This article is written by Santosh B. Malligawad.

Introduction

The Specific Relief Act, 1963 provides the remedy of specific performance of a contract. The aggrieved party can approach the court to enforce the contractual terms upon breach of a contract. However, the rigid scheme of the Act dissuaded the aggrieved party from approaching the court.

The Specific Relief (Amendment) Act, 2018 provides a new scheme to remedy the situation. This article provides an overview of this new scheme. In the second part, the author narrates the origin and development of the specific relief under the English law of equity. The author further demonstrates the lacunae in the original scheme and the manner in which same have been resolved under the Specific Relief (Amendment) Act, 2018.

The amending Act kindles an interesting controversy. The controversy is in the background of conflicting judgments rendered by various High Courts and also the Supreme Court with regard to the scope and applicability of the new scheme under Specific Relief (Amendment) Act, 2018. In the fourth part, the author breaks down this controversy with the help of precedents and well-settled principles of law.

Specific Relief: a historical backdrop

“Ubi Jus, ibi remedium”: where there is a right, there is a remedy.

The remedy of specific relief was cradled in English law of equity, as a discretionary relief. The courts of equity granted specific relief upon satisfaction of inadequacy test. The inadequacy test presupposes that any breach of contract is adequately compensable in terms of money and that insisting upon specific performance of a contract would impinge the liberty of the promisor. To that effect, the courts of equity have adopted a ‘hierarchical approach’, whereby the compensation for the breach is granted as a primary relief and specific performance as a secondary relief. 

The Indian jurisprudence has closely followed the English principles in this regard. The principles of equity are incorporated into the scheme of the Specific Relief Act, 1963. 

The legal system across the world have modified the scheme for granting the specific relief as per the economic needs and governmental policies. The legal systems with civil law tradition treat specific relief on the same footing as the relief of compensation and the party has liberty to choose the appropriate remedy. In the U.S. and other common law systems, the  specific relief is granted subject to passing inadequacy test, otherwise only the damages would be awarded. In German law, the specific relief is not granted as a matter of right, but only if the compensation is not sufficient to do the justice. Under the European Contract law and U.N. DETROIT principles, the specific relief can be availed as a primary remedy. 

The Specific Relief (Amendment) Act, 2018: An overview of  the new scheme  

The scheme of specific relief, as devised by the courts of equity, is a procedural labyrinth. The breaching party could use the scheme of the Act as a shield against his own defaults. Consequently, the specific relief under original scheme of the Act is rendered unpredictable. The Specific Relief (Amendment)Act, 2018 was enacted in order to overcome the lacunae, in the following manner.

• Elimination of inadequacy test:  The courts of equity granted specific relief only when the compensation under the common law were inadequate. Likewise, under the scheme of Specific Relief Act, 1963, the aggrieved party is required to satisfy the inadequacy test at the outset. The compensation would be deemed inadequate if : (a) there exists no fixed yardstick to determine the precise damages quantifiable in terms of money; or (b) that the compensation in terms of the money for breach of contract, would not afford adequate relief. 

The inadequacy test posed certain technical difficulties. The non-availability of any precise yardstick to determine the loss caused, or adequacy of compensation, or the loss of future business and expectation renders the inadequacy test burdensome.  In addition, the inadequacy test demands expertise on part of the courts, with respect to various technical factors and nuances involved in contracts across various fields. Consequently, the inadequacy test was hurdling expeditious procedure of the court.  

The Specific relief (Amending) Act, 2018 has eliminated the inadequacy test by substituting the Section 10 and Section 14 and Section 20 in entirety. Under the amended scheme, the remedy of specific relief is a regular statutory remedy. The amendment has dispensed the courts indulgence into technical aspects pertaining to adequacy of compensation. The amendment has also relaxed the  negative burden of proof on the aggrieved party. 

• The specific relief – no more discretionary relief: The remedy of specific relief was granted by the courts of equity as a discretionary relief. Likewise, the original scheme of the Specific Relief Act, stipulated that the specific relief may be granted at the discretion of the courts. However, the discretion was guided by the sound principles of law. 

The element of discretion added to the uncertainty of granting the relief. The Specific Relief (Amendment) Act, 2018, The amending Act has eliminated the discretion of the courts by entirely substituted Section 10 and Section 20 of the Act. 

The amended Section 10 stipulates that specific performance of contract shall be enforceable subject to provisions of Section 14 and Section 16. Meaning thereby, that the grant of specific relief is not subject to the discretion of the court. The specific relief is a regular statutory remedy under amended scheme of the Act. 

