Introduction
The origin of the current Specific Relief Act can be traced back to the year 1877 when the first act in the same name came up. As a matter of fact; the general remedy available before the aggrieved party was compensation or damage of loss suffered; and for this purpose prior to the amendment Act of 2018, the remedies were granted at the discretion of the court which is now done away with.
The Specific Relief (Amendment) Act, 2018(the “Amendment Act”) came into force on August 1, 2018. The prime impetus of the Amendment Act is to improve India’s global ranking on the enforceability of contracts and the ease of doing business indices. The main objective of the Amendment Act is to address the delay being caused in relation to the enforceability of contracts. Moreover, the amendment acts also provide parties with remedies whose contractual rights have been violated.
What is the specific performance of the contract?
Specific performance of the contract is an equitable relief that is provided by the court in exceptional cases. Basically, it’s enforced against the defendant to perform the contract which he had promised to perform. Normally on the breach of contract, pecuniary compensation is given to the other party, but sometimes money is not an adequate relief for such breach and sometimes no other remedy can satisfy the plaintiff in such case-specific performance of the contract is awarded as a relief to the plaintiff. The party seeking the remedy must satisfy the court that no other remedy of damages is adequate. First and foremost, this remedy is discretionary in nature which means that it’s not a matter of right.
For example in a contract regarding the sale of immovable property money cannot be an adequate remedy, in such cases court may grant the remedy of specific performance. Specific performance of the contract forced the defendant to do what he had promised to do.
There is an auction of sculpture which is one of a kind in the world, plaintiff paid the money but he did not receive the sculpture, and the auction house denied to perform their form of contract, in such situation if the plaintiff can satisfy the court that such breach cannot be remedied by normal remedy, the court may order the specific performance of the contract.
Section 14
Specific Relief Act of 1963 has ensured and provides for a large number of remedial aspects of law and the Act is, in fact, a replacement of the earlier Act of 1877. In order to protect life and property enumeration of rights and duties must be supplemented by the legal devices; which shall assist the individual to enforce his rights. The prime objective of the Act is to ensure that whenever there is a wrong there must be a remedy that must exist. Since substantive laws have their limitations when it comes to remedies and reliefs, therefore scope remains for the Act whose only objective is to assist and provide a platform for reliefs in a certain specific manner in order to cure or resolve the dispute relating to violation of a legal right.
The term specific performance means enforcement of the exact terms of the contract. Contracts that cannot be specifically enforced are dealt with under Section 14 of the Special Relief Act. Section 14 ensures those cases where the parties to the contract have substituted the performance of the contract. One of the prerequisites is serving a notice of not less than thirty days to the party who has breached the contract, asking him to perform his part of the contract. It is said that the notice is served primarily due to prevent the right of substituted performance from being an exercise in an unfair and unjust manner.
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CONTRACTS WHERE COMPENSATION IS AN ADEQUATE RELIEF
A contract for non-performance of which compensation in money is an adequate relief.
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CONTRACTS RUNNING INTO MINUTE OR NUMEROUS DETAIL
A contract that runs into such minute of numerous details.
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CONTRACTS DEPEND UPON PERSONAL QUALIFICATION
A contract dependent upon personal qualification cannot be enforced.
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CONTRACTS DEPENDENT UPON VIOLATION OF THE PARTIES
A contract dependent upon violation of the parties cannot be enforced.
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UNCERTAINTY OF TERMS
A contract eh term of which the court cannot be found with reasonable certainty.
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REVOKABLE
A contract which is in its nature revokable.
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CONTRACT MADE BY TRUSTEE IN EXCESS OF THEIR POWER
A contract made by trustees either in excess of their power or in breach of their trust.
KEY ASPECTS COVERED UNDER THE AMENDMENT ACT
Certain key aspects covered under the Amendment Act are highlighted as below:
With the enactment of the Amendment Act, the steps have been taken to minimize the discretion of the courts; when it comes to seeking specific performance of contracts and; provides for a right to an aggrieved party to seek specific performance of a contract in certain cases, subject to the provisions contained in Sections 11(2), 14 and 16 of the Act. The Amendment Act also grants an additional right; which appears to be in alternative and without prejudice to other rights under the Act and the Indian Contract Act, 1872, to have the option of substituted performance through a third party, and recover the expenses and other costs actually incurred, spent or suffered by such aggrieved party, from the party committing the breach of the contract.
