How can contract be rescinded by party when other party is not available and cannot be served notice?

Rescission as an Antecedent Right, Not Merely a Court Remedy

There is a foundational distinction that the law has always recognised, and it was expressed with characteristic clarity by the Supreme Court in Hungerford Investment Trust Ltd v Haridas Mundhra (AIR 1972 SC 1826): a suit for rescission is, in substance, a suit for the declaration of the validity of a rescission already made by the party. The court, when it adjudges rescission, does not create any new right — it merely adjudicates upon the antecedent right of the party and passes upon whether the rescission already exercised was justified in law.

This principle, also acknowledged by Pollock & Mulla with their characteristic incisiveness — "By the very definition, rescission depends not on the court but on the option of a party, which he can exercise without the aid of the court" — means that the absence or unavailability of the other party does not, in principle, destroy the right to rescind. It only defers the question of declaration of that rescission to the court.

The same insight is carried forward in the words of section 27 itself. The section uses the expression "may sue" — indicating that approaching the court is an option, not an invariable obligation. As expressly noted in the commentary, it is not necessary that a party having a right to rescind a voidable contract can obtain relief only by a formal adjudication of rescission. Even where a party does not seek rescission, being entitled to do so, he is not deprived of his other remedies under law — including the right to damages for non-fulfilment of the contract, or the right to raise the option to rescind as a defence when the other party sues to enforce the contract.

When a Party May Rescind Without the Court

When a contract is terminable — that is, when it contains an express or implied right to terminate on the occurrence of a specified event — the act of termination itself puts an end to the contract, and the terminating party need not always approach a court. The right to rescind flows from the contract itself, and its exercise is a unilateral act. Under section 39 of the Contract Act, where one party has refused to perform or disabled himself from performing his promise in its entirety, the promisee may put an end to the contract by communicating his election to that effect, without any judicial intervention whatsoever.

Similarly, where the contract is voidable under sections 19 or 19A of the Contract Act — on account of fraud, misrepresentation, coercion, or undue influence — the innocent party has the option of treating the contract as void. He exercises this option by communicating his election to rescind. Under section 66 of the Contract Act, when a person at whose option a contract is voidable rescinds it, he must restore any benefit he has received under it to the person from whom it was received, and must compensate the other party. The act of restoration and communication together constitute the exercise of rescission as a self-operative right.

In all these cases, the question of the other party being "unavailable" does not technically arise as a legal impediment. The rescinding party communicates his election to rescind. If the other party cannot be found, the correct approach is to use every available channel — last known address, registered post, publication if necessary — to effect communication of the rescission. The legal act is complete when the communication is dispatched or made in a manner that reasonably demonstrates the election to rescind. The other party's silence, non-response, or absence does not defeat the exercise of the right.

The Problem of the "Unavailable" Defendant — When Court Becomes Necessary

The practical difficulty arises when, despite the self-operative nature of rescission, the rescinding party still needs a judicial declaration — for example, because the instrument creating the contract has been registered, or because property rights are in question, or because some legal document requires a court order to be rendered inoperative. A voidable instrument, by its nature, appears valid on its face until it is formally set aside. As the law recognises, in cases where the legal effect of a document cannot be taken away without setting aside the same, it cannot be treated to be void but would be obviously voidable — and equity requires that the innocent party approach the court.

In such a situation, when the party against whom rescission is sought cannot be served notice, the remedy lies not in abandoning the suit but in following the procedure of the Code of Civil Procedure, 1908 for service by substituted means. Order V Rule 20 of the CPC permits the court, where it is satisfied that the defendant is deliberately avoiding service or cannot be found despite all reasonable efforts, to order substituted service — by affixing the summons at the defendant's last known residence, or by publication in a newspaper, or any other mode the court deems fit. The court proceeds to hear the matter ex parte if the defendant does not appear after substituted service is effected, and may grant the relief of rescission accordingly.

Section 27 Contemplates Suit Even Against Absent Defendants

The language of section 27 — "any person interested in a contract may sue to have it rescinded" — is wide enough to accommodate a suit by a party even when the other side is not promptly available. The entire machinery of civil procedure exists precisely to address such situations: courts deal with absent defendants regularly through ex parte procedures, and the formal adjudication of rescission is no different in this respect from any other civil suit. The plaintiff files the suit, the defendant is served (or substituted service is ordered), and if the defendant chooses not to appear, the court adjudicates the matter on the basis of the evidence placed before it.

Where the fact of the other party's unavailability is itself relevant — for instance, where the defendant has absconded knowing that rescission will be sought against him — such conduct may well be taken into account by the court as evidence of the very fraud or misrepresentation that renders the contract voidable in the first place.

An Important Caution — Limitation and Laches

A party who decides to wait, hoping that the other will reappear, runs a serious risk. The period of limitation for a suit for rescission is three years from the date when the facts entitling the plaintiff to have the contract rescinded first become known to him, under Article 59 of the Limitation Act, 1963. Moreover, an unexplained delay in filing the suit — even after the party has communicated his intention to rescind — may amount to laches. The Supreme Court noted in Lalit Kumar Jain v Jaipur Traders Corporation Pvt Ltd (2002 5 SCC 383) that unexplained delay after exchange of notices, in filing a suit for the relief under section 27 or section 31, would imply that the plaintiff did not stand by his declaration to rescind or was sitting on the fence, and this would disentitle him to the equitable relief.