1996 (2) TMI 536 - SC - Indian Laws

Summary

Issues Involved:
1. Whether the trustees committed fraud by not disclosing the highest offer to the Court.
2. Whether the appellants' offer was bona fide.
3. Whether the purchasers were bona fide purchasers without notice of the appellants' offer.

Summary:

Issue 1: Fraud by Trustees
The trustees, while seeking permission to sell the property, did not disclose the appellants' offer of Rs. 14,20,000/- made on January 23, 1990. This non-disclosure led the Single Judge to conclude that the trustees had committed fraud upon the Court. The trustees' application to the Court falsely stated that the highest offer received was Rs. 9,00,000/- and that it would be difficult to secure higher offers. The Supreme Court found this assertion to be patently incorrect and untrue, indicating that the trustees had indeed practised fraud upon the Court.

Issue 2: Bona Fides of Appellants' Offer
The Division Bench held that the appellants' offer was not bona fide, relying on uncontroverted statements made by the trustees in their counter affidavit. However, the Supreme Court found this approach to be patently wrong. The trustees' claim that the appellants were not serious about their offer was unsupported by any contemporaneous record or material evidence. The Supreme Court concluded that the appellants' offer was bona fide and that the trustees' failure to disclose it was unjustified.

Issue 3: Bona Fides of Purchasers
The Division Bench concluded that the purchasers had bona fide purchased the property for value without notice of the appellants' offer. However, the Supreme Court held that since the permission to sell the property was obtained by fraud, the bona fides of the purchasers were immaterial. The Supreme Court emphasized that a judgment or decree obtained by fraud is a nullity and can be challenged in any court, even in collateral proceedings.

Conclusion:
The Supreme Court allowed the appeal, set aside the impugned order, and remitted the matter to the Division Bench of the High Court to call for fresh offers from both the appellants and the purchasers. The new offers should not be less than Rs. 19,40,000/-, and the property should be sold at the highest offer received. The appellants were awarded costs of Rs. 10,000/- from the trustees.