India: Section 14: Contracts Not Specifically Enforceable – Part 2

Last Updated: 13 September 2018
Article by Ashima Obhan and Shubhangi Agarwal

The Specific Relief (Amendment) Act, 2018 ("Amendment Act") has brought about significant amendments to the Specific Relief Act, 1963 ("Act"), the critical one being that specific performance is now (unless a case falls within the exceptions) the norm instead of a discretionary power with Indian Courts. Our present series of articles focus on the four exceptions to the specific performance rule. In Part 1 of the series we discussed substituted performance and in Part 2 we discuss the second exception that has been carved out.

Performance of a Continuous Duty

Section 14(b) now states that a contract cannot be specifically enforced "the performance of which involves the performance of a continuous duty which the court cannot supervise." An equivalent provision was also there as Section 14(d) of the [old] Act.

The fundamental principle behind this Clause is that the court cannot stop its normal functions for the purpose of giving effect to the terms of a contract. Earlier under the Specific Relief Act, 1877, the continuous duty which the court could not supervise was considered over a period of 3 years which was later omitted under the Act and thus at present there is no restriction on the time limit for the performance of a continuous duty. Examples of contracts which could come under the purview of Section 14(b) are contracts of appointment of employees for continuous service, maintenance contracts, contracts for transportation of heavy and large material on consortium basis may also be affected by difficulty of supervision.

In Her Highness Maharani Shantidevi P Gaikwadv. Savjibhai Haribhai Patel (2001 5 SCC 101), residential houses for the weaker sections of the society were required to be constructed. The plaintiff and the defendant got into the respective agreement regarding the construction. But later, the defendant declared that the agreement and the affidavit-cum-declaration are illegal and thus the plaintiff and defendant are incompetent to get into the contractual obligations. Aggrieved, the plaintiff had filed a decree for specific performance of the agreement which was granted by both the trial court and the High Court. Later when the defendants had sought redressal from the Supreme Court, the appeal was granted, and the Supreme Court held that keeping in mind the nature of the scheme and the facts and circumstances of the case, the performance of this contract would involve continuous supervision which is not possible. It further stated that "... it is extremely difficult, if not impossible, to continuously supervise and monitor the construction and thereafter allotment of such houses."

In the case of Urmila and Co. Pvt. Ltd. v. J.M. Baxi and Co. (AIR 1986 Del 336), a contract was signed that involved the transportation of over dimensional cargo from Kandala Port to Guna for installation of the project for National Fertilizer Limited. The parties had to decide whether a particular bridge should be bypassed or strengthened, there were contradictory opinions regarding the same. The plaintiff pleaded for an interim injunction restraining the defendant from proceeding with the contract. However, the court dismissed the application and while doing so stated that"Specific performance cannot be granted in view of Clauses (b) and (d). The present contract is such as involves the performance of a continuous duty which the court cannot supervise. The parties have to take decision daily as to how the work of as transportationof a particular machinery will be executed. They will also have to continuously decide to whether a particular bridge should be bypassed or strengthened. In fact, the entire execution of the work will depend upon the consistent co-operation of the parties. The court cannot supervise the day to day affairs. Further if the contract exists, it consists of numerous details and its execution depends upon the personal qualification and volition of the parties. As already mentioned, it will be for the parties to decide from time to time as to how problems regarding transportation coming before them will be solved and as to how civil work connected therewith will be performed."

When Specific Performance is Decreed

Courts may be ready to enforce a contract requiring continuous supervision, if the contract sufficiently defines the scope and the ambit of the work that is required to be conducted. In K.M. Jaina Beeviv. M.K. Govindaswami(AIR 1967 Mad 369), the plaintiff agreed to vacate the premises on the condition that on the completion of the building, vacated for reconstruction, the plaintiff will be given a lease of a portion of the premises rebuilt. On the landlord's refusal to complete the contract, the plaintiff sued the landlord for specific performance. By the time of the suit, the building was built and at the time of the hearing of the appeal in the High Court of Madras the construction of the building was complete. Thus, the High Court of Madras held that the suit could be allowed.

What is significant is the expression "continuous" referred to in Section 14(b). Inferring what lies within the scope of the Court's supervision and what doesn't, varies according to the facts and circumstances of each case. Judicial interpretation shows that a Court may order the doing of something which has to be done once and for all so that the Court can see it to its conclusion, but Indian Courts have been disinclined to grant specific performance in cases where the matter involved a prolonged process under the guidance and surveillance of the Court.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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