Prior to amendment
Prior to the enactment of the amendment act, specific performance of a contract was a discretionary remedy; which could be granted only when the real damage was caused when the action caused could not be ascertained accompanied with the non-performance of the action or; in instances when monetary compensation would not be adequate relief for the non-performance of the contract.
After amendment
However, now the discretion of the court is curtailed when it comes to granting the specific performance of a contract, until and unless the contract for which the specific performance is sought, falls within the purview of contracts specified in the amended Section 14 of the Act, or in a situation when the aggrieved party seeking such relief falls within the category of persons as has been mentioned in the amended Section 16 of the Act. Adding more to it, the amended Act expressly provides the aggrieved party to ask for compensation for the breach of a contract in addition to seeking specific performance of such contract (whereas before the amendment, any claim for compensation was either in addition to or in substitution of seeking specific performance.)
After the coming of the recent Amendment Act; Courts are prevented to grant any form of injunction in suits; where the contract is likely to cause a delay in completion of such a project related to infrastructure projects. These projects engulf transport, energy, water and sanitation, communication, such as telecommunication, and social and commercial infrastructure, such as affordable housing (subject to amendments by the Central Government).
Intention behind it
The intent is to reduce the intervention of the court in infrastructure projects and; also to ensure that public interest attached to such projects is not affected by court proceedings; which may impede or delay the progress of completion of such projects, especially the projects in which larger public interest is involved.
Also, the special civil courts need to set up which are to deal with a suit filed relating to infrastructure projects and the timeline for the disposal of all cases filed under the act is that of 12 months which is to be calculated from the date of the receipt of summons by the defendant. The court may extend the period up to a maximum of further 6 months, after recording the reasons in writing for such extension.
The Amendment Act inserts a new section in the Act for engaging technical experts in suits. Where the court considers it necessary to get an expert opinion to assist the court on any specific issue involved in the suit. Courts will determine the terms of payment of such experts and; the payment will be borne by the parties to the suit in such proportion and; at such time, as the court may direct.
Amendments under section 15
Through the introduction of sub-section (fa) in Section 15 of the Act; the Amendment Act has further added limited liability partnerships to the list of parties who may seek specific performance.
Amendments under section 20
The Amendment Act also amends Section 20 of the Act to provide for substituted performance. In the case where there is a situation arise in breach of a contract; the aggrieved party is entitled to arrange for the performance of the contract by a third party or by his own agency, and; to recover the costs and expenses actually incurred. However, this does not stop the aggrieved party from claiming compensation from the defaulting party.
IMPLICATIONS OF THE AMENDMENT ACT
Although the Amendment Act aims to: (i) remove difficulties in the enforcement of contracts, and; (ii) provide for expeditious disposal of cases filed under the Act. The language of the amended provisions expressly takes away the powers of a civil court to grant an injunction in respect of all disputes arising out of a contract relating to an infrastructure project. While the object behind such amendment is; to prevent any impediment or delay in progress or completion of such projects; which are generally in the larger public interest. The possibility of the courts refusing to entertain an injunction application in Bonafide cases cannot be ruled out and; such an embargo raises interesting public policy concerns.
Further, the Amendment Act may affect the jurisdiction of the courts under the Commercial Courts Act, 2015. It may cause potential overlap between the jurisdiction of the special courts envisaged to adjudicate contracts relating to infrastructure projects and general commercial disputes relating to construction and infrastructure contracts. Without an iota of doubt, there is a great need for clarity in relation to all this.
CONCLUSION
The prime impetus of the Amendment Act is; to improve India’s track record on the enforceability of contracts and; accelerate the time taken to dispose of pending cases by protecting contractual expectations and wiping out uncertainties. Despite the fact by the introduction of certain provisions such as; the appointment of experts and substituted performance are common contractual terms. They are nevertheless a welcome statutory addition. It is noteworthy that compelling specific performance of particular circumstances might turn out to be impractical especially where the defaulting party to a contract is on the brink of financial distress or potential insolvency proceedings under the Insolvency & Bankruptcy Code.
Likewise, it seems meaningless and absurd to provide for alternative monetary compensation; unless a third-party guarantor underwrites the obligations of the defaulting party.
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