ANALYSIS OF THE SPECIFIC RELIEF (AMENDMENT)ACT 2018
The Specific Relief Act, 1963 (hereinafter referred to as the ‘Act’) is an act of parliament of India which provides remedies for those persons whose civil or contractual rights is being violated. The remedies for non-performance of a contract are (1) compensatory (2) specific. Damages are the primary remedy for breach of contract. However, an alternative discretionary remedy is provided by this act, for contracts to be specifically enforced. The Supreme Court in Hungerford Investment Trust Ltd. V. Haidas Mundhra held that this act is does not cover h whole law on the subject as it is not exhaustive enough. The Specific Relief Act 2018 was passed by both the houses, proposing amendments to the act. The Amendment was made on the recommendations of the Expert Committee headed by Mr. Anand Desai in its report dated May 26, 2016, with the aim of , amongst various things, to bring regulation regarding the enforceability of contracts in relation to infrastructure developments in India with the object of promoting public interest and ease of doing business, deal with issues concerning delays in enforceability of contracts and provide efficient remedies to the parties who have suffered a breach or non –completion of a contract. Both the houses passed the Specific Relief Act 2018 with a very brief discussion without any engaging debates. Similar to the earlier legislations made for enhancement of business capabilities, this is probably yet another instance of ‘legislate in haste, amend at leisure’.
Expert Committee Report
The expert committee consisting of 6 members from legal and academic professions was set up. After scrutinizing the present circumstances the above mentioned committee submitted a report to the government suggesting few amendments to the already existent Specific Relief Act such as, granting of specific performance as a general rule, taking away the power of total discretionary relief and ease of doing business in India. Two years before the said amendment act was brought the committee gave its report to the Union Law and Justice Minister which recommended:
Particular guidelines to reduce the discretion of courts in matters of specific relief.
Different perspective towards specific performance, mainly making it a rule and providing damages as an alternative remedy.
Though the afore mentioned amending act has not accepted and implemented all the suggestions given by the expert committee in its report ,especially changes regarding the approach on remedies and also any recommendations that took fair procedures into account .
PROVISIONS BROUGHT BY THE AMENDMENT ACT:
Discretionary Specific Performance
If any person breaks his/her promise of performance of a particular contract, in that case a civil court can grant an order of specific performance for the completion of the same, on the other hand an order for compensation is required when a person who breaches the contract has to pay in monetary for the loss incurred. The Specific Relief Act 1963 provides and exception which grants specific performance in cases where giving just compensation is not justified. This approach of exceptions is existent in many countries such as UK, some states in USA, Singapore and in various other common law countries. Although, countries like Germany, France, China and others allow the aggrieved party to choose between the two available remedies. This amending act aims to curb the exceptional nature of the grant of specific performance, which doesn’t mean that it will be compulsory for the suffering parties to choose for it. It merely creates a choice of remedies for the parties approaching the court in the matter of breach of contract.
Before the Amendment , in cases of issues arising due to non-fulfillment or breach of contracts ,courts used their judicial discretionary power in granting of specific performance in accordance with sections 10 and 20 of the act. However, post the amendment, the words “may, in the discretion of the court” in the pre amended section has been replaced with “shall”, resulting in limitation to the discretion of courts in decreeing the specific performance of contracts.
Under Section 10 of the Act, discretionary remedy as to performance of contract has been recognized which can be granted by courts only in the following instances:
When the actual damage due to non- performance of any contract is not ascertainable ; or
Monetary relief to the aggrieved party would not be an adequate amount for the loss incurred due to the breach or non fulfillment.
According to section 20 of the Act, earlier courts would grant specific relief on the basis of certain principles stated as follows:
(i)The exercise of discretion by the courts should not be arbitrary or unreasonable and judicial principles should be the guiding light for it.
(ii) Wherever the discretion is improper to be exercised, the court has to refrain from using it in every circumstance.
(iii) The aggravated party must have provided with all the substantial acts.
(iv) Willingness to take all the necessary action on his/her part.
The Amendment Act, while amending the Section 10 has also repealed Section 20 and has limited the discretion of the courts in matters of specific performance.
Contracts which cannot be specifically enforced – Section 14
The Amendment Act restricts the contracts from being specifically enforced under the following categories:
Where the aggrieved party has already been provided with the substituted performance;
Where the supervision of the courts are required perpetually;
Where personal qualifications of an individual are an essential to the contract;
Nature of the contract is determinable.
Specific performance cannot be claimed by certain persons
According to Specific Relief Amendment Act , under section 16, specific performance cannot be enforced on persons :
By whom substituted performance has already been obtained.
Attains incapability of performing a certain contract
Violates the important terms of the contract;
Fails to perform his/her part of the contract.
Acted in fraud.
The Amendment act through section 16 provides that any aggrieved party while seeking specific performance has to show the willingness and readiness of performing actions in compliance with the completion of essentials terms and contracts and not necessarily has to prove the averment to such effect.
