INTRODUCTION
The Indian Contract Act of
1872,
which is the most important piece of legislation controlling Indian contract
law, established the law governing contracts in India. The Act is based on the
ideas of English common law. A false claim, active concealment, vow without the
purpose to carry it out, any other deceptive act, or any act ruled fraudulent
are all listed in Section 17 as activities that constitute fraud. Any of the following
conduct undertaken by a constricting party, his collusion, or his agent to
deceive or persuade another party or his agent to agree is considered fraud. A
decree is a plant that has been obtained through deception, and the operation
has moved in a delinquent manner. The court possesses the necessary authority
to give relief in such a case, and res judicata rules would not apply. Indeed,
innocent misrepresentation may be grounds for a claim of fraud relief. A
contract that is voidable under Section 19 is reached by deceit. Even yet,
even silence is enough to establish that deception has occurred. If the court
is willing to "verify" substantiation, it means the information has
been disclosed. The defendant's wicked or felonious purpose can be proven based
on the evidence and circumstances of the case. The punishment for fraud is non-compoundable
because it includes both a fine and imprisonment. Online fraud has increased as
technology has advanced, and committing fraud has recently become a serious
crime in the eyes of the law. However, if the agreement was obtained or forced
by compulsion, there was undue influence or fraud.
FRAUD
"Any of the following
activities undertaken by a contracting party, his connivance, or his agent to
trick or persuade another party, or his agent, to join into the agreement are
considered fraud."
Someone who knows or believes a fact deliberately caches
it. There was a promise made with no intention of keeping it. Any other
behavior that is intended to deceive. Any act or omission that the law has
expressly labeled fraudulent. Confidentiality on material likely to influence a
person's desire to enter into a contract isn't fraud unless the conditions of
the case are comparable enough that it's the person remaining silent's job to
speak, or unless his silence is unique to speaking. To be regarded fraudulent,
the contractual party, or any other individual with whom he colluded, or his
agent, must have subjected him to similar conditioning to persuade him to enter
the agreement. The parties have no obligation to communicate about data that
could affect the other party's agreement to the contract, and merely remaining
silent does not constitute fraud unless the circumstances of the case produce a duty
to speak or silence similar to speech.
DIFFERENCE BETWEEN
FRAUD AND MISREPRESENTATION
The
crucial distinction between fraud and misrepresentation is that in the first case, the
person making the suggestion doesn’t believe it's true, whereas in the
alternate case, he believes it's true, even though in both cases, the pledge is
misled by a misrepresentation of the verity. Rattan Lal Ahluwalia v. Jai Janider Parshad was the case. Under
common law, fraud not only makes the contract voidable at the discretion of the
person whose assent was attained by deception, but it also gives rise to a
claim for damages for deception.
CONSTITUENTS OF FRAUD?
The Constituents of Fraud are as follows:
ACTIVE CONCEALMENT
When one party declines to disclose material contract
information despite having a legal obligation to do so, this is known as active
concealment. It necessitates more than ineffective concealing; it necessitates
a deliberate act of concealment. It's vital to note that the previously
described unresistant caching relates to silence. While bare silence does not
constitute fraud, it may do so when the person should communicate or when silence is
equal to speech, according to the provision.
PROMISE WITHOUT INTENTION OF EXECUTING IT
Pledging
without intending to keep it's considered fraud. To fall under this section, it
must be demonstrated that the pledge had no intention of carrying out the
pledge at the time it was made, and any after conduct or representation isn't
taken into account.
ESTABLISHING
FACTS WITHOUT BEING CONVINCED OF THEIR ACCURACY
To
prove that a claim was made with the knowledge of the person making it, it must
be shown that the statements were untrue. The assertion must be false in both
substance and fact. In Jewson & Sons
Ltd v. Arcos Ltd, giving a deceptive print and urging someone to act on it
constituted fraud, even if each verity was physically true.
RECKLESS
AND AMBIGUOUS STATEMENTS
Whether
the representation is made recklessly or intentionally, evidence of the absence
of factual and honest belief is all that is required to establish the reality
of fraud; inquisitiveness or recklessness on the part of the represented as to
the verity or falsity of the representation only serves to illustrate the lack
of similar belief. When a statement is ambiguous, the person to whom it is made
must prove that he misinterpreted it. If the representative meant the statement
to be understood that way, rather than if he truly feels it is accurate but the
person relying on it does not, he will be accused of fraud.
