Fraud / Fraus Omnia Corrumpit /

Fraud, in the law of contract, is defined in Section 17 of the Indian Contract Act, 1872 as including: (1) a suggestion as to a fact of that which is not true by one who does not believe it to be true; (2) active concealment of a fact by one having knowledge or belief of the fact; (3) a promise made without any intention of performing it; (4) any other act fitted to deceive; and (5) any such act or omission as the law specially declares to be fraudulent. The essential distinguishing feature of fraud — compared to misrepresentation — is the element of intent: the fraudster knows the representation is false, or does not believe it to be true, or acts recklessly as to its truth.

For fraud to avoid a contract under the ICA, the fraud must have: (1) been committed by the other party or with their connivance; (2) induced the aggrieved party to enter into the contract; (3) involved an active act of deception — mere silence is generally not fraud unless there is a duty to disclose; and (4) caused actual damage to the deceived party. On establishing fraud, the deceived party's remedies include: (1) avoiding (rescinding) the contract; (2) recovering damages for the fraud; and (3) in appropriate cases, claiming specific performance subject to equitable defences.

Fraud in criminal law (cheating under Section 318 BNS, formerly IPC 420) requires: (1) deception of any person; (2) inducing the deceived person to deliver property or alter their legal position; and (3) dishonest intent — the intent to cause wrongful gain or wrongful loss. The criminal dimension of fraud involves a higher standard of proof (beyond reasonable doubt) and focuses on the mental element of dishonest intent. A false representation made honestly (misrepresentation) may give rise to civil remedies but not criminal prosecution; only intentional deception with dishonest intent triggers the criminal provision.

Fraud on the court — submitting false evidence, making false statements to the court, or fabricating documents — is a separate category with serious consequences. Courts have held that a judgment obtained by fraud on the court can be set aside even after the expiry of the appeal period, because fraud vitiates all proceedings. This is one of the exceptional grounds on which a final judgment (ordinarily res judicata) may be reopened — fraud ab initio prevents a fraudulently obtained decree from being given the protection of res judicata.

For advocates, the practical significance of distinguishing fraud from misrepresentation lies in the available remedies: (1) In civil cases — fraud enables both rescission of contract AND damages for the tort of deceit; misrepresentation enables only rescission; (2) In criminal cases — fraud (cheating, BNS 318) requires dishonest intent — establishing that the accused genuinely believed the representation to be true is a complete defence; and (3) In property transactions — a title obtained by fraud is vulnerable to being set aside even decades later, while a title obtained without fraud (through genuine but mistaken representations) is protected after limitation.