This Analysis of The Specific Relief (Amendment) Act, 2018 is written Ishita Warghat, a second-year law student from the National Law Institute University, Bhopal
INTRODUCTION
Throughout our lives, we come across numerous kinds of agreements varied in nature. They might or might not be binding upon us. From running errands in a supermarket and using credit card services to undertaking a construction project, they vary in magnitude. However big or small the extent of the contract, the basic principles remain the same. A contract is a legally enforceable agreement which binds two or more parties having common intentions.
As contract is a legally binding agreement, both the parties are supposed to honor the promises made in the agreement. To oblige the parties to honor the same, there are certain recourses available in the Indian Contract Act, 1872 and Specific Relief Act, 1963. Out of all the remedies such as damages and injunctions, one of the remedies as mentioned in the Specific Relief Act, 1963 is specific performance of contract, which the research topic primarily deals with. It replaced an earlier act of 1877 and was assented to on 13th December,1963. But as an old law, some amendments to the principal act as per the evolving needs and changes of the society were made.
Formulated with the intent of improving India’s rank in enforcement of contracts and Ease of Doing Business, the Parliament enacted the Specific Relief (Amendment) Act, 2018 (herein referred to as the Amendment Act), with the purpose of updating and renewing the Specific Relief Act, 1963 (herein referred to as the Principal Act). Published in the Gazette of India, it received the presidential assent on 1st August,2018 and came into force on 1st October,2018.
Passed on the basis of the recommendations of an Expert Committee constituted on 28th January, 2016, by the central government with the aim of reviewing the principal act and suggest changes, not all the propositions recommended by the committee were implemented. Consisting six members with the Additional Secretary, Ministry of Law and Justice as the Member Secretary, the above-mentioned expert committee discussed, analyzed and submitted a report consisting all suggestions and recommendations to the Minister, Ministry of Law and Justice on 26th May, 2016. Thus, after a complete analysis and study of the topic a possible conclusion can be derived.
MEANING OF SPECIFIC PERFORMANCE
In India, the Specific Relief Act, 1963 observes the fundamentals that govern specific performance. To lucidly state, specific performance is the fulfillment of a contractual obligation in order to honor the contract where damages are not an adequate relief. It is an equitable remedy granted by the court. The plaintiff files a suit against whom such contractual obligation needs to be enforced. The plaintiff can plead specific performance only as per the original terms of the contract.
RECOMMENDATIONS OF THE COMMITTEE
The report of the expert committee consists of eight chapters in toto. The detailed analysis of some of the important chapters are as follows:
CHAPTER I
Chapter I consists of all referential terms and the intent of the act which is briefly stated as follows:
- To grant specific performance of contracts as a general rule instead of a general exception for better enforceability of contracts.
- To analyze and deliberate on the provision with the view of enforcing the contracts in the context of contemporary and modern developments and considering contracts based on infrastructure involving public interest and other such public investment projects.
- To thoroughly discuss and deliberate the amendments to be brought forth for the successful implementation of the primary goal and curb the discretionary and compensatory relief.
CHAPTER III
The analysis of the provisions of the act are as follows:
- Introduction of provisions that would enhance the ease of doing business and would obligate the parties to perform the contract. Inclusion of a provision that would allow the party demanding the enforcement of contract to seek remedy as per choice. Thereby making injunction or specific performance a choice and not discretionary.
Paragraph 11.7 of the report recommended amending Section 10 thereby making specific performance a general relief instead of a general exception. It also recommended the merging of all grounds of refusal to relief into one section, namely Section 14 instead of enacting them in other section also, namely Section 14 and Section 20.
- Elaboration on refusal to remedies.
CHAPTER IV
This chapter primarily deals with the discretion of courts.
- In paragraph 12.1.2, a proposal regarding clearly defining the grounds on which specific performance can be withheld is mentioned. It also highlighted the need for limiting the discretion. Further, it observed that specific performance should be granted to the plaintiff unless proven otherwise by the defendant.
- Paragraph 12.2.4 highlighted the exceptions for the enforcement of specific performance.
(a) Non-realization by the defendant that the non-performance of the contract would have such adverse consequences on the plaintiff. It was recognized that if the performance of the contract was unreasonably burdensome for the party, then the contract need not be enforced.
(b) While formulating the contact, the plaintiff had an unfair or undue advantage on the defendant.
