Application No.346 of 2019, were, according to Mr. Dhond, imaginary and against the weight of the record. Mr. Dhond would urge that when the statement was made before the DRT, Lucknow, the lenders of the company in liquidation had not resolved to pursue their remedies under the SARFAESI Act, and, therefore, at that stage the statement was made on behalf of the secured creditor that it did not wish to proceed under the SARFAESI Act. Therefore, the contention that the suppression of the said proceeding before this Court constitutes fraud, is wholly untenable.

24. Placing reliance on Section 13(9) of SARFAESI Act, Mr. Dhond submitted that it is well recognized that where the company is wound up, the secured creditor could opt to realize its security instead of proving its claim under the winding up. It was pursuant to the decision taken in the joint lenders meeting on 18 June 2018, the secured creditor preferred Company Application No.346 of 2019. Mr. Dhond would urge, the acts and omissions on the part of the Receiver, DRT, which were prejudicial to the interest of the secured creditor, forced the lenders to take a decision to realise the security standing outside the winding up process/mechanism. Such a decision, which the secured creditor is authorised by law, cannot said to be a fraudulent act.

25. Mr. Dhond further submitted that the Official Liquidator who represented the company in liquidation was very much a party before the DRT, Lucknow as well as before this Court. Therefore, it cannot be said that there was a deliberate suppression of facts. Non-impleadment of Intervener as party Respondent, according to Mr. Dhond, was of no consequence as the applicant is neither necessary nor a proper party and the Intervener has its remedies under the provisions of SARFAESI Act.

26. Lastly, it was submitted that whenever the secured creditor proceeds under the SARFAESI Act, the Intervener would have opportunities to assail the said action before the tribunal under the SARFAESI Act. Therefore, no case is made out either to allow the Intervention or to recall the order dated 19 October 2020, submitted Mr. Dhond.

27. I have given anxious consideration to the rival submissions canvassed across the bar. The uncontroverted facts have been noted above.

28. At the outset, it must be noted that the question as to whether the State of Uttar Pradesh still has subsisting interest in the subject property, or ownership still vests in the State of Uttar Pradesh, is a matter which cannot be delved into and adjudicated in this proceeding. The submissions canvased on behalf of both the parties, placing reliance on the recitals in the Agreement dated 19 June 1960 and the Deed of Transfer dated 29 April 1961, therefore, do not deserve elaborate consideration. Whether the applicant – State of Uttar Pradesh had the right to take back the possession of the subject property for the alleged breach of the terms of the Agreement and Deed of Transfer and whether its right of re-entry was perfected, are the issues which require determination in an appropriate proceeding before an appropriate forum.

29. In my view, in the instant application, the only question that warrants determination is whether the orders, referred above, especially the order dated 19 October 2020 was obtained by fraud or misrepresentation of such magnitude as to erode their sanctity. Before exploring an answer, in the backdrop to the facts, it may be apposite to note the nature and connotation of fraud in a judicial proceeding. Any conduct which is actuated by the design to obtain an unfair advantage over the other side and is based on falsehood is firmly deprecated by the courts.

30. A useful reference in this context can be made to the judgment of the Supreme Court in the case of S.P.Chengalvaraya Naidu V/s. Jagannath (1994) 1 SCC 1 [LQ/SC/1993/933] wherein the vitiating effect of fraud was tersely put in the opening para of the Judgment :

“1. Fraud avoids all judicial acts, ecclesiastical or temporal” observed Chief Justice Edward Coke of England about three centuries ago. It is the settled proposition of law that a judgment or decree obtained by playing fraud on the court is a nullity and non est in the eyes of law. Such a judgment/decree by the first court or by the highest court has to be treated as a nullity by every court, whether superior or inferior. It can be challenged in any court even in collateral proceedings."

