2018 Amendment To The Specific Relief Act: Retrospective Or Prospective?
The common law treated money as a measure of every loss. Until the English Courts of Chancery assumed the jurisdiction to decree Specific Performance, the only remedy in common law for the non-performance of contracts was damages. To fill that void, the Courts of Equity, at their discretion, compelled the party to a contract to perform his/her part of the contract when damages recoverable...
The common law treated money as a measure of every loss. Until the English Courts of Chancery assumed the jurisdiction to decree Specific Performance, the only remedy in common law for the non-performance of contracts was damages. To fill that void, the Courts of Equity, at their discretion, compelled the party to a contract to perform his/her part of the contract when damages recoverable at law were not an adequate remedy. The Specific Relief Act, 1963 ("the Act") embodied this equitable relief.
The exceptional nature of the Act stems from the test of inadequacy of compensation. This test provided an implicit leverage/privilege to the promisor who could get away with his/her contractual obligation when it was a more beneficial course of action over performance after compensating the other party. Since this approach was unable to match the pace of evolving economic environment in India, it had to be changed to make the country more business-friendly.
Later came the 2018 Amendment to the Act ("Amendment"), premised upon the recommendations in the Expert Committee Report 2016. The theme of the Amendment was to invert the status quo and make the specific performance of contracts and injunctions a rule and damages for non-performance an exception. In the process, the Courts lost their discretion (subject to certain exceptions) that was guaranteed under sections 10 and 20 of the Act, prior to the Amendment. The question is 'will this Amendment apply retrospectively?'. This article analyzes the current conflict in the judicial approach over the subject and an independent solution for the same.
To facilitate better understanding, a chart contouring the pre amendment and post amendment status of important sections of the Act is produced hereinbelow:
| Section | Pre Amendment Status | Post Amendment Status |
| Section 10 | Cases in which specific performance of contract enforceable.—Except as otherwise provided in this Chapter, the specific performance of any contract may, in the discretion of the court, be enforced— (a) when there exists no standard for ascertaining actual damage caused by the non-performance of the act agreed to be done; or (b) when the act agreed to be done is such that compensation in money for its non-performance would not afford adequate relief. Explanation.—Unless and until the contrary is proved, the court shall presume— (i) that the breach of a contract to transfer immovable property cannot be adequately relieved by compensation in money; and (ii) that the breach of a contract to transfer movable property can be so relieved except in the following cases:— (a) where the property is not an ordinary article of commerce, or is of special value or interest to the plaintiff, or consists of goods which are not easily obtainable in the market; (b) where the property is held by the defendant as the agent or trustee of the plaintiff. | Specific performance in respect of contracts.—The specific performance of a contract shall be enforced by the court subject to the provisions contained in sub-section (2) of section 11, section 14 and section 16.
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| Section 14 | Contracts not specifically enforceable.— (1) The following contracts cannot be specifically enforced, namely:— (a) a contract for the non-performance of which compensation in money is an adequate relief; (b) 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; (c) a contract which is in its nature determinable; (d) a contract the performance of which involves the performance of a continuous duty which the court cannot supervise. (2) Save as provided by the Arbitration Act, 1940 (10 of 1940), no contract to refer present or future differences to arbitration shall be specifically enforced; but if any person who has made such a contract (other than an arbitration agreement to which the provisions of the said Act apply) and has refused to perform it, sues in respect of any subject which he has contracted to refer, the existence of such contract shall bar the suit. (3) Notwithstanding anything contained in clause (a) or clause (c) or clause (d) of sub-section (1), the court may enforce specific performance in the following cases:— (a) where the suit is for the enforcement of a contract,— (i) to execute a mortgage or furnish any other security for securing the repayment of any loan which the borrower is not willing to repay at once: Provided that where only a part of the loan has been advanced the lendor is willing to advance the remaining part of the loan in terms of the contract; or (ii) to take up and pay for any debentures of a company; (b) where the suit is for,— (i) the execution of a formal deed of partnership, the parties having commenced to carry on the business of the partnership; or (ii) the purchase of a share of a partner in a firm; (c) where the suit is for the enforcement of a contract for the construction of any building or the execution of any other work on land: Provided that the following conditions are fulfilled, namely:— (i) the building or other work is described in the contract in terms sufficiently precise to enable the court to determine the exact nature of the building or work; (ii) the plaintiff has a substantial interest in the performance of the contract and the interest is of such a nature that compensation in money for non-performance of the contract is not an adequate relief; and (iii) the defendant has, in persuance of the contract, obtained possession of the whole or any part of the land on which the building is to be constructed or other work is to be executed. | Contracts not specifically enforceable.—The following contracts cannot be specifically enforced, namely:— (a) where a party to the contract has obtained substituted performance of contract in accordance with the provisions of section 20; (b) a contract, the performance of which involves the performance of a continuous duty which the court cannot supervise; (c) 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 (d) a contract which is in its nature determinable.
