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ANALYSIS OF THE SPECIFIC RELIEF (AMENDMENT)ACT 2018


INTRODUCTION

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:

  1. Particular guidelines to reduce the discretion of courts in matters of specific relief.

  2. 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:

  1. When the actual damage due to non- performance of any contract is not ascertainable ; or

  2. 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:

  1. Where the aggrieved party has already been provided with the substituted performance;

  2. Where the supervision of the courts are required perpetually;

  3. Where personal qualifications of an individual are an essential to the contract;

  4. 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 :

  1. By whom substituted performance has already been obtained.

  2. Who himself:

  • 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.


Expert Opinion

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