Source: Supreme Court  

Why in News? 

Recently, the bench of Justices J.B. Pardiwala and R. Mahadevan held that mere allegation of fraud is insufficient; the plaintiff must prove that the fraud actively concealed the right to sue to claim benefit under Section 17 of the Limitation Act, 1963. 

• The Supreme Court held this in the matter of Santosh Devi v. Sunder (2025). 

What was the Background of Santosh Devi v. Sunder (2025) Case? 

• The dispute centers around a sale deed (No. 638) executed and registered on 26th May 2008, along with the corresponding mutation entry (No. 5340) dated 29th August 2008. 
• The Appellant-Plaintiff, Santosh Devi, filed Civil Suit No. 310-RBT of 2012 in the Court of Additional Civil Judge (SD), Ganaur on 12th October 2012, seeking:  
  • Declaration that the sale deed and mutation were invalid to the extent of 1/2 share executed in favor of the Respondent-Defendant Sunder 
  • Mandatory injunction directing the Respondent to execute and register a corrected sale deed and mutation in favor of the Appellant 
  • Permanent injunction restraining the Respondent from alienating any part of the suit property 
• The Appellant's contention was that:  
  • She had paid the entire sale consideration for the property. 
  • The Respondent had fraudulently and forcibly managed to get his name included in the sale deed for 1/2 share without contributing to the purchase price. 
  • She only discovered this alleged fraud in March 2010, approximately two years after the execution of the deed. 
• The Appellant was a signatory to the sale deed and was present at the time of its execution and registration. She was working as a property dealer at the relevant time. 
• The Appellant served a legal notice on the Respondent on 19.09.2012 regarding the matter, which was allegedly refused by the Respondent on 08.10.2012. 
• The litigation proceeded through three tiers of courts:  
  • Trial Court: Dismissed the suit primarily on grounds of limitation. 
  • First Appellate Court: Affirmed the trial court's decision. 
  • High Court of Punjab and Haryana: Dismissed the second appeal vide judgment dated 23rd July 2024. 
• Both the trial court and the appellate court found that the Appellant was fully aware of the contents of the sale deed at the time of its execution, as the deed writer had read it aloud before all parties who then affixed their signatures acknowledging its correctness. 
• The limitation period for filing a suit for cancellation of a sale deed is three years from the date of execution of the deed (Article 59 of the Limitation Act, 1963). 
• The Appellant's suit was filed more than four years after the execution of the sale deed. 

What were the Court’s Observations? 

• The Supreme Court observed that when a registered document is challenged, the initial onus of proof lies upon the person challenging the document, as there exists a legal presumption that a registered document is validly executed. 
• The Court noted that when fraud is alleged as a ground for exemption from limitation, it is an acknowledged rule of pleading that the plaintiff must set forth the particulars of the fraud with specificity, not merely make general allegations. 
• The Court observed that Order VII Rule 6 of the Civil Procedure Code, 1908 mandates that "the plaint shall show the ground upon which exemption from such law is claimed," requiring specific factual statements to establish the basis for exemption. 
• The Court held that mere use of general words such as 'fraud' is ineffective to provide the legal basis for exemption in the absence of particular statements of fact which alone can furnish the requisite foundation for the action. 
• The Court distinguished between fraud relating to the transaction itself and fraud that prevents a plaintiff from knowing their right to sue, clarifying that Section 17 of the Limitation Act is concerned with the latter. 
• The Court observed that under Section 17 of the Limitation Act, the plaintiff must establish that they were kept out of knowledge of their right to sue by means of fraud perpetrated by the defendant. 
• The Court found that the alleged fraud relating to the sale transaction itself had no nexus with keeping the plaintiff unaware of her right to file a suit for cancellation of the sale deed. 
• The Court noted that no specific reference to the provisions of Section 17 of the Limitation Act was made in the plaint, though the pleading proceeded on the hypothesis that the plaintiff had contributed along with the defendant in the purchase. 
• The Court observed that for claiming exemption under Section 17 of the Limitation Act, it must be demonstrated that the defendant actively prevented the plaintiff from discovering the fraud or the plaintiff could not, with reasonable diligence, have discovered it earlier. 
• The Court opined that where an alleged fraud involves a documented transaction to which the plaintiff was party and signatory, a higher threshold of proof is required to establish that the plaintiff could not have discovered the fraud with reasonable diligence at the time of execution. 
• The Court held that in cases where the plaintiff alleges commission of an offence involving fraud, the burden of proving the elements of such offence, including the time of discovery, rests with the plaintiff when seeking exemption from limitation. 

What is Section 17 of the Limitation Act, 1963? 

• Section 17(1) creates a legal exception to the normal limitation periods prescribed by the Act by postponing the commencement of the limitation period in cases of fraud, mistake, or fraudulently concealed documents until discovery (actual or constructive). 
• Under Section 17(1)(a), when a suit is based upon the defendant's fraud, the limitation period begins only when the plaintiff discovers the fraud or could have discovered it with reasonable diligence, rather than from the date of the fraudulent transaction. 
• Section 17(1)(b) addresses situations where the defendant's fraud conceals from the plaintiff knowledge of a right or title that forms the foundation of a suit, thereby postponing the limitation period until such concealment ends. 
• The doctrine of reasonable diligence is embedded in Section 17, requiring courts to consider not only when the plaintiff actually discovered the fraud or mistake, but also when they reasonably ought to have discovered it with proper vigilance. 
• The proviso to Section 17(1) creates an important protection for bona fide purchasers for value, preventing the extension of limitation from affecting innocent third parties who purchase property without knowledge of any underlying fraud, mistake, or concealed document. 
• Section 17(2) provides a separate remedy for judgment-creditors whose decree execution was prevented by the judgment-debtor's fraud or force, allowing application for extension of the execution period within one year of discovering the fraud or cessation of force.