minal Appeal No 277 of 1993
From the Judgment and Order dated 14101991 of the Bombay High Court in Crl
Application No 226091 in Crl
Revision Application No 123 of 1991
Altaf Ahmed Addl
Solicitor General BR Handa Mrs Manjula Rao SM Jadhav AS Bhasme and AM Khanwilkar for the Appellant
Dr B Subha Rao Respondent in person
The Judgment of the Court was delivered by RM SAHAI J
The short question that arises for consideration in this appeal is if the High Court was justified in allowing the application filed by the accused for declaring that the charges framed by the Additional Sessions Judge by order dated 2427th July 1990 were null and void as they were obtained by fraud practised by the State
Merits or otherwise of the application alleging fraud against the State apart what has left us completely surprised is not so much the entertaining of the application filed by the accused for declaration that the charges framed against him were nullity having been procured by fraud as the procedure adopted by the learned Single Judge of granting the prayer 332 merely for failure of the State to file any reply by way of counter affidavit than by recording any finding that the State was guilty of procuring the order framing the charges by fraud
One of the objections raised by the State was that since the High Court by its order passed on 2526th March 1991 in Criminal Writ Petition No 966 of 1990 had specifically held that the question of framing charge had become final therefore it could not be re opened cannot be said to be without substance as the Division Bench had clearly held that it was not open to go behind the order passed by the learned Single Judge on 3rd4th April 1990 directing that the charges be framed against the accused not only under Section 3 but under Section 5 as well
Nor can any exception be taken to the finding of the Bench that the said order could not be said to have been passed without jurisdiction in as much as the learned Single Judge had jurisdiction to decide the revision application preferred under the provisions of the Code
Even the question of fraud raised by the accused was negatived by the Division Bench and it was held that it was not capable of being gone into as it did not form part of the substratum of the case of the prosecution and was not germane to the question of deciding as to whether he was entitled to be discharged or not
However it is not necessary to rest the decision on this ground as the learned Single Judge having allowed the application as being vitiated by fraud it appears necessary to examine if the pleading on fraud in the application filed by the accused was sufficient in law to empower the High Court to take cognizance of it and even if it was did the accuse succeed in proving it as even if the State did not file any counter affidavit the application could not be allowed unless it was found as a fact that the State by its acts or omissions acted deceitfully or it misled the court Fraud  is false representation by one who is aware that it was untrue with an intention to mislead the other who may act upon
it to his prejudice and to the advantage of the representor
It is defined in Oxford Dictionary as  using of false representations to obtain an unjust advantage or to injure the rights or interests of another 
In Webster it is defined as deception in order to gain by another s loss craft trickery  guile any artifice or deception practiced to cheat deceive or circumvent another to his injury
It has been defined statutorily in Section 17 of the Contract Act as including certain acts committed with connivance or with intent to deceive another
In Administrative Law it has been extended to failure to disclose 333 all relevant and material facts which one has a positive duty to disclose
It is thus understood as deliberate act or omission to mislead other to gain undue advantage It consists of some deceitful practice of wilful device resorted to with intent to deprive another of his right or in some manner to do him an injury  Black s Law Dictionary
Effect of fraud on any proceeding or transaction is that it becomes nullity
Even the most solemn proceedings stand vitiated if they are actuated by fraud
Such being the nature and consequence of it the law requires not only strict pleading of it but strict proof as well
Did the averments in the application made out case of fraud  Were the statements of fact capable of giving rise to an inference in law that the State was guilty of misleading the court  From the charge sheet it is clear that it complied with the requirements of law and mentions not only the offence and the section but the particulars as to time place and person
Whether prosecution was possessed of sufficient evidence to prove each of the charges is different matter but they were framed on basis of documents seized from possession of the accused at the airport search of his residence on the next day interrogations of the accused and examination of prosecution witnesses
In the connected appeal No 276 of 1993 Arising out of SLP Crl No 986 of 1992 directed against the discharge of the accused for failure to obtain sanction a very brief summary has been given of various attempts made by the accused to get an order of discharge on merits without success
It is not necessary to recount all that here
Ul timately when the accused was discharged for failure of the State to obtain sanction under Section 197 of the Criminal Procedure Code in brief the Code  and the State challenged the correctness of the order by way of revision the accused filed the application for the declaration that the charge sheet be declared null and void
In paragraph 3 of the application it was stated that the charges were vitiated by fraud as the Punchnama dated 30th May 1988 was fabricated as it did not contain his signature and it was ante dated
It was further averred that three months even the copies of the remand application filed by the police were denied to the applicant and the orders thereon were not supplied to him
It was also claimed that the complaint was in contradiction with the statement of witnesses
May or may not be so but that could be relevant when the merits were gone into
It certainly could not be taken as a ground for claiming that the framing of charge was fraudulent especially when these aspects had been thrashed out once before the learned Single Judge who by his order dated 3rd4th 334 April 1990 held that the charges against the accused were made out not only under Section 3 but under Section 5 of the Act
In the same paragraph the accused extracted certain observations made by a learned Single Judge in one of the orders and claimed that they furnished guidelines to distinguish between offences under Sections 3 and 5 of the OS Act
According to him if honest and fair answer to the question if any charge was made out Was given by the State it would have exonerated the applicant but the State committed fraud by keeping the Trial Judge in the dark of real facts and induced him to entertain erroneous opinion and pass order on 24th July framing charges against him