The Amendment Act seeks to bring expert opinion into the picture by adding section 14A to the Act. It seeks to provide courts the power of engaging with experts in the respective matters. The court can demand reports for reference from any person of expertise in relation to any ongoing matter. The Amendment Act seeks to introduce section 14A which talks about the courts power to engage experts. This report when submitted to the court becomes a part of the record of the suit established. All the expensed incurresd by the expert shall be paid by the involved parties in proportion to what court deems fit. The introduction of this section was brought to provide aid and assistance to the court.
Substituted Performance Obtained in Contract
Section 20 has been substituted by this Amendment Act and has thereby introduced the concept of “substituted performance”. According to this section the party aggrieved can engage a third party or even its own agency to complete the performance of a contract, at the cost of the party who breaches the contract. Before engaging the third party or its own agency, the aggrieved party has to send a 30 days’ notice and only on refusal to the performance, the suffering party should choose the third party option. This section was introduced with the object in my mind that damages are not the end to any contract ,an option of substituted performance will aid the aggrieved party in restoring its position as it would have been in case the contract was not breached .
Pursuant to this new section, the aggrieved party can now recover the expenses if any incurred from the substituted performance by the party at default. Also, the party seeking performance can seek for both substituted performance and damages.
The remedy of substituted performance is new only in its expression. It is a remedy provided in situations, where a person breaks the contract even after giving the opportunity again thereby giving the aggrieved party the right to get it done by itself and recover the expenses from the party at default, this is made a statutory right under the amendment. This right was already recognized by the Original Contract Act 1872 but was subjected to 3 conditions for grant or compensation mentioned above, restricting the aggrieved party from recovering all the expenses and costs. The government contracts include risk and cost clause to safeguard themselves from such expenses. The new provisions will now allow the aggrieved party to demand these expenditures. But, at times parties indulging in cases like these go to extreme conditions and can take undue advantage of this provision, by incurring unreasonable amount of expenditures. The expert committee suggested some form of control over this provision ,which was not considered in the amendment act and has not be added to it.
Infrastructure Projects and Special Provisions in relation
Section 20A has been introduced by this Amendment Act .It seeks to restrict the courts from granting any injunctions in the matters of infrastructure projects, specifically mentioned in the provided schedule, if such grant or injunction can cause a delay or obstruction in the progress of any such project. It provides an exhaustive list of such projects under a schedule given. Although, it should be noted that the above exception is created only in relation to the application of contractual suits; meaning that it won’t apply to any other legal proceeding, apart from those which have contractual considerations, for example easement rights, government clearance etc. Section 20 B deals with the establishments of special courts. The state governments in consultation with the Chief Justice shall establish civil courts, one or more in number. The functions of these courts will be to try contractual suits lying under the category of infrastructural projects only. Under section 20C suggests a time period for the disposal of the matters in courts like these. The special courts have to dispose the matter within the period of 12 months, but this time can be extended by the courts to a maximum of 6 more months with adequately recording the reasons for the extension of such period. Before the said amendment, section 21 stated in a suit for specific performance that, the plaintiff may also claim compensation for its breach, whether in addition to, or in substitution of, such performance .This amendment act has substituted the words in addition to and in substitution of with the word in addition to .Therefore , the aggrieved party while claiming for compensation need not see it as an alternative remedy but should be aware that it can be filed in addition to the specific performance sought .New provisions governing the specific performances of contracts concerning the Infrastructure projects have been inserted by this Amendment Act. The aim of regulating the contractual disputes in the sector of infrastructure has been mentioned in Sections 20A, 20B, 20C of the Amendment Act. Infrastructure Project is defined under the explanation to section 20A (1), as projects belonging to various categories mentioned in the new schedule which has been added to the act. These categories cover Energy, Transport, Water and Sanitation, Social and Commercial Infrastructure and communication. The Central Government can alter all the above mentioned categories by publishing a notification in the official gazette.
The rationale behind the amendments suggested under this Act is, predominantly safeguarding public interest in the sector of infrastructure by ways of ensuring that the progress of these projects are not hindered by an unforeseeable situations caused by any parties engaging in contractual disputes. Besides, if any such dispute arises it should be dealt with, in such an expeditious and efficient manner that the private parties involved in the infrastructure project contract should also be benefitted from it. Therefore, the task of adjudication is given to the special courts and not the civil courts to prevent any unnecessary delay in completion of the projects and also protecting the interest of the involved parties at the same time.
Addition of Limited Liability Partnerships
A sub section (fa) has been introduced under section 15 of the existing Specific Relief Act, which introduced the limited liability partnerships to the list of parties by whom specific performance can be sought. Construction and Infrastructure industries will have the true impact of this amendment .Parties may be prompted to add a specific clause relating to substituted performance in drafting of new contracts .The substituted performance and specific performance of any contract will be treated as a legal remedy in the form of rule instead of exception.The act also provides safeguards to the party at default by giving enough opportunities to remove or cure the defects.
ANALYSIS OF THE CHANGE IN PROVISIONS
Removal of Mitigating Factors unde the Amendment
This Amendment Act does not restrict itself to infrastructure projects or its application to only business relations. Any member of public, who makes any contract, will have this act applied on them. It especially affects agreements for purchase or transfers of immovable property. This amending act gives rise to a major cause of concern as it completely takes away the mitigating factors that should be surrounded to the grant of remedy.
