NDLI: Sri Tarsem Singh Vs. Sri Sukhminder Singh

Content Provider	Supreme Court of India
e-ISSN	30484839
Language	English
Access Restriction	NDLI
Subject Keyword	Contract Act 1872 : Sections 20 65 & 74
Content Type	Text
Resource Type	Law Judgement
Jurisdiction	India
Act(s) Referred	Indian Contract Act, 1872 (9 of 1872)
Case Type	Special Leave Petition
Court	Supreme Court of India
Disposal Nature	Petition Dismissed
Headnote	Contract Act, 1872 :Section '20-Mistake as to a matter of fact-Applicability-Conditions for-Mistake as to area of land agreed to be sold-Seller intended to sell land in terms of "bighas" and purchaser intended to purchase it in terms of ''Kanals' '-Held : It is a mistake a~ to a matter of fact essential to the agreement . Sections 74 and 20-Parties under a mutual mistake with regard to a matter of fact essential to the agreement for sale-Agreement contained a stipulation that earnest money would be forfeited in case the purchaser did not perform his part of the contract by paying the balance amount of sale consideration-Held: Agreement itself is void under S.20-Hence, forfeiture clause is also void-Therefore, it cannot be enforced for recovery of compensation under S. 74 as that Section contemplates a valid agreement. Section 20-Void agreement-Effect of-Held: When an agreement is void, and its terms are void none of its terms can be enforced, except where the clause constitutes a separate and independent agreement severable from the main agreement. Sections 65 and 20-Earnest money-Forfeiture of-Parties under a mutual mistake with regard to a matter of fact essential to the agreement for sale right from its inception but realised the mistake at a much later stage-Held: Amounts to agreement "discovered to be void" within the meaning of S. 65-Hence, under such an agreement for sale the seller could not legally forfeit the earnest money by invoking the forfeiture clause in the agreement in case the buyer did not perform his part of the contract by paying the balance amount of sale consideration.Sections 13, 14 and 20-Mutual consent should be a free consent and is the sine qua non for a valid agreement-A thing not understood in the same sense by a party as is understood by the other party-Agreement would be A invalid under S.20 right from its inception even if the discovery of this fact is made at a much later stage. Words and Phrases :"Discovered to be void" and "becomes void"-Meaning of-In the context of S.65 of the Contract Act, 1872. The petitioner-defendant, who owned agricultural land, entered into a contract for sale of that land with the respondent-plaintiff at a certain rate based on the area of the land. At the time of the execution of the agreement the respondent paid earnest money to the plaintiff. Since petitioner did not execute the sale deed in favour of the respondent in terms of the agreement although the respondent was ready and willing to perform his ·part of the contract, the respondent filed the suit for Specific Performance against the petitioner which was decreed by the trial court. The decree was modified in appeal by the Additional District Judge who held that the parties to the agreement, namely, the petitioner and the respondent both suffered from a mistake of fact as to the area of the land which was proposed to be sold as also the price (sale consideration) whether it was to be paid at the rate of per "bigha" or per "Kanai". The Lower Appellate Court also found that the respondent was not ready and willing to perform his part of the contract. Consequently, the decree for Specific performance was not passed but a decree for refund of the earnest money was passed against the petitioner. This was upheld by the High Court. Hence this Special Leave Petition.On behalf of the petitioner-defendant it was contended that the decree for refund of earnest money was erroneous since it. was stipulated in the agreement that in the event of the respondent not executing the sale deed by paying the balance amount of sale consideration the earnest money would stand forfeited; that a mistake of fact with regard to the 'price' of the 'area' would not be a matter essential to the agreement as the only dispute, in this case, was with regard to the price of land, whether the price to be paid for the area calculated in terms of 'bighas' or 'Kanals'; that as per Section 73 and 74 of the Contract Act, 1872 the forfeiture clause in the. agreement was liable to be enforced; and that Section 65 of the Act would apply when the agreement was 'discovered to be void' or where the 'contract becomes void' and not to an agreement which was void from its inception.
Judge	Hon'ble Mr. Justice S. Saghir Ahmad
Neutral Citation	1998 INSC 51
Petitioner	Sri Tarsem Singh
Respondent	Sri Sukhminder Singh
SCR	[1998] 1 S.C.R. 456
Judgement Date	1998-02-02
Case Number	4639

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