Agreement procured by deliberate fraud is voidable even if defrauded party could discover truth: Delhi High Court

The Delhi High Court recently held that an agreement procured by fraud is voidable at the instance of the party deceived, even if the defrauded party had the means to discover the truth by due diligence [Sangam (India) Ltd v The National Highway Authority of India & Anr]..A Division Bench of Justices Vibhu Bakhru and Tara Vitasta Ganju held that 'deliberate fraud' does not come under the scope of the Exception to Section 19 of the Indian Contract Act, which deals with voidability of agreements without free consent. The Exception in questions states:If such consent was caused by misrepresentation or by silence, fraudulent within the meaning of section 17, the contract, nevertheless, is not voidable, if the party whose consent was so caused had the means of discovering the truth with ordinary diligence.After going through precedents on the issue, the Court held,“The ratio of the aforesaid decisions is that cases of deliberate fraud, do not come within the meaning of Exception to Section 19 of the Contract Act and where an Agreement has been procured by fraud, the contract is voidable at the instance of the party deceived, notwithstanding that the party whose consent was caused by fraudulent misrepresentation had means of discovering the truth by due diligence.".The Court rendered the finding while dealing with an appeal under Section 37 of the Arbitration and Conciliation Act, 1996 by Sangan India Limited against the National Highways Authority of India (NHAI).A single-judge had earlier set aside an arbitral award in Sangam India’s favour on the ground that the company had the means of discovering the truth regarding unavailability of a stretch of the national highway for toll collection, for which it entered into a contract with the NHAI. It was held that the agreement was not voidable on account of misrepresentation..However, the Division Bench did not agree with the conclusions of the single-judge and held that in view of the Exception to Section 19 of the Contract Act, the findings are not required to be adjudicated upon.The Court remanded the matter back to the single-judge for fresh adjudication..Sangam India was represented by Senior Advocate Gaurav Pachnanda and Advocates Ruchira Gupta, Akanksha Sisodia and Nikita Jaitly.Advocates Ankur Chhibber, Anshuman Mehrotra and Nikunj Mehrotra represented NHAI. .[Read Judgement]