Lecture – 15th March 2022

Section 17 Effects of fraud or mistake

In the matters of fraud, the limitation period would not start from the actual date of fraud
committed but the date on which fraud was discovered by the application or if with reasonable
diligence that applicant could have come to know about the fraud or in case of a concealed
document until the plaintiff or applicant first has means of producing the concealment document or
compelling its production.

In the earlier act of 1908 mistake was not recognised as a ground. The English limitation act of 1936
was there which mentions about mistake. So, this present Indian law has been drafted in accordance
with the English limitation act so as to also includes mistake. But later on, by the act of 193 the
element of mistake was added.

This section is based upon the principle of natural justice that in case a person does not know about
fraud which is being committed against him. His period of limitation should not start because the
fraud may have been committed at a time when he has no idea even with due diligence, he could
not find about it.

So basically section 17 is enabling provision which postpones the starting point of limitation for suits
and applications wherever there is a ground of fraud or mistake. this was clarified by court in case of

Sheoram v. Ikramunissa (1923 ALL HC)

The object of this section was laid down by the SC in case of

Pallav Sheth v. Custodian &others (2001 SC)

‘’It was laid down by the SC that the fundamental principle of justice and equity is reflected in
section 17. A party should not be penalised for failing to adopt a legal proceeding when the facts
which are materially necessary have been wilfully concealed from him or any party acting
fraudulently should not get the benefit running in his favour.’’

Section 17 covers 3 aspects

• Frauds
• Mistake
• Concealment

Fraud – there are two types of fraud.

1. Active fraud – there is a conscious effort to defraud.
2. Implied fraud – the person is defrauded without any act of mind (e.g., silence)

In limitation act, fraud must mean an Active fraud.

The language of section 16 is very clear that it amounts to suits or application and does not apply to
appeals. The principle of this section is based on an English principle which have been quoted in the
case of

Biman Chandra Dutta v. P N Ghose (1922 Cal HC)

The right of any party is not affected by lapse of time so long as he remains without any fault of his
own in ignorance of the fraud that has been committed against him.

Q. whether section 17 applies to criminal proceedings? it was held very clearly that section 17
does not apply to criminal proceedings.

Fraud basically means taking advantage or making another person believe something true which
does not even exist in a different way. In fraud there is always an element of deception.

To defraud, fraudulently has been defined in section 25 IPC when an intend to defraud or not
otherwise.

Dr. Vimla v. State of Delhi

SN Dutta v. State of UP

It is cleared that fraud always has two elements –

1. Deceit
2. Injury to person

To get the benefit under section 17 fraud must have been committed by defendant or his agent.
Fraud by any 3rd person is not covered under this section.

Fraud must have been committed before the suit or application.

Mistake-
The word mistake means to understand wrongly, there is an error in judgement, mistake always is a
slip.

In mistake there is no intention or knowledge, mistake can be of two types –

1. Mistake of fact
2. Mistake of law

Q. does section 17 cover both mistake of fact and law?

It covers both mistake of fact and mistake of law.

Mistake of fact – means a fact exists but not known or some other fact exists or some other thing is
construed as a fact.

Mistake of law – means deriving an erroneous conclusion of law. Mistake of law is covered here but
the ignorance of law is not.

To establish fraud, it can’t be established on suspicion, conjectures or surmises. The aspect of fraud
must be proved by fact. Satish Chandra v. Satish Roy (1923 PC).

By ordinary diligence have discovered-

It means section 17 also provides for the defence of defendant.

Proviso:
(2) this sub-section deals with judgement debtor. Judgement has to apply for the period of extension
to the court.

- 1 year POL extension- from the date of discovery of fraud or cessation of force as the case may be.

Example-

A- Decree holder
B- Judgement debtor

A goes to the court to execute a decree. B beats A. A has registered many FIRs and no action is taken
against him. A even puts up petition in civil court but gets no remedy.

In the mean time judgement debtor dies. By this time A’s limitation period was over. How much time
will he get as an extension to get execution of decree? – 1 year.

Q. On whom will the Burden of Proof lie?

1. who alleges, will have the BOP i.e., Plaintiff.

2. once the plaintiff has established that fraud has been committed then the onus of proof shifts to
the Defendant.

Saseendra Kumar v. State Bank Travancore (2011 Kerala HC)

The amount was credited to the account of defendant by mistake of bank

Defendant didn’t do anything and remained silent for some time and later on started withdrawing
money.

The person whose money was wrongly credited i.e., plaintiff was residing outside India and the
period of limitation was over.

Then plaintiff, came to bank and asked for his money then he got to know about the wrong transfer
of money to account of some other person.

Question came up to the Kerala HC, whether the extension be provided to plaintiff? yes

The period of limitation will run when fraud, mistake was discovered by the bank.

(Section 18.19.20) – are interconnected. And they deal with the law of
acknowledgement
Acknowledgement means to accept the liability.

Example- A was a contractor and made a contact with the govt. for 1cr.

Government changed and negated for that contract. Govt. can only give 50 lakh & gave him 25 lakhs
only – when the limitation period was coming to an end A went to the court that he had already
spent 50 lakh and now the govt refused to give the complete money. Court said that the government
had at least acknowledged that A’s money was pending and from this acknowledgement fresh
period of limitation is starting. Now A can claim the money freshly.

ACKNOWLEDGEMENT –

It is a conscious admission of the existing liability in respect of property or right claimed in suit.
 Green v. Humphrey (2884)

Acknowledgement is an admission by the writer that he owes a debt to the person in question.

The SC had given a wide dimension to the wrd admission in the case,

Tilak ram v. Nathu (1967 SC)

Acknowledgment is not a mere admission of “jural relationship” between the parties but a
relationship of a debtor and a creditor.

Prabhakar v. M Pillai (2006 SC)

Jural relationship between the parties means the legal relationship between the parties with
reference to their rights and obligations.

Acknowledgement does not create a new right or a cause of action. It merely extends the POL.

L.C. Mills v. Aluminium corporation (1971 SC)

Q. For the purpose of limitation act when will an acknowledgement to be considered as a valis
acknowledgement?

Q. when will the acknowledgement extend the limitation period?

Section 18 Effect of acknowledgement in writing –

1. If the prescribed period for the suit or application has been expired and
acknowledgement made after the expiration of such period is to of no value as it will
not help in extension of period of limitation.

So, acknowledgement must be made while the prescribed period is existing or before
the expiry of the prescribed period.

Effects of acknowledgement

Acknowledgement if it is made during the prescribed period, a fresh limitation period

starts from the date when acknowledgement was signed and not received,

Acknowledgement signed on 1st Jan, will that day exclude from the computation?

Section 18 is quite on this section 12 provides that when computation of a period is to

be made from the day that is to be excluded plus section 9 of general clauses act,
1897.
So, the first Jan it would be excluded from the competition period of limitation.