India: Specific Relief (Amendment) Act, 2018

Last Updated: 27 September 2018
Article by Seema Jhingan, Rupal Bhatia and Tanmay Mohanty

Introduction

The Central Government has recently notified and published the Specific Relief (Amendment) Act, 2018 ("SRA 2018") in the Official Gazette on August 01, 2018 vide which certain existing enforceability conditions have been removed and certain new concepts have been introduced in the Specific Relief Act, 1963 ("SRA 1963"). The amendments are made pursuant to the recommendations of an Expert Committee to keep pace with the growing Indian economy, the need to uphold the sanctity of an executed contract and for promoting and facilitating 'Ease of Doing Business' in India.

Key Features of SRA 2018

  • Mandatory Specific performance of the Contracts: Grant of relief of specific performance was exercised at the discretion of the court under the SRA 1963 in certain special circumstances including where there existed no standard for ascertaining actual damage caused by the non-performance of the contract, or where compensation in money for its non-performance would not afford adequate relief. The SRA 2018 has however taken away this discretion of the courts and the courts have to now mandatorily enforce specific performance of a contract except in cases where the contracts cannot be specifically enforced under the provisions of the SRA 2018. This is a major shift in enforcement of executed contracts intended to bring certainty to performance by parties to a contract. The track record of grant of relief of specific performance of contracts was poor due to several reasons including the discretion provided to the courts, which has now been removed for ensuring due performance of a contract. 
  • Contracts not specifically enforceable: Section 14 of the SRA 1963 provided for certain contracts which were not specifically enforceable. This section has been substituted by the SRA 2018 with certain new exclusions/exceptions which are largely similar to the earlier section 14 of the SRA 1963. However, the earlier exclusion where the contract was not specifically enforceable "for the non-performance of which compensation is an adequate relief" has now been omitted and going forward, even if adequate relief is a possibility a contract can now be specifically enforced (provided it doesn't fall under the exclusions). Certain unenforceable contracts remain the same under both the legislations, such as (i) a contract performance of which involves the performance of a continuous duty which cannot be supervised by the court; (ii) a contract which is so dependent on the personal qualifications of the parties that the court cannot enforce specific performance of its material terms and (iii) determinable contracts. In addition to the above, SRA 2018 has introduced the concept of "substituted performance" (discussed herein below) and has made such contracts unenforceable where a party has obtained "substituted performance" in terms of the SRA 2018.   

    Substituted Performance: In terms of Section 20 of the SRA 2018 a party which has suffered a breach of contract due to non-performance by the other party has an option of substituted performance of the contract through a third party or through its own agency and recover the actual expenses and costs so incurred from the defaulting party committing breach of the contract. The party opting for substituted performance is required to send a written notice of at least thirty (30) days to the defaulting party calling upon the said party to perform the contract within a specified period of time. In the event of refusal and/or failure by the defaulting party within the specified period, the option of substituted performance may be exercised. The section further provides that the party suffering breach can also claim compensation for breach despite having exercised its right for substituted performance. However, once substituted performance is opted by a party, specific performance of the contract cannot be enforced in favour of such party.
  • Timeline for disposal of suits: Another crucial aspect brought in by the SRA 2018 is the timeline for disposal of suits under the Act. It provides for disposal of a suit within twelve months from the date of service of summons upon the defendant and such time period may be extended not exceeding six months in aggregate. However, the court is required to write the reasons while giving such extension(s).

  • Injunctions and Special Courts: Section 20A has been introduced in SRA 2018 that curbs the power of the court in granting injunctions in contracts involving "infrastructural project" as specified in the Schedule where granting injunction would cause delay in the progress or completion of such "infrastructure project". A similar exclusion has been added in Section 41 of the SRA 1963. The SRA 2018 further introduces Section 20B requiring the State Government to designate one or more civil courts as special courts within the local limits of the area to exercise jurisdiction and to try suits under the Act in respect of contracts relating to infrastructure projects.

Other features of SRA, 2018:

  • The courts have been given the power to appoint experts where it considers necessary to get an expert opinion for assistance on a specific issue involved in a suit. Such experts can also be called to lead evidence and produce documents on the issue.
  • A new clause (fa) has been inserted in Section 15 of the SRA 1963, to enable a new limited liability partnership ("LLP") which arises out of the amalgamation of two LLPs, to seek specific performance of a contract that was entered into by one of the LLP prior to amalgamation. Similarly, specific performance of a contract can be enforced against a new LLP which arises out of amalgamation of two LLPs and the contract was executed by one of the LLP prior to amalgamation.
  • Unlike the SRA 1963, where averment related to a party's readiness and willingness to perform the contract was essential, now it would be sufficient if the party proves his performance under the contract or his readiness and willingness to perform the contract even without averring the same in his pleadings.

The amendments introduced to SRA 1963 are a welcome step towards simplifying enforcement of contracts and timely redressal of suits seeking specific performance of contracts. Making specific performance of contracts a general rule instead of a general exception and introduction of substituted performance as an alternate remedy further strengthens the law with respect to enforcement of contracts and its long term sanctity

LexCounsel provides this e-update on a complimentary basis solely for informational purposes. It is not intended to constitute, and should not be taken as, legal advice, or a communication intended to solicit or establish any attorney-client relationship between LexCounsel and the reader(s). LexCounsel shall not have any obligations or liabilities towards any acts or omission of any reader(s) consequent to any information contained in this e-newsletter. The readers are advised to consult competent professionals in their own judgment before acting on the basis of any information provided hereby.

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Authors
Seema Jhingan
Rupal Bhatia
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