Tarsem Singh v. Sukhminder Singh
Supreme Court of India, 2 February 1998, 2 judges
An agreement to sell land made under a mutual mistake about the area (kanals or bighas) was void under Section 20 of the Contract Act; its forfeiture clause failed and the earnest money had to be refunded under Section 65.
Facts
The petitioner agreed on 20.5.1988 to sell agricultural land described as 48 kanals 11 marlas to the respondent at Rs. 24,000 per unit, and received Rs. 77,000 as earnest money. The agreement provided that the earnest money would be forfeited if the respondent failed to pay the balance and obtain the sale deed in time. The respondent sued for specific performance and the trial court decreed the suit. In appeal the respondent amended the plaint to describe the land as 48 bighas 11 biswas and raised the price. The Additional District Judge found that both parties were under a mistake of fact as to the area and the rate, and that the respondent was not ready and willing; he refused specific performance but decreed refund of the earnest money with interest. The High Court dismissed the second appeal, and the vendor sought special leave.
Questions before the Court
- Was a mutual mistake about whether the land was measured in kanals or bighas a mistake as to a matter of fact essential to the agreement under Section 20?
- Could the vendor rely on the forfeiture clause to keep the earnest money?
- Does Section 65 of the Contract Act apply to an agreement void from its inception?
What the Court held
- Section 20 applies only where both parties are under a mistake of fact essential to the agreement; a unilateral mistake is outside it. Bigha and kanal are different units, so the dispute was really about how much land was sold. The area was as essential to the agreement as the price, which depended on it, and the agreement was void.
- Sections 73 and 74 presuppose a valid contract. A forfeiture clause in an agreement void under Section 20 cannot be enforced, even by way of defence; a void agreement cannot be split up, save where a clause is a separate and severable agreement.
- The words 'discovered to be void' in Section 65 cover an agreement void from its inception because of a mutual mistake that the parties realise only later. The vendor who received Rs. 77,000 under it was bound to restore it, and the decree for refund was rightly passed.
- The Court confined this to agreements discovered to be void under Section 20, noting that refund may not follow where an agreement is void for reasons under Sections 23 and 24. The special leave petition was dismissed.
Why it matters
The judgment explains when a bilateral mistake of fact makes an agreement void under Section 20 of the Contract Act, holding that the area of land agreed to be sold is a matter essential to the agreement. It also holds that a forfeiture clause falls with a void agreement and that Section 65 requires restitution of earnest money paid under an agreement later discovered to be void from its inception.
In the Court's words
Copied from the official judgment; each passage links to its page.
“This Section provides that an agreement would be void if both the parties to the agreement were under a mistake as to a matter of fact essential to the agreement. The mistake has to be mutual and in order that the agreement be treated as void, both the parties must be shown to be suffering from mistake of fact. Unilateral mistake is outside the scope of this Section.”
“If the forfeiture clause is contained in an agreement which is void on account of the fact that the parties were not ad-idem and were suffering from mistake of fact in respect of a matter which was essential to the contract, it cannot be enforced as the agreement itself is void under Section 20 of the Contract Act. A void agreement cannot be split up.”
“The words "discovered to be void", therefore, comprehend a situation in which the parties were suffering from a mistake of fact from the very beginning but had not realised, at the time of entering into the agreement or signing of the document, that they were suffering from any such mistake and had, therefore, acted bona fide on such agreement. The agreement in such a case would be void from its inception, though discovered to be so at a much later stage.”
Provisions interpreted
Case and bench
- Parties
- Sri Tarsem Singh v. Sri Sukhminder Singh
- Case
- Special Leave Petition (number not printed in the file)
- Decided
- 2 February 1998
- Bench
- S. Saghir Ahmad, M. Jagannadha Rao
- Opinions
- Unanimous. Judgment delivered by S. Saghir Ahmad, J.
Questions on this case
5 questions in live Law Maker papers mention this case. A few from free papers:
Question 1, Legal Current Affairs: August 2026
In Maya Banerjee v. Union of India (20 August 2026), a widow's claim to family pension raised a conflict between S.K. Mastan Bee and Tarsem Singh, both decided by two-Judge Benches, the later decision not having considered the earlier one. The Supreme Court:
- A. followed Tarsem Singh and limited the arrears to three years before the date of filing of the writ petition
- B. referred the conflict to a three-Judge Bench without deciding the widow's claim on its merits
- C. held both decisions per incuriam and granted pension only from the date of its own judgment
- D. followed S.K. Mastan Bee and granted family pension from the date of the husband's death
Show the answer
D. followed S.K. Mastan Bee and granted family pension from the date of the husband's death
Applying the rule in Union of India v. S.K. Kapoor that the prior decision of a coordinate Bench binds a later Bench of equal strength, the Court (Prashant Kumar Mishra and Shree Chandrashekhar, JJ., 2026 INSC 959) followed S.K. Mastan Bee, which the later Tarsem Singh had not considered, and granted family pension from 12 November 2000 with 6% interest on arrears.