31. In the case of Meghmala and Ors. (supra), the Supreme Court referred to a large body of precedents and observed that it is a settled position of law that where the applicant gets an order/office by making misrepresentation or by playing fraud upon the competent authority, such order cannot be sustained in the eye of law. The observations in paragraphs 34 and 36 are material and, hence, extracted below :

“34. An act of fraud on court is always viewed seriously. A collusion or conspiracy with a view to deprive the rights of the others in relation to a property would render the transaction void ab initio. Fraud and deception are synonymous. Although in a given case a deception may not amount to fraud, fraud is anathema to all equitable principles and any affair tainted with fraud cannot be perpetuated or saved by the application of any equitable doctrine including res judicata. 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. (Vide S.P. Changalvaraya Naidu (supra); Gowrishankar & Anr. Vs. Joshi Amba Shankar Family Trust & Ors. AIR 1996 SC 2202 [LQ/SC/1996/460] ; Ram Chandra Singh Vs. Savitri Devi & Ors. (2003) 8 SCC 319 [LQ/SC/2003/1017] ; Roshan Deen Vs. Preeti Lal AIR 2002 SC 33 [LQ/SC/2001/2515] ; Ram Preeti Yadav Vs. U.P. Board of High School & Intermediate Education AIR 2003 SC 4628; and Ashok Leyland Ltd. Vs. State of Tamil Nadu & Anr. AIR 2004 SC 2836 [LQ/SC/2004/30 ;] ).

……

36.From the above, it is evident that even in judicial proceedings, once a fraud is proved, all advantages gained by playing fraud can be taken away. In such an eventuality the questions of non-executing of the statutory remedies or statutory bars like doctrine of res judicata are not attracted. Suppression of any material fact/document amounts to a fraud on the court. Every court has an inherent power to recall its own order obtained by fraud as the order so obtained is non est.”

32. In the backdrop of the aforesaid enunciation of law, the submission of Mr. Dhond that the Intervener cannot seek the reliefs by virtue of instant application in a disposed of proceeding cannot be acceded to unreservedly. If the element of fraud or misrepresentation in obtaining order dated 19 October 2020 in Company Application No.346 of 2019 is made out to the satisfaction of the Court, the technical objection as to the maintainability of an application in a disposed of proceeding does not commend itself. It is well neigh settled that fraud vitiates everything. A decree or order obtained by fraud is non-est in the eye of law. The nullity of such decree or order obtained by fraud can be agitated in any proceeding and at any stage, despite finality having been attached to the proceeding. The issues of locus and procedural challenges, thus, stand relegated to a secondary stage and do not preclude the Court from examining the allegations of fraud and also making a declaration to that effect striping the order of all its cloak of legality and sanctity, provided clear case of fraud is made out.

33. What constitutes fraud in judicial proceeding and the consequences the fraud entails were illuminatingly postulated by the Supreme Court in the case of A.V.Papayya Sastry and Ors. (supra), on which reliance was placed by Mr. Singh, in the following words :

“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 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/s. Beasley, (1956) 1 ALL ER 341, Lord Denning observed :

“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 as ‘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 principal of ‘finality of litigation’ cannot be stretched to the extent of an absurdity that it can be utilized as an engine of oppression by dishonest and fraudulent litigants.”

34. On the aforesaid anvil, reverting to the facts of the case, it is incontrovertible that SA No.150 of 2018 was withdrawn by the State of Uttar Pradesh upon a statement having been made on behalf of the secured creditor that it was not proceeding under the provisions of the SARFAESI Act, and, thus, there was no cause of action. In the said application, the State of Uttar Pradesh had, inter alia, sought quashing of the notice dated 29 March 2018 issued by the secured creditor under Section 13 of the SARFAESI Act, and the consequential action /proceeding initiated by the secured creditor under the said Act.

35. Evidently, the State of Uttar Pradesh was made to alter its position by withdrawing the challenge to the action and the measures initiated under the SARFAESI Act, in view of the said statement. On that day i.e. 11 March 2019 when the said SA No.150 of 2018 was disposed as not pressed by the State of Uttar Pradesh, the secured creditor had already obtained an order in Company Application (L) No.647 of 2018, albeit by consent of the parties, that the sale notice issued by the Recovery Officer, DRT, be set aside and the sale of the subject property be conducted through the Office of the Official Liquidator.

36. Indisputably, the said facts were not brought to the notice of DRT, Lucknow. The submission of Mr.Dhond that the Official Liquidator was very much a party before the DRT, Lucknow, and, therefore, was aware of the developments in the intervening period, especially the order dated 28 November 2018 may carry some substance. However, the subsequent developments and the non-disclosure do not appear to be innocuous.