CHAPTER VII
This chapter discussed that the committee deliberated if any amendment was needed to address other aspects such as unfair contracts, reciprocity in contracts etc. After thorough analysis of the principal act, it was thereby concluded by the committee that the provisions incorporated earlier were enough without any requirement of further additions or changes. Although it was observed that the Section 20(1) of the principal act granted wide discretionary power to the courts, the recommendation mentioned in Chapter III of the report addressed the issue by merging Section 20(1) into Section 14 as grounds for refusal of specific performance of contracts.
CHAPTER VIII
This chapter primarily deals with the elaborate explanations of the amendments proposed. After discussing and analyzing the intricacies and nuances of all the sections, proposal for changes, amendments were made. Relevant additions or removals were proposed by the committee mentioned as follows:
- 1. Section 10 was to be further classified as Section 10 (1), (2), (3). It read as follows:
“Notwithstanding anything contained in any other law for the time bring in force, a party to a contract or any person so entitled under Section 15 shall be entitled to specific performance of a contract or injunction, unless such a relief can be refused under Sections 14,16 or 41”
- 2. Substitution of Section 14(1). The following were the recommendations with respect to the same:
(a) Where the party seeking specific performance could get substituted performance on proportionate terms.
(b) Provisions of Section 20(2) of the principal act to be amalgamated with Section 14(1), barring Section 20(2), dealing with enforcement of being inequitable.
DIFFERENCES BETWEEN THE RECOMMENDATIONS OF THE COMMITTEE AND THE AMENDMENT ACT
| RECOMMENDATIONS | AMENDMENT |
| Suggested inclusion of Section 20(2) along with (a) and (b) in Section 14(1) with explanations. Non-refusal of specific performance in construction projects “subjected to certain provisions” | The recommendation was not followed, and no inclusion was made. 2. This provision was not regarded. |
EFFECTS OF THE DIFFERENCES
The patchy and non-uniform implementation of the recommendations has disabled us from reaping its full benefits. In chapter VII of the report, the committee deliberated on the need to deal with unconscionable terms in the contract and analyzed that because Section 20 specifically deals with the same, it should be clubbed with Section 14 of the act. The committee also referred to similar laws of countries such as the United Kingdom, the United States, New Zealand, and Australia. It also discussed the need for separate legislation on unconscionable terms in line with UK[1] and Singapore. However, as per the amended act, the provisions in Section 20 were changed thus invalidating the above reasoning.
Hence due to this difference, the delineation is uncertain leading to ambiguity. This might prove to be a hindrance or trouble in the future and can lead to a lot of confusion. This rendered the analysis of the of the expert committee regarding Section 20 unfruitful.
SOME IMPORTANT FACTORS CONSIDERED BY THE COURT WHILE GRANTING SPECIFIC PERFORMANCE
READINESS AND WILLINGNESS
Section 16(c) of the principal act made it necessary for the plaintiff to show intent or willingness to perform the contract to demand specific performance. The same was emphasized by the Supreme Court in the following cases:
1.Mehboob-ur-Rehman v. Ahsanul Ghani
“14.Though, with the amendment of the Specific Relief Act, 1963 by Act 18 of 2018, the expression “who fails to aver and prove” is substituted by the expression “who fails to prove” and the expression “must aver” stands substituted by the expression “must prove” but then, the position on all the material aspects remains the same that, specific performance of a contract cannot be enforced in favor to the person who fails to prove that he has already performed or has always been ready and willing to perform the essential terms of the contract which are to be performed by him, other than the terms of which, the performance has been prevented or waived by the other party.”[2]
2.Umabai v. Nilkanth Dhondiba Chavan
“30. It is now well settled that the conduct of the parties, with a view to arrive at a finding as to whether the plaintiff-respondents were all along and still are ready and willing to perform their part of contract as is mandatorily required under Section 16(c) of the Specific Relief Act must be determined having regard to the entire attending circumstances. A bare averment in the plaint or a statement made in the examination-in-chief would not suffice. The conduct of the plaintiff-respondents must be judged having regard to the entirety of the pleadings as also the evidences brought on records.”
However, Section 16(c) of the amended act doesn’t necessitate the plaintiff pleading specific performance to show willingness to perform the contract.
