India: Parliament Passes The Specific Relief Amendment Bill, 2018: Makes Specific Performance Of Contracts Mandatorily Enforceable

Last Updated: 20 September 2018
Article by Ashima Obhan and Akanksha Dua

The Parliament has passed the Specific Relief (Amendment) Bill, 2018 ("Bill"), which brings about significant amendments to the Specific Relief Act, 1963 ("Act"). On July 23, 2018, the Rajya Sabha passed the Bill, which had been passed by the Lok Sabha on March 15, 2018. The Bill is currently awaiting President's assent, following which it will be part of the law. In this article, we are providing a brief overview of the significant changes brought about by the Bill.

Mandatory Enforcement

One of the most significant amendment in the Bill is that it does away with the wider discretion of Courts to grant specific performance and to make specific performance of contracts a general rule subject to certain limited grounds. Section 10 of the Act (as it stood before the amendment), states that specific performance of a contract 'may' be enforced by the Court in its discretion where either: (i) there exists no standard for ascertaining actual damages due to non-performance; or (ii) where monetary compensation for non-performance would not provide adequate relief. As a result, Indian Courts often award damages for breach of contract as a general rule and grant specific performance as an exception. The Bill substitutes Section 10 in its entirety and provides that specific performance of a contract 'shall' be enforced by the Court subject to the limited and specified grounds of refusal. Essentially after the amendment, a party seeking specific performance can now also seek additional relief in the form of damages.

Exceptions to Specific Performance

Section 14 (1) of the Act lists the contracts which cannot be 'specifically enforced'. The Bill replaces Section 14 and has limited the grounds under which specific performance can be refused. A comparative table showing the old provisions vis-à-vis the new provisions is given below:

Act Bill
A contract for the non-performance of which compensation is an adequate relief. Has been deleted under the Bill.
No equivalent provision in the Act. Where a party to the contract has obtained substituted performance of contract in accordance with the provisions of Section 20.
A contract which runs into such minute or numerous details or which is so dependent on the personal qualifications or volition of the parties, or otherwise from its nature is such, that the court cannot enforce specific performance of its material terms. A contract which is so dependent on the personal qualifications of the parties that the court cannot enforce specific performance of its material terms.
A contract which is in its nature determinable. A contract which is in its nature determinable.
A contract, the performance of which involves the performance of a continuous duty which the court cannot supervise. A contract, the performance of which involves the performance of a continuous duty which the court cannot supervise.
Contracts to refer present or future differences to arbitration. Has been deleted under the Bill.

Expert Opinion

A new section has been introduced to the Act (Section 14A), which empowers Courts to get expert opinion from one or more than one experts, where the Court considers it necessary, to assist it on any specific issue involved in the suit. Such opinion or report given by the expert will be a part of the record of the suit. The Court may also direct the fee, cost or expenses to be paid to the expert and the proportion in which the parties shall pay such amount.

Inclusion of Limited Liability Partnerships (LLPs)

Section 15 of the Act (Who may obtain Specific Performance), has been amended to include within its ambit, a limited liability partnership which has entered into a contract and subsequently becomes amalgamated with another limited liability partnership. In such a case, the new limited liability partnership which arises from the amalgamation may obtain specific performance of a contract.

No Need to Aver Readiness and Willingness

It is no longer necessary for parties to aver their readiness and willingness to perform the contract in order to seek specific performance. It is sufficient to merely prove that they have been ready and willing to perform.

Substituted Performance

The Bill has introduced the concept of 'substituted performance'. Section 20 of the Act (as it stood prior to the amendment), which dealt with the guidelines for exercising discretion for granting specific performance by Courts has been wholly replaced by another provision which deals with 'substituted performance'. As per this concept, a party affected by a breach of contract has an option of availing substituted performance through a third party, or by its own agency. Before availing the substituted performance, the aggrieved party will be required to give a notice of not less than 30 days to the party in breach, calling upon him to perform the contract within such time as would be specified in the notice. On his refusal or failure to do so, the aggrieved party may get the contract performed by a third party or his own agency. The aggrieved party will be entitled to recover the costs and expenses incurred for the substituted performance from the party committing the breach. It is also clarified that a party by obtaining substituted performance forfeits his right to get specific performance of the contract enforced through Court. He may still claim compensation from the party in breach.

Expedited Disposal

In order to expedite the disposal of suits filed under the Act, the Bill has, through the introduction of Section 12C, prescribed a period of 12 months from the date of service of summons to the Defendant, for its disposal. This period of 12 months can be extended for a further period not exceeding 6 months in aggregate after recording reasons in writing for such extension.

UPDATE: The Bill was notified on August 01, 2018 and came into effect therefrom.

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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