However, full reparation to what a party has demanded cannot be provided by the court in any contract. The remedy provided under the law (in force since 1872) does not provide the compensation of entire loss incurred by the aggrieved party due to any breach or non- fulfillment of contract. The courts grants relating to requirements of causation, contemplation or forseeablity are restricted; the power of the court of grant the entire loss is restricted by the mitigating factors. Remedies when restricted by conditions mentioned earlier helps secure balance of interest of every party that has approached the court. Specific performance, as a contract remedy is universally subjected to exceptions even in those legal systems where it is considered as the first or general remedy, these conditions restricting remedies balance the interests of all parties when they approach a court. When parties indulge in sharp practices while remaining within their contract or its performance, conditions like these ensure fairness and justice. International documents and conventions viz. UNIDROIT Principles, Principles of European Contract Law, International Convention on Sale of Goods also recognize these conditions. The Expert Committee suggested that specific performance and injunctions can be denied by the courts on some specific stated grounds. This recommendation was also not considered and added in the Amending Act.
No specific performance where substitutes available
The first and foremost restriction under all legal systems and international convention across the world implies that no specific performance can be granted in case of the aggrieved party already obtained substitution. This persuades the aggrieved party to seek for substitutes and get the said work done and claim for compensation of any loss incurred. Often this restriction may appear very similar to the current provision of the amendment which make specific performance as an exception, the restriction applied works in a different way. The burden of proof that the party which is seeking specific performance has already existing substitutes lies on the party at default. Earlier, under the Act of 1963, the aggrieved has the burden upon itself to show that the compensation provided will not be sufficient. The Amending Act fails to provide for such an important restriction.
No specific performance where enforcement is not possible
Jurisdictions all across the world provide the refusal of specific performance where the contract is incapable of performance or where the contract prohibits the remedy of specific performance itself, these provisions have also not been incorporate in the act. Earlier under the existent act the defendant could in certain circumstances be allowed to construct a building in which case continuous supervision of court is required, is now restricted and hence this possibility has been removed by the amendment.
Some other grounds of refusal of specific performance across the world includes situation where at the time of contracting between both the parties forms a relation where the contract breaker is the one with an unfair advantage , or has the ability to subject the aggrieved party undue hardships. Other grounds for refusing relief recognized across most jurisdictions relate to situations where the terms of the contract or the relations between parties at the time of making the contract gives the contract breaker an unfair advantage, or subjects the aggrieved party to undue hardship. Fairness and justice was ensured through these provisions. These grounds were key elements in the Act of 1963 regarding the discretion of courts. Expert committee also suggested that these specific grounds should be incorporated in the amending act to be proved necessarily before any grants. Apart from these, similar grounds have not been included in the act for the refusal of grant of relief.
Certainty of enforcement essential in business contracting
There can be no denial of the fact that the courts must find grounds of relief on which fairness and justice is ensured. The exceptions to grant of the specific performance and the grant of relief will eventually be molded through case-laws. This possibility makes grant of reliefs uncertain. Contracting gets affected majorly by the uncertainty in grants. Certainty is an essential factor for the parties to develop faith in their contracts. Direct recognition of grounds of refusal of specific relief confines exceptions to those which are provided. These shouldn’t be left to the High Court and Supreme Court instead proper and adequate legislations should be brought to address it.
Injunctions in public works contracts restricted
When the bill was being introduced in both the houses of parliament for discussion, the law minister emphasized on the provision of restriction on powers of courts to give injunctions in the matter of infrastructure projects that would eventually result in delay of the progress of the projects. He gave considerable importance to this provision and also states that contract breakers will not be able to gain injunctions of such type in their favor. However, the amendment which is pertinent is not restricted to contract disputes. The amendment brings forth a doubt and fear is expressed for the same that due to these provisions, rights of the parties which are essentials viz; relating to property affected by infrastructure projects can be violated. These fears are well founded from all aspects as under the amendment made in section 41 the court is given the power to refusal of injunctions in every matter whether related to contractual dispute or not.
Applicability of the Amending Act
Other defects are also presenting in Amending Act. With the aim of achieving certainty in the interest of public, specific provision should have been made in relation to the contracts to which they will apply. Only those contracts should come under the ambit of this law which has been made after the amended law was brought by the legislature as the parties to a contract decides their terms and prices according to existent remedies available.
No compensation in substitution of specific performance
In some cases where the plaintiff is refused the grant specific performance under the grounds mentioned some of which covered by this act, the aggrieved party has the right to claim for compensation .But due to the provision in Civil Procedure Code the party is restricted to file another suit and is rendered remedy less.
Some of the new sections in the Amendment Act are absolutely redundant such 14(a) and 16(a) which states that in case of substituted performance already been obtained by the aggrieved party then they are not to be granted any relief of specific performance .There is no need for these provisions because of the amended section 20(3) express provisions.
Wider consultation desirable
The usefulness and the effectiveness o this legislation could be enhanced; id the bill would have been better circulated and put up for discussions in the legal fraternity. Consultation and comments should have been taken into consideration by those lawyers who practice the specific performance suit .These opinion and views would have made a difference in the efficiency of this legislation