High Courts must hear Fraud allegations on merits, not paperwork, rules SC

In a significant procedural challenge touching the heart of judicial access and fairness, the Supreme Court has stepped in after the Telangana High Court rejected a borrower’s writ petition at the threshold, raising serious questions about whether allegations of fraud can be buried by registry objections rather than judicial scrutiny. The case brings into focus how far court registries can go in policing pleadings, and whether technical objections can override substantive justice.

The controversy began when borrowers approached the Telangana High Court under Article 226, alleging that an advocate appointed as a Commissioner under Section 14 of the SARFAESI Act had taken possession of their secured asset through fraud and collusion with the secured creditor, without following statutory safeguards.

However, instead of examining these allegations, the High Court Registry raised objections relating to the form of the prayer clause, the inclusion of multiple reliefs in a single prayer, the arraying of certain respondents, and the filing of a “DB set” since the matter arose under SARFAESI. When the matter was placed before a Division Bench, the court agreed with the registry, rejected the writ petition outright, and directed the papers to be returned, prompting the borrowers to move the Top Court.

The Supreme Court came down heavily on the approach adopted by the High Court, holding that rejecting a writ petition alleging fraud on mere technical objections was fundamentally unjust. Emphasising the maxim “fraus omnia corrumpit”, meaning “fraud unravels everything”, the Court observed that to “nip a proceeding, where fraud and collusion are alleged, in the bud on a mere technicality is unjust.” The Bench found no merit in the registry objections, noting that even if multiple reliefs were claimed in one prayer or the prayers were imperfect, the High Court could have permitted correction or amendment rather than outright rejection.

In a sharp rebuke, the Court stated it was “pained to observe that there has been an abandonment of its judicial role by the High Court.” Consequently, the Apex Court overruled the registry’s objections, set aside the High Court’s order, revived the writ petition, and directed that it be placed before a different Division Bench after being marked defect-free.