In addition, the aggrieved party can now choose his own remedy. The amended scheme provides that the aggrieved party can either choose for a substituted performance or the compensation instead of the specific relief. The amendment gives considerable weightage to the convenience of choice to the aggrieved party.  

Breaking down the scope of new scheme – whether prospective or retrospective

The Specific Relief (Amendment) Act, 2018, has received the presidential assent on 01.08.2018 and came into force on 01.10.2018. Even though the Specific Relief (Amendment) Act came into force on 01.10.2018, the amending Act is strangely silent as to, whether the new scheme would be prospective or retrospective. 

The ambiguity is aggravated by the conflicting decisions rendered by Hon’ble Supreme Court and various High courts while interpreting and deciding the Specific Relief (Amendment) Act, 2018. The Hon’ble Allahabad High Court in a suit for specific performance of agreement for sale, negated a contention that the amendment was brought only during the pendency of the appeal and the same is prospective, as such unamended Section 20 was applicable to the case. The court inter alia noted that the appellant cannot take the benefit of the unamended provision and disposed the appeal by considering the amended provisions despite the fact that both execution of the agreement and the institution of the suit were both prior to commencement of amendment. 

The Hon’ble Calcutta High Court, also in a recent judgment, has held that section 14, as amended, would be applicable to the pending proceedings. The reasoning behind this finding by the High court is that the court has to consider the change in circumstance and law while passing the judgment. The language of the Section 14, i.e “The following contracts cannot be specifically enforced..” was interpreted to mean that the question of “enforcement” of a contract comes only after passing the decree and not on the date of institution of the suit. As such any change in law before passing decree has to be made applicable to pending proceedings.

The Hon’ble Supreme Court in a recent judgment, took note of the change in the scheme. The Hon’ble Supreme Court while deciding a suit for specific performance of an agreement for sale executed in the year 1984, has held that the after the amendment in the scheme of the Act by virtue of The Specific Relief (Amendment) Act, 2018, the Courts are obliged to decree the suit for specific performance. The Hon’ble Supreme Court further held that the only embargos in decreeing the suit are the ones which have been stipulated in Section 11, Section 14 and Section 16. 

Contrarily, the Hon’ble High Court of Karnataka has held the amendment is purely prospective even though the same is by way of substitution. The reasoning given by the Hon’ble High Court is that the amendment comes into force from 01.10.2018 and that nothing in the Act expressly provides for the retrospective applicability of the amendments. The court has further observed that the statute has to interpreted in the light of text and context of the enactment.

In the background of this ambivalence, it is necessary to inquire into the true scope and applicability of the new scheme. It is axiomatic to mention that a prospective amendment is one which applies to transactions and events subsequent from the date of commencement. On the other hand, the term retrospective is puzzling, since sometimes it is used interchangeably as retroactive, which are different from each other. 

The Hon’ble Supreme Court of India in Madan Mohan Pathak v. Union of India has laid down that the term retrospective means any statute or an amendment which applies even to the transaction and facts coming into existence prior to the commencement of such a statute or amendment. On the other hand, the term retro-active means any statute or an amendment which not only relies on or takes into consideration facts or events that have transpired prior to the commencement of such a statute or amendment, but also affects or unsettles such facts and events even though they have attained finality. Therefore, both of these terms, even though used interchangeably, are not the same. In the background of the aforesaid distinctions, let us proceed to examine the scope of Specific Relief (Amendment) Act, 2018.

• Amendment by way of substitution: The amendment of a statute  could be carried out by way of insertion, deletion, substitution, or repeal, etc. Each of the manner adopted for amendment unfolds different interpretations. 

It is expressly apparent that the method of amendment adopted under the Specific Relief (Amendment) Act, 2018 is that of substitution. The amending Act substitutes Section 10, Section 14 and Section 20 which together formed the basis of the original statutory scheme. 

The general dictionary meaning of the term substitute means to place someone or something in place of another. Any amendment by way of substitution involves two steps; firstly the old law is repealed and ceases to exist and secondly, the new law would take the place of the  old law. Consequently, the substituted provision incorporates itself into original enactment. Thereafter, such an amended provision should be read and construed (except where it would lead to repugnancy, inconsistency or absurdity), as if the amended provision had been written with the same ink and paper at the time of enacting original provision. The substituted provision would (unless it is not made expressly clear that it is only prospective in nature) come into effect from the date of the earlier Act. However, this is not a rigid rule. If such an interpretation leads to repugnancy, inconsistency or absurdity, then this principle of interpretation is not applicable. Further, the amendment by way of substitution cannot be interpreted in a manner where the crystallised rights or transaction which have attained finality prior to amendment, are affected.