37. In Company Application No.346 of 2019, the Secured Creditor, inter alia, prayed that the decision of the secured creditors taken in the JLM held on 18 June 2019 be taken on record and pursuant thereto, the sale of the assets of the company in liquidation be conducted under the provisions of the SARFAESI Act and the order dated 28 November 2018 may be modified and to that extent, the Official Liquidator be discharged from his duties and the Receiver, DRT be also discharged from his duties. This application was preferred in the month of July 2019. The averments in this application, rather the omissions therein, are of material significance.

38. The secured creditor referred to the fact that the possession notice under Section 13(4) of the SARFAESI Act, was issued on 29 March 2018 and symbolic possession was taken. However, the fact that the State of Uttar Pradesh had assailed the said action under the SARFAESI Act, by preferring the SA No.150 of 2018 before the DRT, Lucknow, and the said application came to be disposed of as not pressed, upon the statement being made on behalf of the secured creditor that it did not wish to proceed under the SARFAESI Act, were conspicuous by their absence, though, the secured creditor adverted to the facts, which transpired, since the institution of Suit No.3821 of 1999 by ICICI Bank and the appointment of the Court Receiver in the year 2002. The Secured Creditor asserted that as it had lost faith in the functioning of the Receiver appointed by the DRT and the Court had by an order dated 28 November 2018 permitted that the sale be conducted through the Official Liquidator, the secured creditor decided to sell the secured assets under the provisions of the SARFAESI Act.

39. Mr. Dhond submitted that the secured creditor is entitled in law to stand outside the winding up proceeding and enforce its security. There can be no quarrel with this proposition about the right of the secured creditor to opt out of the liquidation proceeding and realize its security. The provisions contained in Sections 529 and 529A of the Companies Act, 1956 are abundantly clear.

40. A useful reference in this context can be made to a three Judge Bench judgment of the Supreme Court in the case of Jitendra Nath Singh V/s. Official Liquidator and Ors. (2013) 1 SCC 462 [LQ/SC/2012/834] wherein the Supreme Court expounded the import of the provisions contained in Section 529 and 529A of the Companies Act, 1956. The Supreme Court culled out the propositions in paragraph No.16 as under :

“16. Our conclusions on interpretation of the provisions of Sections 529 and 529A of the Companies Act, therefore, are:

16.1 A secured creditor has only a charge over a particular property or asset of the company. The secured creditor has the option to either realize his security or relinquish his security. If the secured creditor relinquishes his security, like any other unsecured creditor, he is entitled to prove the debt due to him and receive dividends out of the assets of the company in the winding up proceedings. If the secured creditor opts to realize his security, he is entitled to realize his security in a proceeding other than the winding up proceeding but has to pay to the liquidator the costs of preservation of the security till he realizes the security.

16.2 Over the security of every secured creditor, a statutory charge has been created in the first limb of the proviso to clause (c) of sub- section (1) of Section 529 of the Companies Act in favour of the workmen in respect of their dues from the company and this charge is pari passu with that of the secured creditor and is to the extent of the workmen’s portion in relation to the security of any secured creditor of the company as stated in clause (c) of sub- section (3) of Section 529 of the Companies Act.

16.3 Where a secured creditor opts to realize the security then so much of the debt due to such secured creditor as could not be realized by him by virtue of the statutory charge created in favour of the workmen shall to the extent indicated in clause (c) of the proviso to sub-section (1) of Section 529 of the Companies Act rank pari passu with the workmen’s dues for the purposes of Section 529A of the Companies Act.

16.4 The workmen’s dues and where the secured creditor opts to realize his security, the debt to the secured creditor to the extent it ranks pari passu with the workmen’s dues under clause (c) of the proviso to sub-section (1) of Section 529 of the Companies Act shall be paid in priority over all other dues of the company.”

(emphasis supplied)

41. There can be no duality of opinion about the rights of the secured creditor to enforce his security. The question that merits consideration in this application is, whether the secured creditor obtained the order for sale of the subject property by suppressing the fact that when it had initially proceeded to realize the security under the SARFAESI Act, the actions were challenged by the State of Uttar Pradesh and it had given up that course at that point of time.

