2026 Supreme(All) 833

HIGH COURT OF JUDICATURE AT ALLAHABAD 
SARAL SRIVASTAVA, SUDHANSHU CHAUHAN, JJ.
Vinay Kumar Singh - Petitioner
Versus
State Of U.P. And Others - Respondent
WRIT - C No. - 37749 of 2019
Decided On : 10-04-2026

A contract becomes void under Section 20 of the Indian Contract Act when both parties enter into it under a mutual mistake of fact regarding the subject matter's essential attributes, such as the actual availability of the leased mining area, necessitating restitution of benefits under Section 65.

Headnote:(A) Indian Contract Act, 1872 - Sections 20 and 65 - Mining Lease - Agreement void due to mutual mistake - Essential matter of fact regarding available land area being incorrect - Where parties entered into a lease under the common belief that the entire area was available for mining, but a significant portion was subsequently found to be under a boundary dispute between sovereign entities, the agreement becomes void from its inception - Obligation of the state to provide an encumbrance-free site for mining - State authorities failed to demarcate the undisputed area effectively or provide unhindered possession - Upon a contract being discovered to be void, parties are entitled to restitution of benefits conferred under Section 65. (Paras 75-79)

(B) Article 226 of the Constitution of India - Writ Jurisdiction - Interference with state action - Where the state fails to provide possession of the leased area and subsequently cancels the lease citing revenue loss, such action is arbitrary when the failure of performance is attributable to the state’s own inaction in resolving inter-state disputes - Principles of equity require that an aggrieved party be restored to the position prior to the contract. (Paras 82-90)

Facts of the case:
The petitioner, as the highest bidder, was awarded a mining lease. Shortly after commencement, an inter-state boundary dispute surfaced, preventing mining operations in a portion of the allotted site. Despite ongoing litigation and court directives, the state failed to effectively demarcate boundaries or provide unhindered possession of the entire area. The lease was eventually cancelled by the state on grounds of revenue loss resulting from non-operation. The petitioner sought a refund of the deposited amounts and lease expenses.

Findings of Court:
The court found that the lease agreement was void under Section 20 of the Contract Act due to a mutual mistake regarding the existence and availability of the land as represented. The state failed to ensure an encumbrance-free site, which is an inherent obligation in such contracts. Consequently, the lessee is entitled to a refund of the deposits, minus the value of minor minerals already excavated, while other disputed claims regarding development expenses were relegated to appropriate legal forums for determination.

Issues: The main issues were the validity of the mining lease contract in light of boundary disputes, the state's liability for failure to provide peaceful possession, and the applicability of the Indian Contract Act to mandate restitution.

Ratio Decidendi: An agreement suffers from mutual mistake of fact when the essential subject matter—the deliverable area—is found not to exist in the spatial capacity represented at the time of the contract. Once such an agreement is voided, restitution is mandated under equitable principles and statutory provisions, preventing the state from retaining benefits for failing to deliver the essential subject of the contract.

Result: Writ petition allowed in part; refund of deposit ordered with interest, subject to permissible deductions for minerals already excavated.

Table of Content
1. procedural history and factual genesis of the mining dispute. (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12 , 13 , 14)
2. summary of rival contentions regarding possession and boundary disputes. (Para 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23)
3. analysis of evidentiary record regarding the state's failure to provide clear possession. (Para 24 , 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42 , 43 , 44 , 45 , 46 , 47 , 54 , 55 , 56 , 57)
4. application of section 20 and section 65 of indian contract act regarding mutual mistake and restitution. (Para 48 , 49 , 50 , 51 , 52 , 53 , 58 , 59 , 60 , 61 , 62 , 63 , 65 , 66 , 67 , 68 , 69 , 70 , 71 , 72 , 73 , 74 , 75 , 76 , 77 , 78 , 79 , 80 , 81 , 82)
5. assessment of monetary relief, restitution of deposits, and adjudication of secondary claims. (Para 83 , 84 , 85 , 86 , 87 , 88 , 89 , 90 , 91 , 92 , 93 , 94 , 95 , 96)
6. final closure of the writ jurisdiction order. (Para 97 , 98)

JUDGMENT :

Delivered by Hon'ble Sudhanshu Chauhan, J.

1. Heard Shri Shashi Nandan, learned Senior Counsel assisted by Shri Jai Singh Parihar, learned counsel for the petitioner and Shri Kartikeya Saran, learned Additional Advocate General assisted by Shri Rajeshwar Tripathi, learned Chief Standing Counsel II and Shri Sandeep Kumar Singh, learned Additional Chief Standing Counsel for respondents.

2. The controversy involved in the present writ petition is that the District Magistrate, Banda-respondent no.4 had issued an e-tender cum e-auction notice dated 16.02.2018 inviting bids for excavating 5,00,000 cubic meters of sand/morum over an area of 25 hectares comprised in part of Khasra No.5 and part of Khasra No.9 in Village- Bilharka, Tehsil-Narayani, District- Banda.

3. The bid made by the petitioner in pursuance to the tender notice was accepted and a letter of intent was issued on 19.03.2018. The terms of reference (TOR) for the proposed site was issued by the State Level Environment Impact Assessment Authority (SLEIAA) on 25.05.2018 and the environmental clearance was subsequently granted to the petitioners for mining on the aforesaid site on 08.02.2019.

4. Subsequently, a mining lease dated 13.02.2019 was executed between the parties. Under the lease the petitioner was to excavate annually 5,00,000 cubic meters of sand/morum at the rate of Rs. 527/- per cubic meter. The lease was for a period of five years and the amount so payable was to increase at the rate of 10% for every subsequent year. Besides, the petitioner prior to commencement of mining was required to deposit an amount of Rs. 6,58,75,000/- towards security and 25% of the first instalment for the first year amounting to Rs. 6,58,75,000/-. Hence, the petitioner had deposited a total amount of Rs. 13,17,50,000/- as advance besides a stamp duty of Rs. 3,21,73, 877/- was paid by the petitioner on the lease.

5. However, shortly after the petitioner commenced mining, the mining operations were disrupted by officials of State of Madhya Pradesh (MP) on the pretext that a part of the mining area allotted to the petitioner fell within the State of M.P. The petitioner made complaints regarding the incident with a request to resolve the boundary dispute. A joint inspection team comprising of officers of State of Uttar Pradesh (U.P) and State of M.P. was constituted but the dispute relating to boundaries remained unresolved. In the meanwhile a demand for payment of second instalment under the lease dated 13.02.2019 was raised. However, the petitioner expressed his inability to make any payment till the boundary dispute was resolved between the two States.

6. As the petitioner was not permitted to carry out mining operations and demand for second installment was being made by the respondent no.4, the petitioner was constrained to file Writ-C No.-18794 of 2019 seeking a direction that the two States be directed to settle the boundary dispute in respect of river, 'Ken' and State of U.P. be restrained fro

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