The Specific Relief (Amendment) Act, 2018 substitutes Section 10 Section 14 and Section 20 of the Act. In view of the aforesaid principles of interpretation, the substituted provisions would deemed as is they are written with the same ink and paper. Consequently, the amended provisions would date back to the effective date of the original Specific Relief Act, 1963.

• The amendment whether procedural or substantive: Further, the nature of the amendment either procedural or substantive greatly determines such scope of application of such an amendment. 

Generally, the law which imposes duties or creates any rights in persons is termed as substantive law and the law which prescribes the manner in which such rights and duties are to be enforced in a court are known as procedural laws.

One of the fundamental tenet of statutory interpretation, is that a statute or an amendment operates only prospectively, unless the contrary is expressly or impliedly made clear by the language and intention of the legislature. This principle is strictly applied in cases where such an enactment or amendment substantive and takes away or impair an existing right or impose new obligations and disabilities. 

However, this principle is not applicable in cases where the amendment is merely procedural, declaratory, clarificatory, curative or a remedial amendment. 

Insofar as the nature of the Specific Relief Act, 1963, it was observed in the 9th law commission report that, the Specific Relief Act, 1963 merely lays down the procedure for availing different reliefs and it was also considered incorporating the provisions of the Act, into The Code of Civil Procedure. However, this suggestion was found to be impractical since it would be a laborious task and also for the fact that legal profession and courts were accustomed to the existing arrangement. Thereafter, the Hon’ble Supreme Court and various High Courts have categorically held that the Specific Relief Act, 1963, is a procedural enactment which merely stipulate the rules of pleading and the procedure to be followed by the court before granting the specific relief.

Section 10 of the Specific Relief Act originally stipulated inadequacy test as a precondition for granting specific relief. The amending Act entirely substitutes Section 10. Thereby eliminating the inadequacy test.  Likewise, the unamended Section 20 of the Act stipulated that the specific relief may be granted at the discretion of the court. Similarly, the amending Act substitutes Section 20 as well. Thereby rendering the specific relief as regular statutory remedy instead of a discretionary remedy. Essentially, the Specific Relief (Amendment) Act, 2018 refines the cumbersome procedure scheme of the principal Act. 

In the light of aforesaid discussion, it could be safely argued that the scope of the new scheme under the Specific Relief (Amendment) Act, 2018 is retrospective. Firstly, for the reason that the amendment is carried out by way of substitution, as such the amended provisions would date back to the original enactment. Such interpretation neither affect the vested rights or open up the transactions for challenge which have attained finality, nor does it create any repugnancy or inconsistency.

Secondly, amened scheme under the Specific Relief (Amendment) Act, 2018 is procedural in nature such as the Specific Relief Act, 1963. As such the procedural amendments, made during the pendency of proceedings are applicable to the such pending proceedings and appeals, as long as it does not lead to repugnancy or absurdity.

Conclusion

The Specific Relief (Amendment) Act, 2018 brings a fundamental shift in the nature of relief and the procedural scheme of the original Act. By virtue of the amendment, the specific relief has changed from being a discretionary remedy into a statutory remedy. The amended scheme provides for various avenues of redressing the breach of contract. 

The amendment inculcates culture of strict enforcement of contracts. The amendment further untangles the cobweb of procedure and technicalities thereby expediting the legal process. The discussion at Part III, reveales that the rigidity in the old scheme was the result of antique principles of equity. These antique principles were inconsistent with governmental policies and changing requirements. Therefore, the amendment seeks to remedy the situation by eliminating the inadequacy test and element of discretion as provided under Sections 10 and Section 20 of the Specific Relief Act, 1963. 

Insofar as the controversy surrounding the scope of new scheme, the discussion at part IV clearly demonstrates that the amended scheme could be retrospective, even in the absence of express provision. The factors such as method adopted for amendment, the nature of the amended provisions, the legislative intent and the principles of interpretation, bolster the contention regarding the retrospective scope of the amended scheme under Specific Relief (Amendment) Act, 2018. More importantly, the judicial pronouncements clearly establish that the amended scheme could made applicable to pending proceedings even though the transactions may have effected prior to commencing date of Specific Relief (Amendment) Act, 2018. 

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