In paragraphs 4 to 8 various sentences from one or the other judgment rendered for or against the accused by different courts at one or the other stage were extracted and it was claimed that the State either knowingly did not place correct facts to substantiate those observations or deliberately concealed the truth and made fraudulent submissions inducing the Trial Judge thereby to frame the charges
Emphasis was laid on the submissions advanced by the State and it was stated that it was result of fraudulent submissions that the Trial court was induced to frame charges against the accused
No foundation giving rise to fraud was laid
Facts which could be fished out from paragraphs averring fraudulent submissions could not in our opinion be said to be relevant for alleging fraud
For instance in paragraph 4 it was stated the Ld Addl
Session Judge was deceived by the aforesaid fraudulent and false submission of the Respondent in February 1989 during the judicial proceedings and the Ld Addl
Session Judge was induced to believe that the applicant was also found and caught carrying books on 30 5 1988 at the Sahar Airport Bombay which books as alleged by the Respondent could not have come into possession of the Applicant even in the ordinary course when the applicant was holding the office of the Captain of Navy
The respondent knew very well that in the record of the Sessions Case No 108488 there were no books as alleged by the Respondent and moreover the disputed documents were not deposited in the Sessions Court in February 1989 when the Learned Addl
Session Judge was induced to believe the fraudulent submissions of the 335 Respondent in February 1989
The above mentioned fraudulent submissions of the Respondent were clearly meant to deceive the Session Court in February 1989 and to see that the applicant was not discharged under Section 227 Cr
PC  Similarly in paragraph 5 it was stated It is significant to note that in February 1989 the documents were not deposited in the Session Court though it was mandatory under Section 209c Cr
PC to deposit the documents in the Session Court after the Case was committed to the Sessions on 2291988 by the Ld Magistrate
Thus in actual position  there were no documents in February 1989 for consideration  of the Ld Addl
Session Judge as prescribed under the provisions of Sec
227 Cr
PC and the Respondent took advantage of that situation and intentionally made the aforesaid fraudulent submissions in Feb 1989 during the judicial proceedings before the Ld Addl
Session Judge Shri Patel and caused circumstances to induce the Ld
Session Judge Shri Patel to entertain erroneous opinions and pass orders resulting in miscarriage of justice 
In paragraph 7 it was stated as under The Ld Addl
Session Judge Shri Patel passed two orders dated 11 9 1989 and 11 10 1989 to compel the Respondent to deposit the documents in the Session Court and accordingly the Documents were deposited in the Session Court only on 11 10 1989 which conclusively establishes that in February 1989 when Charges were framed the Documents were not with the Session Court and the fraudulent and false evidence advanced in February 1989 by the Respondent alone became the basis to frame Charges  in February 1989
 We must confess our inability to appreciate the worth of such averments to establish fraud
Legal submissions cannot be equated to misrepresentation
In our opinion the pleadings fell short of legal requirements 336 to establish fraud
Various sentences extracted from different judgments between the accused and State in various proceedings could not give rise to an inference either in law or fact that the state was guilty of fraud
Suffice it to say that it was complete misapprehension under which the accused was labouring and it was indeed unfortunate that the High Court not only entertained such application but adopted a course which amounted to reviewing and setting aside orders of his predecessor without sufficient material and accept the claim that all earlier judgments were liable to be ignored under Section 44 of the Evidence Act as the proceedings were vitiated by fraud
We are constrained to say that the learned Judge not only committed an error of procedure but misapplied the law
In the result this appeal succeeds and is allowed
The order dated 14th October 1991 in Criminal Miscellaneous Application No 2260 of 1991 is set aside and the application of the accused for declaring the order dated 2427th February 1990 framing the charges against him as vitiated by fraud is dismissed
NVK Appeal allowed


Summary:
The assessee acquired shares in certain companies under blank transfers  without getting the transfers registered with the companies and it received dividends in respect of these shares
It claimed that the dividend income should be grossed up under section 162 Income tax Act and that it should be allowed credit under section 185 for the tax deducted at source on the dividend in the hands of the companies
Held that the assessee was not entitled to the benefits of sections 162 and 185 as its name was not in the register of members of the companies
The benefit of section 185 could only go to a shareholder and a shareholder in that section meant the same thing as in the Indian Companies Act 1913 i e a  member having his name on the register
The scheme of the Indian Companies Act 1913 shows that the words  member   shareholder  and  holder of a share  have been used interchangeably
The words holder of a share are really equal to the word shareholder and the expression  holder of a share  denotes only a person who as a shareholder has his name entered on the register of members
In re Wala Wynaad Indian Gold Mining Company 1882 21 Ch
D 849 Shree Shakti Mills Ltd vs Commissioner of Income tax  jaluram Bhikulal vs Commissioner of Income tax  Arvind N Mafatlal vs Incometax Officer 1957 32 IT 
R 350 Bikaner Trading Co vs Commissioner of Income tax  referred to
A company when it pays income tax does not do so on behalf of the shareholders but the shareholders get the benefit of such payment
The rates of income tax applicable to the company are in most instances higher than the rates applicable to individual shareholders and by the process of grossing up the recipient of the dividend gets some benefit
Cull vs Inland Revenue Commissioners and Inland Revenue Commissioners vs Blott  referred to
440 In blank transfers the transfer deed signed by the transferor is handed over with the share scrip to the transferee who may complete the transfer by entering his name and applying to the company for registration of his name
The company only recognises those persons whose names are on the register of members and they alone are legally entitled to the dividend declared
In the case of a blank transfer equities exist between the transferor and the transferee and the transferee has a right to claim the dividend from the transferor who holds it in trust for him but the company is only liable to the transferor and not to the transferee
Though the transferee is clothed with an equitable ownership he is not a full owner since the legal interest vis a vis the company still outstands in the transferor