This article is written by Ishwita Mondal, pursuing a Diploma in Advanced Contract Drafting, Negotiation, and Dispute Resolution from Lawsikho.
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The Specific Relief Act is a legal statute that deals with recovering damages in case of non-performance of the contract. This act was enforced with the view that if a party withdraws from doing his or her performance of the contract against the other party, the aggrieved party can approach the court under the Specific Relief Act. More specifically, the party whose civil rights have been hampered and who has suffered actual damages can seek relief under the Specific Relief Act. This Act mainly comes into play when for the damages caused to the party any monetary compensation would not suffice. The Act does not confer any rights on itself, relief is only provided when legal rights are violated. The Specific Relief Act, 1963, needed certain modifications as few provisions of the Act, was imposing restraint on the investors to invest in India, as it was completely the court’s discretion whether to grant specific relief to the party, so in 2017 a bill was proposed to amend it and to make it a general rule rather than an exception.
The existing legal framework hindered investors from investing in India. India has a low rating when it comes to the ease of doing business and it is mainly due to the laws surrounding enforcement of contracts and their breach.
The court had discretionary power about granting specific performance. So, when there was a breach of contract and it needed to be litigated, it often happened that the non-defaulting party was left with protracted litigation and no other option to enforce the contract. Section 20 of the Act says that it is the discretion of the court to grant specific performance and the court is not bound to grant such relief merely because it is lawful, it was held in the case of Ranganatha Gounder vs. Sahadeva Gounder and Others, 2005. The investors from outside India were fearful to form a contract in India because if by any chance they underwent a breach of contract then they might not get the benefit of specific performance as it depended on the discretion of the court.
So, the Union Government felt the need to change a 50-year-old law and wanted to come up with an amendment, to make India a country that is ideal for investing.
Anand Desai Committee Report
The Specific Relief (Amendment) Bill, 2017 came with certain changes in the Specific Relief Act, 1963. There were several provisions that were used to restrict the parties from enjoying their rights. In the light of the Union Government’s ‘Make in India’ initiative and to facilitate further the ease of doing business, an expert committee was set up in 2017, which is known as the Anand Desai Committee. The objective of this committee was to report the modifications and amendments which are needed in The Specific Relief Act,1963.
The Anand Desai Committee recommended the following:
- Specific Performance should be made a general rule for the remedy for breach of contract and not an exception and monetary compensation should be made an alternate remedy.
- The discretionary power of the court should be restricted while granting specific performance; rather it should be presented to the parties as their right.
- The rights of the third parties should be recognized, but such cannot be done in the case of governmental contracts.
- To include the scope for addressing unconscionable contracts, unfair contracts, reciprocity in contracts etc. and implied terms in a contract in the Act.
- Public Utility Contracts should be considered as a distinct class of contract. The Committee also viewed that in order to carry out public work to usher in progress without interruption, such contracts should be kept to a minimum.
The Specific Relief (Amendment ) Bill was introduced by Mr Ravi Shankar Prasad who was the Law and Justice Minister in 2017 and received presidential assent on 1st August 2018.
Specific features of the Amendment Bill, 2017
- Specific performance: The amendment Bill proposes to take away the discretion from the court while granting specific performance.
- Substituted performance: The Bill also allowed third parties to be allowed as substitutes if a contract is broken. This is provided as an alternate remedy.
- Injunctions: The Bill had proposed to prevent courts from granting injunctions in contracts related to infrastructure projects.
- Special courts: Special Courts are proposed to be made to deal with infrastructure projects.
- Recovery of possession: The bill proposed to permit dispossessed persons to file a suit for recovery of possession for immovable property.
Amendment made by the Specific Relief Amendment Bill, 2017 in respect to the breach of contract
The Specific Relief (Amendment) Bill, 2017 has made enforcement of contracts easier in India. Section 10 of the Specific Relief Act, 1963 states that the court has discretion while granting specific performance of the contract where:
(i) There exists no standard to understand the actual damage caused by the non-performance of the contract.
(ii) Where breach or non-performance of the contract is of such a nature that monetary compensation would not suffice.
Additionally, Section 10 also incorporates the idea that breach of contract for immovable property cannot be revived by monetary compensation whereas the damage for breach of contract for movable property can be revived by monetary value. So, The Specific Relief Act, 1963 had provided the court with the discretion to provide specific performance only in special circumstances and not as a general rule.
The position of law in India related to the breach of contract before 2018 did not provide adequate relief to the parties. The question related to a special status that is granted to the immovable property first arose in the Supreme Court of Canada in the case of Semelhago v. Paramadevan (2 SCR 415). From the decision given in the case, it was interpreted that specific performance should not be granted when the evidence about the uniqueness of the property is absent to such an extent that its substitute would not be readily available.
In the case of P.S Ramkrishna Reddy V. M.K Bhagyalakshmi and another said that specific performance for agreement of sale cannot be refused on the ground that the property was immovable.
The amendment which was proposed tried to bring the same position in India as of Canada and other countries like Australia, New Zealand. Section 10 of the Specific Relief Act, 1963 dealt with the matter where specific performance of the contract needs to be granted. After the amendment, Section 10 of The Specific Relief Act, 1963 was substituted and specific performance is dealt with under Section 11(2), 14 and 16. Due to the amendment, the discretionary power of the court has been reduced and granting of specific performance has been made a general rule. Section 11 is related to the act which is in regard to the specific performance of a trust. After the amendment, Section 11 (1) states that “Except as otherwise provided in this Act, specific performance of a contract shall be enforced when the act agreed to be done is in the performance wholly or partly or a trust”. Section 11(2) states that a contract that is enforced by a trust in excess of its power cannot be specifically enforced.
Illustration: A kept 1000 packets of biscuits in trust of B. A disposes of them wrongfully. Then A needs to restore the same quantity to B and B can enforce the remedy of specific performance.
Section 14 lays down the types of contracts that cannot be specifically enforced. The following contracts cannot be specifically enforced namely:
- Where a party to the contract has obtained substituted performance of a contract in accordance with the provision of Section 20;
- A contract, the performance of which involves the performance of a continuous duty which the court cannot supervise;
- A contract which is so dependent on the personal qualification of the parties that the court cannot enforce specific performance of its material term; In the case of Anitha Aidinyantz vs. Ken R Gnankan, 1997 it was held that contract of personal service can not be enforced not an absolute rule. and
- A contract that is in its nature determinable.
Additionally, Section 14(1) (a) bars the granting of a special performance in cases where the breach of contract can be adequately revived by monetary compensation. Upon the enactment of the contract, the court no longer needs to determine whether a breach of contract can be recovered through monetary compensation. The court needs to see before granting specific performance that whether the contract comes within the ambit of Sections 11(2), 14 and 16. If the answer is yes, specific performance cannot be granted.
Section 16 states that if the plaintiff has not performed his part of the performance then he cannot claim specific performance against the other party.
The bill has limited the discretionary power of the court while providing specific performance for breach of contract. It stated that except in special circumstances like Section 11, 14 and 16, specific performance should be the general rule. Considering today’s reality, the remedy which is provided by enquiring about the uniqueness of the property is not relevant and is absurd because what is unique for one may not be unique for the other. In this case, the law needs to be more specific. Discretionary power of the court on deciding whether to grant specific performance in case of breach increases inconsistency. So, the bill aimed to make the law more objective for providing a remedy in case of breach of contract.
The enforcement of contracts in India was the main point of concern for the investor outside of India and the Specific Relief (Amendment) Bill, 2017 tries to solve all these issues which have brought about landmark changes in the law of India.
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