UNBLEMISHED CONDUCT
It is necessary that the plaintiff while performing the contract or while attempting to perform the contract shows unwavering faith while doing so. The same was emphasized by the supreme court in the following judgment:
1. Aniglase Yohannan v. Ramlatha
“12. The basic principle behind Section 16(c) read with Explanation (ii) is that any person seeking benefit of the specific performance of contract must manifest that his conduct has been blemishless throughout entitling him to the specific relief. The provision imposes a personal bar. The Court is to grant relief on the basis of the conduct of the person seeking relief. If the pleadings manifest that the conduct of the plaintiff entitles him to get the relief on perusal of the plaint, he should not be denied the relief.”
READINESS MUST BE SHOWN THROUGHOUT UPTO THE DATE OF THE DECREE
The plaintiff in order to successfully plead for specific performance must show that the intent or willingness to perform was there throughout the contract. The following was validated by the Supreme Court in the following judgement:
Vijay Kumar v. Om Parkash
“7. In order to obtain a decree for specific performance, the plaintiff has to prove his readiness and willingness to perform his part of the contract and the readiness and willingness has to be shown throughout and has to be established by the plaintiff.”[3]
NECESSARY PARTIES
During the pendency of the suit, a third party too can claim to be a party to a contract at a later stage during the case. The Supreme Court in the following case had laid down the principals to be considered while determining the necessary parties to a contract.
“7. In our view, a bare reading of this provision, namely, second part of Order 1 Rule 10 sub-rule (2) CPC would clearly show that the necessary parties in a suit for specific performance of a contract for sale are the parties to the contract or if they are dead, their legal representatives as also a person who had purchased the contracted property from the vendor. In equity as well as in law, the contract constitutes rights and also regulates the liabilities of the parties. A purchaser is a necessary party as he would be affected if he had purchased with or without notice of the contract, but a person who claims adversely to the claim of a vendor is, however, not a necessary party. From the above, it is now clear that two tests are to be satisfied for determining the question who a necessary party is. Tests are — (1) there must be a right to some relief against such party in respect of the controversies involved in the proceedings; (2) no effective decree can be passed in the absence of such party.
PROPER DECREE
The Supreme Court in a case held that in a case of transfer of property, the defendant and the transferee both would be involved in specific performance. The principal was further elaborated in the following case:
Vijay A. Mittal v. Kulwant Rai.
“38. The question arose before this Court in Durga Prasad v. Deep Chand as to what form of decree should be passed in the case of specific performance of contract where the suit property is sold by the defendant i.e., the owner of the suit property to another person and later he suffers a decree for specific performance of contract directing him to transfer the suit property to the plaintiff in term of contract.
39. The learned Judge, Vivian Bose, J. examined this issue and speaking for the Bench in his inimitable style of writing, held as under: (Durga Prasad case)
“Where there is a sale of the same property in favour of a prior and subsequent transferee and the subsequent transferee has, under the conveyance outstanding in his favour, paid the purchase-money to the vendor, then in a suit for specific performance brought by the prior transferee, in case he succeeds, the question arises as to the proper form of decree in such a case. The practice of the courts in India has not been uniform and three distinct lines of thought emerge. According to one point of view, the proper form of decree is to declare the subsequent purchase void as against the prior transferee and direct conveyance by the vendor alone. A second considers that both vendor and vendee should join, while a third would limit execution of the conveyance to the subsequent purchaser alone. According to the Supreme Court, the proper form of decree is to direct specific performance of the contract between the vendor and the prior transferee and direct the subsequent transferee to join in the conveyance so as to pass on the title which resides in him to the prior transferee. He does not join in any special covenants made between the prior transferee and his vendor; all he does is to pass on his title to the prior transferee.”
FEATURES OF THE AMENDMENT
MANDATORY ENFORCEMENT OF SPECIFIC PERFORMANCE
Under the principal act, the court could grant specific performance relief at its discretion in certain unique circumstances, such as where there was no criterion for determining genuine damage caused by the contract’s non-performance or where monetary compensation would not provide enough relief.
However, the amendment act has taken away the courts’ discretion, requiring them to demand specific performance of a contract unless the contract cannot be expressly enforced under its requirements. This is a significant change in the way executed contracts are enforced, with the goal of providing assurance to the performer.
TIME LIMITATION
Another important feature of the amendment is the deadline for resolving lawsuits under the Act. It stipulates that a lawsuit must be resolved within twelve months of the date of serving of the summons on the defendant, with a maximum extension of six months. However, while granting such an extension, the court is compelled to state the reasons.
