Sections 27 to 30 of the Specific Relief Act, 1963: Rescission of Contracts
Chapter IV of the Specific Relief Act, 1963 governs when a court may rescind a contract, how rescission operates after a decree for specific performance, and the duty to restore benefits or make equitable compensation. Sections 27, 28, 29 and 30 are explained below with their statutory provisions and practical implications.
Section 27. When rescission may be adjudged or refused
A voidable contract is one that an entitled party may elect to avoid. Ratification, intervening third-party rights, inability to restore the parties substantially to their original position, or inseverability may defeat a claim for rescission. The court examines the facts and equitable consequences.
(1) Any person interested in a contract may sue to have it rescinded, and such rescission may be adjudged by the court in any of the following cases, namely:-
(a) where the contract is voidable or terminable by the plaintiff;
(b) where the contract is unlawful for causes not apparent on its face and the defendant is more to blame than the plaintiff.
(2) Notwithstanding anything contained in sub-section (1), the court may refuse to rescind the contract-
(a) where the plaintiff has expressly or impliedly ratified the contract; or
(b) where, owing to the change of circumstances which has taken place since the making of the contract (not being due to any act of the defendant himself), the parties cannot be substantially restored to the position in which they stood when the contract was made; or
(c) where third parties have, during the subsistence of the contract, acquired rights in good faith without notice and for value; or
(d) where only a part of the contract is sought to be rescinded and such part is not severable from the rest of the contract.
Explanation.-In this section "contract" in relation to the territories to which the Transfer of Property Act, 1882 (4 of 1882), does not extend, means a contract in writing.
Section 28. Rescission in certain circumstances of contracts for the sale or lease of immovable property, the specific performance of which has been decreed
A decree for specific performance does not automatically end the court's supervision. If a purchaser or lessee fails to pay within the time fixed or extended, the vendor or lessor may seek rescission in the same suit. The court may also order possession restored and account for rents, profits and appropriate refunds. A separate suit for relief under this section is barred.
(1) Where in any suit a decree for specific performance of a contract for the sale or lease of immovable property has been made and the purchaser or lessee does not, within the period allowed by the decree or such further period as the court may allow, pay the purchase money or other sum which the court has ordered him to pay, the vendor or lessor may apply in the same suit in which the decree is made, to have the contract rescinded and on such application the court may, by order, rescind the contract either so far as regards the party in default or altogether, as the justice of the case may require.
(2) Where a contract is rescinded under sub-section (1), the court-
(a) shall direct the purchaser or the lessee, if he has obtained possession of the property under the contract, to restore such possession to the vendor or lessor; and
(b) may direct payment to the vendor or lessor of all the rents and profits which have accrued in respect of the property from the date on which possession was so obtained by the purchaser or lessee until restoration of possession to the vendor or lessor, and, if the justice of the case so requires, the refund of any sum paid by the vendee or the lessee as earnest money or deposit in connection with the contract.
(3) If the purchaser or lessee pays the purchase money or other sum which he is ordered to pay under the decree within the period referred to in sub-section (1), the court may, on application made in the same suit, award the purchaser or lessee such further relief as he may be entitled to, including in appropriate cases all or any of the following reliefs, namely:-
(a) the execution of a proper conveyance or lease by the vendor or lessor;
(b) the delivery of possession, or partition and separate possession, of the property on the execution of such conveyance or lease.
(4) No separate suit in respect of any relief which may be claimed under this section shall lie at the instance of a vendor, purchaser, lessor or lessee, as the case may be.
(5) The costs of any proceedings under this section shall be in the discretion of the court.
Section 29. Alternative prayer for rescission in suit for specific performance
A plaintiff seeking specific performance of a written contract may include an alternative request that, if performance is refused, the instrument be rescinded and delivered up for cancellation. The alternative prayer should be expressly included in the pleadings.
A plaintiff instituting a suit for the specific performance of a contract in writing may pray in the alternative that, if the contract cannot be specifically enforced, it may be rescinded and delivered up to be cancelled; and the court, if it refuses to enforce the contract specifically, may direct it to be rescinded and delivered up accordingly.
Section 30. Court may require parties rescinding to do equity
Rescission is subject to equitable adjustment. The successful party may be required to return benefits received under the contract and compensate the other party as justice requires.
On adjudging the rescission of a contract, the court may require the party to whom such relief is granted to restore, so far as may be, any benefit which he may have received from the other party and to make any compensation to him which justice may require.
Practical considerations in a rescission claim
A pleading for rescission should identify the contract, the facts establishing the right to rescind, any prior affirmation or ratification, the position of third parties and the relief sought. In proceedings under Section 28, the parties should also address compliance with the decree, any extension of time, possession, payments and consequential restoration.
Official legal sources
For the statutory text and subsequent amendments, consult the India Code legislative database and the Gazette of India. For judicial decisions and case status, see the Supreme Court of India and eCourts portal. Application of the provisions depends on the facts, pleadings and binding judicial decisions.