WHEN IS SILENCE
CONSIDERED AS A FRAUD?
The duty to communicate
occurs when one party places their trust and confidence in the other and the
other party accepts that trust. The duty to communicate may also apply in the
context of a contract, where one party lacks the resources to investigate the
truth and must rely on the information provided by the other. Silence can be
used as a cover for words in some situations. A person is inversely liable for
fraud if he or she maintains silent despite knowing that their silence is
dishonest. Although a statement may be true at the time it is uttered, it may
become incorrect when it is acted upon by the other person owing to a change in
circumstances. Whenever a person shares a commodity, whether or not it is his
job to speak, he must reveal all information. Contracts are voidable under Section 19 in the absence of free
consent. In this scenario, silence or deception must fall under the definition
of fraud as defined in Section 17.
CASES WHERE THERE IS NO FRAUD
Indeed
if a false statement was made, the party professing fraud couldn't be supposed
to have been duped if it had the data in front of it or could know them. The
partition of property on the death of the father and mother wasn’t set away in Janakiamma v. Raveendra Menon because
the complainant was apprehensive of the vittles of her father's Will and no new
partition was ordered. In the vast maturity of cases, fraud can not be proven
with positive and concrete substantiation.
REMEDIES AVAILABLE FOR FRAUD
Even
if restitutio in integrum is not
possible, as, in Indranath Banerjee v.
Rooke, such a suit would provide a remedy. Due to the opposing party's
distortion of facts, the plaintiff in Dambarudhar
Behera v. the State of Orissa cancels the contract. The plaintiff demanded
compensation for expenses incurred during the contract's drafting as well as
lost wages until the deception was discovered. The Court awarded him damages,
stating that the number of damages awarded for false misrepresentation
shouldn't exceed the losses that would have passed if the data hadn't been
misrepresented. In the event of a quiet fraud, the complainant has two options
the complainant has the right to repudiate, terminate, the contract and seek
payment for his losses or confirm the contract and train an action against the
defendant for damages. The defendant's malignant or felonious intent can be
proven depending on the data and circumstances of the case. The defendant can
also face felonious proceedings, which might affect forfeitures or maybe a
captivity judgment for the defendant.
PUNISHMENT FOR
COMMITTING FRAUD
The punishment for fraud is non-compoundable because it includes
both a fine and imprisonment. Online fraud has increased as technology has
advanced, and perpetrating fraud has become a serious crime in the eyes of the
law. If an existent is found guilty of fraud under Section 447, he can be sentenced
to prison for a period ranging from six months to ten years. He will also face
forfeitures ranging from the amount engaged in the fraud to three times the
amount involved in the fraud. If the circumstances of the fraud are detrimental
to the public interest, the perpetrator might be sentenced to a minimum of
three years in jail.
CONCLUSION
As a result, being unaware of some
material information that affects a person's decision to engage in a contract
does not constitute fraud. Silence, on the other hand, may be considered fraud
if it can be proved as speech or if the existing must inform the other party of
the information. Silence can lead to fraud if one person declines to disclose
relevant information, causing harm to the other. Frauds committed all around
the world could be the outcome of a dire financial situation. The penalty for
fraud is now low, and it should be increased to instill a moral heart in
residents so that they are not deceived by the benefits of deception. The
general public should be apprehensive of common swindles and should
double-check whether the information handed by the party is accurate. Fraud
elimination doesn't be overnight, and society as a total must pay the price.
This blog is authored by Dakshita Dhage, a Student of Maharashtra National Law University, Nagpur.
ENDNOTES
1.
THE INDIAN CONTRACT ACT, 1872
<https://legislative.gov.in › sites › default › files>
2.
Avtar
Singh, Contract and Specific Relief, 12th Ed (2020)
3.
www.gtlaw.com
4.
www.mondaq.com
5.
https://indiankanoon.org/doc/353998/
6.
Rattan Lal Ahluwalia vs Jai Janinder Parshad
on 27 October, 1975 AIR 1976 P H 200
7.
JEWSON & SONS, LTD. v. ARCOS, LTD. (1933) 47 Ll.L.Rep.
93
8.
Janaki Amma And Ors. vs Raveendra Menon And Ors. on 3 June,
1981 AIR 1981 Ker 205
9.
Indra Nath Banerji vs E.G. Rooke on 2 August,
1909 3 Ind Cas 316
10. Dambarudhar Behera vs
State Of Orissa And Ors. on 14 May, 1980 AIR 1980 Ori 188