Introduction
On March 15th, 2018, the Lok Sabha passed the Specific Reliefs (Amendment) Bill, 2017 (“Bill”) by a voice vote proposing to amend several provisions of The Specific Reliefs Act, 1963 (“Act”). The Bill, introduced by the Ministry of Law & Justice, is yet to face the scrutiny of the Rajya Sabha. It is notable that this is the first time that an amendment has been sought since the promulgation of the Act.
The Act currently offers specific relief in the event of a breach of the contract as an exceptional remedy under limited circumstances and the Bill seeks to amend this position to allow damages only as an exceptional remedy in the event of a breach. The significant changes that the Bill introduces have been discussed below –
1. Specific performance:
In substitution of the existing Section 10 of the Act, which gives wide powers to the court to exercise its discretion to determine the relief to be awarded, the amended section restricts “specific performance” as the relief that can be awarded subject to provisions of Sections 11(2), 14 and 16 of the Bill. The underlying principles that helped courts to enforce specific performance were (i) that there existed no standard for ascertaining the actual damage caused by the non-performance of the act agreed to be done; and (ii) when the act to be done is such that compensation in money for its non-performance would not afford adequate relief. Now, pursuant to the Bill, in order to determine the specific performance to be awarded, the court has to examine the circumstances of the suit in light of the following provisions of the Bill –
- (i) Section 11(2), which provides that a contract made by a trustee in excess of his powers or in breach of trust cannot be specifically enforced.
- (ii) Section 14, which provides the kinds of contracts which are not specifically enforceable.
- (iii) Section 16, which lists the reasons due to which specific performance against a person cannot be enforced.
2. Contracts not specifically enforceable:
In substitution of the existing Section 14 of the Act, which allows awarding compensation for non-enforcement of a contract, the amended section under the Bill provides the following conditions for contracts, which cannot be specifically enforced –
- (i) Where the party has obtained substituted performance.
- (ii) Where the performance of the contract is a continuous duty, which cannot be supervised by the court.
- (iii) Where the contract is so dependent on the personal qualifications of party of which specific performance the court cannot enforce.
- (iv) Where a contract is by nature determinable.
3. Personal bars to relief:
In substitution to the condition that a contract cannot be specifically enforced in favour of a person who would not be entitled to recover compensation for its breach, the amended section under the Bill states that a contract cannot be specifically enforced in favour of a person who has obtained substituted performance of contract.
A big problem that parties faced was not only to prove the readiness and willingness to complete the project from the date of the contract through the decree but also to have a specific plea regarding this in the plaint. Further, the condition to “aver and prove” the readiness and willingness to perform the obligations under the contract has been amended to “proving” the readiness and willingness to perform the obligations only.
4. Power of Court to engage experts:
A new Section 14A has been included pursuant to the Bill, which allows the court to engage experts at a determined fee, cost, or expense in a given suit to assist the court with their understanding of the subject-matter including evidence, documents, etc. Any opinion of such an expert shall form part of the record of the court in such matter.
5. Substituted performance of contract:
One of the most significant changes in the Bill is the substitution of the existing Section 20 of the Act concerning the discretion as to decreeing specific performance with “substituted performance”. The amended section under the Bill gives the aggrieved party the right to obtain substituted performance of the contract through a third party or his own agency and recover the expenses and other costs from the defaulting party. Such substituted performance can be availed after duly notifying the defaulting party of exercising such option and allowing it to rectify the breach, failing which substituted performance can be invoked. Notably, this restricts the party from claiming a relief of specific performance once the option of substituted performance has been exercised; however, it does not bar the party from claiming compensation for the breach.
6. Infrastructure projects:
The Bill has accorded special consideration to the ‘infrastructure project’ contracts, which involve huge capital investment and, thus, demand faster and more effective resolution in case of potential disputes between the parties. The Bill focuses on infrastructure projects and various changes have been proposed for facilitating such projects. Insertion of Section 20A pursuant to the Bill is also such a change, which stipulates that injunction in such projects shall not be granted by a court where granting such an injunction would cause impediment or delay in the progress or completion of such project.
A new Schedule is proposed to be added to the Act providing an exhaustive list of projects that qualify under infrastructure projects under the Bill. “Infrastructure project” means the category of projects and infrastructure sub-sectors as specified in the Schedule of the Bill. There are five categories of projects viz., Transport (with seven more sub-categories), Energy (with six more sub-categories), Water and Sanitation (with seven more sub-categories), Communication (with three more sub-categories) and Social and Commercial Infrastructure (with ten more sub-categories). This Schedule is subject to amendments by way of a gazette notification by the Department of Economic Affairs. However, every such notification issued under this Bill shall be laid before each House of the Parliament for any modification on the amendment or its annulment thereof.
Further, the Bill seeks to engage experts to assist courts in cases wherever so required, provided that State Governments has the responsibility to designate one or more civil courts as special courts to try suits under the Act relating to ‘infrastructure projects’ and, crucially, proposed time-bound disposal of cases by special counts.
7 Expeditious disposal of suits:
The special courts so designated shall be required to dispose off the matters before it in a fixed time of twelve months from the date of service of summons by the court, extended by a separate application to a maximum period of another six months in aggregate, after the reasons for such an extension by the court is recorded in writing.
Conclusion
The Bill is yet another change towards increasing “ease of doing business” in India by taking away the discretionary power of courts in enforcing specific remedies and limiting the circumstances in which damages may be awarded to the aggrieved party. It is only logical that this paradigm shift has been introduced now, since the process of awarding damages is a complex one requiring fair and correct assessment of damages, and may often result in over-assessment or under-assessment of the quantum to be awarded. Further, the commonly sought remedy of injunction may only sparingly be awarded by the courts in the case of an infrastructure project, once the Bill becomes effective. This has been done with a view to avoid unnecessary delay and hardship to the aggrieved party given the fact that such projects often involve public-private partnerships and huge expenditure and any delay results in a steep reduction in the value of the project itself. The inclusion of “substituted performance” is a welcome change as it reflects the intention that the focus is now on achieving the end objective of the contract, and recognising that monetary damages might not be the ideal remedy available to an aggrieved party. Essentially, once the Amendment is promulgated, the courts shall be able to award three types of reliefs, i.e., specific performance, substituted performance and monetary compensation.
In conclusion, the Bill is a welcome change and it can be expected to take up India’s contract enforceability position a few notches higher. On the contrary, it is also a fact that the burden on the civil courts in the country is tremendous and this Bill yet aims to keep court’s interference in the process, while taking away its discretionary powers; however, such courts shall be the special courts to dispose cases in a time-bound manner and take necessary support from experts. While the amendments proposed are noteworthy, it remains to be seen how the litigators and courts react to the same, once the Bill is promulgated into an Amendment by the Upper House of the Parliament.
[The author is a Senior Associate in Corporate law practice, Lakshmikumaran & Sridharan, Bangalore]