42. Though, it bears repetition, the chronology of events needs to be noted. The possession notice under Section 13(4) of the Act, 2002 was issued by the secured creditor on 29 March 2018. In the month of May 2018, the State of Uttar Pradesh filed SA No.150 of 2018 before the DRT, Lucknow, assailing the said action. On 28 June 2018, in Company Petition No.999 of 2000, this Court ordered winding up of the company and appointed the Official Liquidator. In the month of August 2018, the secured creditor filed reply in SA No.150 of 2018. Without adverting to the proceedings in SA No.150 of 2018, the secured creditor initially filed Company Application (L) No.647 of 2018 challenging the sale notice by the Receiver, DRT and seeking direction to the Official Liquidator to take possession / take control of all the assets of the company in liquidation. On 28 November 2018, by consent of the parties, the sale notice issued by the Receiver, DRT was set aside and the sale of the assets of the company was ordered through the Official Liquidator. The Official Liquidator took possession of the subject property on 4 January 2019. On 11 March 2019, the State of Uttar Pradesh is made to believe that the secured creditor would not proceed under the SARFAESI Act, and withdraw SA No.150 of 2018. In the month of July 2019, the secured creditor again moved this Court in Company Application No.346 of 2019 seeking modification of the order dated 28 November 2018, so as to allow the secured creditor to proceed under the provisions of the SARFAESI Act. On 19 October 2020, this Court allowed the prayers in the said application and directed the Receiver, DRT to handover possession of the properties, including the subject properties to the secured creditor, with liberty to the secured creditor to conduct the sale in consultation with the Official Liquidator.

43. In the said application Company Application No.346 of 2019, there was no reference whatsoever to the proceeding in SA No.150 of 2018, the stand of the State of Uttar Pradesh therein; of which the secured creditor was fully aware of, the fact that the secured creditor had made the statement that it would not proceed under the SARFAESI Act, and, thereupon, the said SA No.150 of 2018 was disposed of.

44. I find it difficult to accede to the submission that it was not incumbent upon the secured creditor to disclose the aforesaid proceeding and the developments therein. It is trite, it is not suppression of every fact which attaches a taint of fraud to the party which has obtained an order from the Court or tribunal. The fact suppressed ought to be of such a nature that, had the Court or Tribunal been aware of the said fact, it would have influenced a particular decision of the Court or Tribunal. However, it is not for a party to decide on its own as to what constitutes material facts and withhold the facts which it considered immaterial. The party is enjoined to place all the facts before the Court.

45. The nature of duty of disclosure was expounded by the Supreme Court in the case of Bhaskar Laxman Jadhav and Ors. (supra), in the context of a submission that the Petitioners therein were guilty of suppression of facts, especially the rejection of an earlier application for extension of time, and a counter thereto on the premise that the fact which was allegedly suppressed was not material in view of subsequent developments. The Supreme Court observed, inter alia, as under :

“44. It is not for a litigant to decide what fact is material for adjudicating a case and what is not material. It is the obligation of a litigant to disclose all the facts of a case and leave the decision-making to the court. True, there is a mention of the order dated 2-5-2003 in the order dated 24 July 2006 passed by the JCC, but that is not enough disclosure. The petitioners have not clearly disclosed the facts and circumstances in which the order dated 2-5-2003 was passed or that it has attained finality.

………

47. A mere reference to the order dated 2-5-2003, en passant, in the order dated 24-07-2006 does not serve the requirement of disclosure. It is not for the court to look into every word of the pleadings, documents and annexures to fish out a fact. It is for the litigant to come upfront and clean with all material facts and then, on the basis of the submissions made by the learned Counsel, leave it to the court to determine whether or not a particular fact is relevant for arriving at a decision. Unfortunately, the petitioners have not done this and must suffer the consequence thereof.” (emphasis supplied)

46. It would be contextually relevant to note the observations of the Supreme Court in the case of Dalip Singh V/s. State of Uttar Pradesh and Ors. (2010) 2 SCC 114 [LQ/SC/2009/2098] where the erosion in the value of making a full fledged disclosure, even of an inconvenient fact, was traced in a historical perspective. The observations in paragraphs 1 and 2 read as under :

“1.For many centuries, Indian society cherished two basic values of life i.e., `Satya' (truth) and `Ahimsa' (non-violence). Mahavir, Gautam Buddha and Mahatma Gandhi guided the people to ingrain these values in their daily life. Truth constituted an integral part of justice delivery system which was in vogue in pre-independence era and the people used to feel proud to tell truth in the courts irrespective of the consequences. However, post-independence period has seen drastic changes in our value system. The materialism has over-shadowed the old ethos and the quest for personal gain has become so intense that those involved in litigation do not hesitate to take shelter of falsehood, misrepresentation and suppression of facts in the court proceedings.