SPECIAL COURTS
Section 20A limits the court’s ability to grant injunctions in contracts involving “infrastructural projects” as doing so will create a delay in the progress or completion of such “infrastructure project.” Section 41 grants a similar exception. Section 20B adds a new requirement for the State Government to designate one or more civil courts as special courts within the local limits to exercise jurisdiction and try cases brought under the Act in connection with contracts for infrastructure projects.
SUBSTITUTED PERFORMANCE
According to Section 20, a party who has suffered a breach of contract as a result of the other party’s non-performance has the option of substituting performance of the contract through a third party or its own agency and recovering the actual expenses and costs incurred from the defaulting party. The party pleading substituted performance must provide a written notice to the defaulting party of at least thirty (30) days, requiring the defaulting party to perform the contract within a defined time frame. If the defaulting party refuses or fails to perform within the given time frame, the option of substituted performance would be available.
APPOINTMENT OF EXPERTS
According to the amendment act, courts have the authority to appoint experts in cases where they believe it is necessary to obtain an expert opinion for help on a particular problem. Experts in this field can also be called in to present evidence and generate documents on the subject.
LIMITED LIABILITY PARTNERSHIP
Inclusion of clause (fa) in Section 15 allows a new limited liability partnership (“LLP”) to be formed by the merger of two LLPs to seek specific performance of a contract entered by one of the LLPs before the merger. Similarly, a contract’s specific performance can be enforced against a new LLP formed by the merger of two LLPs provided the contract was executed by one of the LLPs prior to the merger.
DISCUSSION AND ANALYSIS
Though the amendment is a change to bridge certain gaps and address the current needs, there are certain challenges that the amendment poses as there are two sides to every coin.
The amendment largely reduces the discretionary powers of the court by substituting the word ‘may’ with ‘shall’ thus compelling specific performance when all the required conditions are met. However, as the facts and circumstances differ from case to case, strict application if this rule might not result in the best of the outcomes especially in cases where the other party is an insolvent or not in a capacity to pay.
The amendment also reduces the authority of the court while granting injunctions against infrastructure projects involving public interest. While it is understood that such a provision was introduced with an intent of avoiding any delay in the completion of a public infrastructure project, there is a possibility that the courts would refuse to entertain injunction pleas in bona fide cases which would go against the very intent with which the provision was introduced.
Moreover, the amendment also proposes to designate certain civil courts as special courts to deal with cases which come under this act related to public infrastructure projects. This might lead to an overlap of jurisdiction with special courts designated under the Commercial Courts Act, 2015 which also deals with disputes arising out of construction and infrastructure projects. This demands a clear distinction between the two.
Additionally, because the amendment lacks a saving clause, it is open to interpretation whether it would be retrospectively or prospectively applicable. Clarity on the same would be needed.
Further not all the recommendations proposed by the Expert Committee constituted in 2016 were implemented. The implementation of these provisions in a patchwork manner would hamper us to fully reap the benefits of the same.
CONCLUSION AND SUGGESTIONS
After thorough analysis and research, the probable conclusion that can be drawn is that the amendment to the Specific Relief Act, 1973 was needed as laws need to change and adapt itself as per the changing needs and circumstances of the society. Introduction of new provisions such as designation of special courts, engagement of experts, prohibition, and reduction of time period have aided the goal that the amendment seeks to achieve i.e., enabling specific performance of contracts as a general rule than a general exception. The amendment seeks to provide additional and speedy legal remedies to the party that has suffered breach of contract and firstly had introduced provisions that prevents parties from avoiding execution of contract.
However, after carefully analyzing the amendment, it can be inferred that one of the provisions, substantially reduces the discretion of the courts as it states that once all conditions are met, specific performance must be granted unless proven otherwise by the defendant. An appropriate balance should be struck between the same thereby not reducing the discretionary power of the courts to such an extent as the facts and circumstances differ from case to case.
The hypothesis has been successfully proved that the amendment seeks to establish specific performance as a general remedy instead of a general exception. Thus, it can safely be concluded that the amendment is a step in the right direction in seeking simplistic and timely addressal of specific performance of contracts.
[1] Unfair Contract Terms Act, 1977.
[2] 2019 SCC OnLine SC 203. (Specific Relief Amendment Act)
[3] 2018 SCC OnLine SC 1913.
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