Court rules mistake of fact renders contract void, earnest money refund ordered.

The High Court upheld the finding that the respondent was not ready and willing to perform the contract fully. Both parties were found to have made a mistake of fact regarding the land's area and price, rendering the agreement void. Consequently, the earnest money could not be forfeited, and the petitioner was ordered to refund it to the respondent. The court applied Section 65 of the Contract Act, directing the refund of the earnest money with interest. The Special Leave Petition was dismissed, affirming the refund decree.

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Issues Involved:
1. Readiness and willingness to perform the contract.
2. Mistake of fact regarding the area and price of the land.
3. Forfeiture of earnest money.
4. Impact of mistake of fact on the agreement.
5. Applicability of Section 65 of the Contract Act.

Summary:

1. Readiness and Willingness to Perform the Contract:
The Lower Appellate Court found that the respondent was not ready and willing to perform his part of the contract as he was only willing to pay Rs. 1,56,150/- instead of the full sale consideration of Rs. 2,35,750/-. This finding was upheld by the High Court.

2. Mistake of Fact Regarding the Area and Price of the Land:
The Lower Appellate Court and the High Court found that both parties suffered from a mistake of fact regarding the area of the land and whether the price was to be paid per "Bigha" or per "Kanal". This mutual mistake made the agreement void.

3. Forfeiture of Earnest Money:
The petitioner contended that the earnest money of Rs. 77,000/- should be forfeited as per the agreement. However, the court held that since the agreement was void due to mutual mistake, the forfeiture clause could not be enforced.

4. Impact of Mistake of Fact on the Agreement:
The court examined the effect of "Mistake of Fact" on the agreement. It was held that the mistake regarding the area and price of the land was essential to the agreement, making it void u/s 20 of the Contract Act. A void agreement cannot be enforced, including any forfeiture clause contained within it.

5. Applicability of Section 65 of the Contract Act:
The court referred to Section 65 of the Contract Act, which mandates the restitution of any benefit received under a void agreement. It was held that the petitioner, having received Rs. 77,000/- as earnest money, was bound to refund this amount to the respondent. The decree for refund of this amount was rightly passed by the Lower Appellate Court.

Conclusion:
The Special Leave Petition was dismissed, upholding the decree for the refund of Rs. 77,000/- along with interest at the rate of 6% per annum from the date of the contract till the date of actual refund.

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