India: Salient Features Of The Specific Relief (Amendment) Act, 2017

Recently, Specific Relief Act, 1963 ("the Act") underwent valiant changes in order to cater to augmented contractual transactions inter-se parties and disputes arising therein. The Act was enacted to define the law relating to specific performance of contracts and conferred discretionary powers upon the concerned Courts in India to grant a relief of specific performance of a contract. As a result of the discretionary powers, the Courts in majority of cases awarded damages as a general rule and granted specific performance as an exception. Recently, it was felt that the Act is not in tune with the rapid economic growth and expansion of infrastructure activities in the country. Consequently, the Specific Relief (Amendment) Bill, 2017 ("the Amendment") was introduced by the Minister of Law and Justice, on December 22, 2017. The bill was passed by the Lok Sabha on March 15, 2018 and subsequently passed by the Rajya Sabha on July 23, 2018. The significant features of this amendment are listed below:

ADDITIONAL PARTY ENTITLED TO SEEK RECOVERY OF POSSESSION (SECTION 6)

Section 6 of the Act permitted the following persons to file a suit for recovery of possession of immovable property: (i) a person put out of possession (dispossessed person); and (ii) any person claiming through such dispossessed person.

The Amendment now additionally permits a person through whom the dispossessed got the possession of the immovable property, to file a suit for recovery.

SPECIFIC PERFORMANCE: "SHALL BE ENFORCED" REPLACES "IN THE DISCRETION OF THE COURT" (SECTION 10)

As per the previous scheme of the Act, to obtain a decree of specific performance, a party filing a suit had to appeal to the discretionary powers of the Court. The Amendment modifies Section 10 by substituting the words, "the specific performance of any contract may, in the discretion of the court, be enforced" with "specific performance of a contract shall be enforced by the court".

The effect of the amendment is that the party filing a suit for specific performance of contract will be entitled for the relief of specific performance. Similar discretionary powers of the Court in granting specific performance have been substituted with the word 'shall' in relation to trusts (under Section 11).

POWER OF COURTS TO ENGAGE EXPERTS (SECTION 14A)

The Amendment introduces a new provision i.e. Section 14A which will empower and enable the Court to engage one or more technical experts to assist on any specific issue involved in any suit. The expert may also be called upon for providing evidence, including production of relevant documents related to the issue.

AMALGAMATION OF LLPS, ONE OF WHICH IS PARTY TO THE CONTRACT ENTITLED TO SEEK SPECIFIC PERFORMANCE (SECTION 15)

Sub-clause (g) of Section 15 of the Act provided that when a company had entered into a contract and it subsequently amalgamated with another company, the new company which arose out of the said amalgamation was entitled to seek specific performance of the contract. The Amendment extends similar rights to a limited liability partnership by inserting Clause (fa) which states that when a limited liability partnership has entered into a contract and subsequently amalgamated with another limited liability partnership, the new limited liability partnership which arises out of the said amalgamation is entitled to seek specific performance of the contract.

SUBSTITUTED PERFORMANCE: NEW RELIEF ADDED (SECTION 20)

The Amendment introduces the concept of 'substituted performance' under Section 20. As per the concept, a party who is affected by the breach of contract can choose to get the contract performed by a third party, or by its own agency, at the cost of the contracting party at default. The affected party has to give prior notice of thirty days to the other party expressing his intention to seek substituted performance. It is also clarified that the party enforcing substituted performance forfeits its right to get specific performance of the contract enforced through Court. Consequently, Section 14 of the Act which enlists contracts which cannot be specifically enforced has also been amended by substituting Clause (a) which earlier read "a contract for the non-performance of which compensation in money is an adequate relief" with "(a) where a party to the contract has obtained substituted performance of contract in accordance with the provisions of section 20".

RESTRAINT ON GRANT OF INJUNCTIONS IN INFRASTRUCTURE PROJECTS (SECTION 20A)

The Amendment has inserted a new Section, i.e. Section 20A which restrains the Court from granting an injunction in a suit involving contract relating to infrastructure, where granting the injunction would cause impediment or delay in the progress or completion of the infrastructure project. Infrastructure projects have been categorized and listed in the Schedule of the Act as follows: (i) Transport; (ii) Energy (iii) Water and Sanitation (iv) Communication; and (v) Social and Commercial Infrastructure. The Infrastructure Sub-sectors have also been listed under the said respective categories.

SPECIAL COURTS FOR INFRASTRUCTURE PROJECTS (SECTION 20B)

The newly inserted Section 20B provides for the State Government to designate, by notification published in the Official Gazette, one or more Civil Courts as Special Courts, after due consultation with the concerned Chief Justice of the High Court. These Special Courts are empowered to exercise jurisdiction, within the local limits of the area and to try a suit under this Act in respect of contracts relating to infrastructure projects.

COMPENSATION – ADDITIONAL AND NOT SUBSTITUTE RELIEF TO SPECIFIC PERFORMANCE (SECTION 21)

Section 21 (1) of the Act relating to award of compensation earlier allowed a party in a suit for specific performance to seek compensation for the breach "either in addition to, or in substitution of", the performance of the contract. The Amendment strikes off the relief of claiming compensation in substitution and retains only the words "in addition to". Therefore, compensation need not be sought as a substitute to the relief of specific performance. The relief for compensation can now be claimed as an additional relief.

CONCLUSION

In view of the enormous commercial activities in India including foreign direct investments, public private partnerships, public utilities infrastructure developments, etc. it was necessary to do away with the discretion of courts to grant specific performance to facilitate speedy enforcement of contracts. The new provisions relating to infrastructure projects compliment the large scale infrastructure work taking place in a developing country like India. The intention is to prevent stalling of the infrastructure projects by the Courts. However, the circumstances that may impediment or delay the progress or completion of the infrastructure projects will be tested by the Courts based on the facts and circumstances of each such case preferred under the Act. Also, after the enactment of the Limited Liability Partnership Act in 2008, the addition of amalgamation of LLPs as a party entitled to seek specific performance was much needed. Further, the provision for substituted performance of contracts from the party who failed to perform its part of contract also constitutes an effective alternative remedy for breach of contracts.

Clearly, the amendments are crucial and take into consideration the important issues being faced while seeking a relief under a contract. With the benevolent changes, more parties are likely to derive the relief of specific performance as well as compensation on account of breach of a contract. Since the specific performance of a contract shall be enforced by the Courts now, a party to a contract is more likely to perform its part of the contract with utmost faith and sincerity, and unlikely to commit a breach or refuse the performance of the contract.

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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