2. In last 40 years, a new creed of litigants has cropped up. Those who belong to this creed do not have any respect for truth. They shamelessly resort to falsehood and unethical means for achieving their goals. In order to meet the challenge posed by this new creed of litigants, the courts have, from time to time, evolved new rules and it is now well established that a litigant, who attempts to pollute the stream of justice or who touches the pure fountain of justice with tainted hands, is not entitled to any relief, interim or final.”

(emphasis supplied )

47. In the case of S.P.Chengalvaraya Naidu V/s. Jagannath (supra), the Supreme Court, inter alia, observed that, 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 an advantage on the other side then he would be guilty of playing fraud on the court as well as the opposite party.

48. The legal position has, thus, crystalized to the effect that the suppression of a material fact or document stands on an equal degree of deviousness as a positive misrepresentation. Suppression of any material fact/document which a party owes a duty to disclose to the court, constitutes a fraud.

49. The aforesaid being the position in law, the non-disclosure of the proceedings in SA No.150 of 2018, especially the stand of the secured creditor therein, cannot be said to be immaterial or inconsequential. The reason is not far to seek.

50. The State of Uttar Pradesh was made to believe that a state of affairs exists. The State of Uttar Pradesh altered its position on the basis of the stand taken by the secured creditor. Having made the State of Uttar Pradesh to alter its position and, obtained the orders of sale through the Official Liquidator, the secured creditor could not have again sought assistance of this Court in again proceeding under the SARFAESI Act without disclosing the facts which transpired in SA No.150 of 2018. In the process, the secured creditor got rid of the Receiver, DRT with a direction to the latter to deliver the possession of the assets of the company in liquidation, including the subject property.

51. The submission on behalf of the secured creditor that the State of Uttar Pradesh has to work out its remedies under the provisions of the SARFAESI Act, and cannot invoke the limited jurisdiction of the Company Court, loses sight of the fact that the State of Uttar Pradesh did resort to the remedies under the SARFAESI Act at the first possible opportunity when the possession notice under Section 13(4) of the SARFAESI Act, was published in the newspaper on 4 April 2018. The State of Uttar Pradesh was made to believe that the secured creditor would not pursue its remedies under the SARFAESI Act. It would be wholly unjust and iniquitous to urge that the State of Uttar Pradesh must again resort to the proceedings before the Tribunal, in the event the secured creditor initiates measures to sell the subject property.

52. The conspectus of aforesaid consideration is that the secured creditor has obtained the order dated 19 October 2020 by non-disclosure of material facts. The Intervener was made to believe in a state of affairs, which the secured creditor professed to alter under few months. In a sense, the State of Uttar Pradesh was deprived of the opportunity to seek adjudication of the rights it asserts and test the legality and validity of the action initiated by the secured creditor under the provisions of the SARFAESI Act.

53. The relative merits of the case of the Intervener, in my view, are not required to be delved into, at this stage. Intervener may or may not succeed in either establishing its claim over the subject property or assailing the legality of the action of the secured creditor. That is besides the point. The Intervener, therefore, deserves an opportunity to agitate its grievance. The aforesaid course of providing an opportunity of hearing to the Intervener would not cause any prejudice to the rights of the parties to the above Petition, including the secured creditor. I am, therefore, inclined to allow the application.

54. Hence, the following order :

ORDER

(i) The application stands partly allowed.

(ii) The order dated 19 October 2020 passed in Company Application No.346 of 2019 stands recalled.

(iii) Company Application No.346 of 2019 stands restored to file.

(iv) The Applicant – Intervener be impleaded as party Respondent in Company Application No.346 of 2019.

(v) Necessary amendment be carried out within a week’s time.

(vi) The Intervener – newly added Respondent shall file Affidavit in Reply to the Company Application No.346 of 2019 within a period of three weeks.

(vii) In the event the secured creditor has obtained possession of the subject property, it shall maintain status quo, subject to further orders to be passed in Company Application No.346 of 2019.

(viii) In the circumstances of the case, there shall be no order as to costs.