Abu Hurairah (radi Allahu anhu) narrated that the Messenger of Allah (sal Allahu alaihi wa sallam) said:

“Isa son of Maryam saw a man stealing and asked him, ‘Did you steal?’ He said, ‘No, by Allah, besides whom there is no god.’ So Isa said, ‘I believe in Allah and contradict my eyes.’” [Sahih Bukhari]

Allah (subhana wa ta’ala) grants His prophets large-heartedness and a high degree of humaneness. Isa (alaihis salam) saw a man stealing with his own eyes. But since the man swore by Allah (subhana wa ta’ala) that he didn’t steal, Isa (alaihis salam) preferred to hold a good opinion about him and protect him from disgrace by saying that he disagreed with what his eyes had observed.

It is the nature of prophets that when they see something wrong being done they do not keep quiet about it. Hence Isa (alaihis salam) questioned the man. However, the name of Allah is so great that if it is sworn by then the person should be believed.

It is not that Isa (alaihis salam) couldn’t distinguish between a liar and a truthful person, but he preferred to take a Muslim at his word and not accuse him of taking a false vow.

Thus, we should also conceal the faults of others and try to protect people from disgrace so long as this does not entail violating someone else’s rights. If the rights of other people are liable to be encroached upon, then the person’s sins may be disclosed, but only to the relevant people.

Allah (subhana wa ta’ala) sees all, nothing escapes Him. It is not our job to necessarily punish all who do wrong. If a false oath is taken, Allah (subhana wa ta’ala) knows it and He will deal with the person as He sees fit.

["Stories From The Hadith" by Mohammad Zakariya Iqbal]