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| Section 16 | Personal bars to relief.—Specific performance of a contract cannot be enforced in favour of a person— (a) who would not be entitled to recover compensation for its breach; or (b) who has become incapable of performing, or violates any essential term of, the contract that on his part remains to be performed, or acts in fraud of the contract, or wilfully acts at variance with, or in subversion of, the relation intended to be established by the contract; or (c) who fails to aver and prove that he has performed or has always been ready and willing to perform the essential terms of the contract which are to be performed by him, other than terms the performance of which has been prevented or waived by the defendant. Explanation.—For the purposes of clause (c),— (i) where a contract involves the payment of money, it is not essential for the plaintiff to actually tender to the defendant or to deposit in court any money except when so directed by the court; (ii) the plaintiff must aver performance of, or readiness and willingness to perform, the contract according to its true construction.
| Personal bars to relief.—Specific performance of a contract cannot be enforced in favour of a person— (a) who has obtained substituted performance of contract under section 20; (b) who has become incapable of performing, or violates any essential term of, the contract that on his part remains to be performed, or acts in fraud of the contract, or wilfully acts at variance with, or in subversion of, the relation intended to be established by the contract; or (c) who fails to prove that he has performed or has always been ready and willing to perform the essential terms of the contract which are to be performed by him, other than terms of the performance of which has been prevented or waived by the defendant. Explanation.—For the purposes of clause (c),— (i) where a contract involves the payment of money, it is not essential for the plaintiff to actually tender to the defendant or to deposit in court any money except when so directed by the court; (ii) the plaintiff must prove performance of, or readiness and willingness to perform, the contract according to its true construction. |
| Section 20 | Discretion as to decreeing specific performance.— (1) The jurisdiction to decree specific performance is discretionary, and the court is not bound to grant such relief merely because it is lawful to do so; but the discretion of the court is not arbitrary but sound and reasonable, guided by judicial principles and capable of correction by a court of appeal. (2) The following are cases in which the court may properly exercise discretion not to decree specific performance:— (a) where the terms of the contract or the conduct of the parties at the time of entering into the contract or the other circumstances under which the contract was entered into are such that the contract, though not voidable, gives the plaintiff an unfair advantage over the defendant; or (b) where the performance of the contract would involve some hardship on the defendant which he did not foresee, whereas its non-performance would involve no such hardship on the plaintiff; or (c) where the defendant entered into the contract under circumstances which though not rendering the contract voidable, makes it inequitable to enforce specific performance. Explanation 1.—Mere inadequacy of consideration, or the mere fact that the contract is onerous to the defendant or improvident in its nature, shall not be deemed to constitute an unfair advantage within the meaning of clause (a) or hardship within the meaning of clause (b). Explanation 2.— The question whether the performance of a contract would involve hardship on the defendant within the meaning of clause (b) shall, except in cases where the hardship has resulted from any act of the plaintiff subsequent to the contract, be determined with reference to the circumstances existing at the time of the contract. (3) The court may properly exercise discretion to decree specific performance in any case where the plaintiff has done substantial acts or suffered losses in consequence of a contract capable of specific performance. (4) The court shall not refuse to any party specific performance of a contract merely on the ground that the contract is not enforceable at the instance of the party. | Substituted performance of contract.—(1) Without prejudice to the generality of the provisions contained in the Indian Contract Act, 1872 (9 of 1872), and, except as otherwise agreed upon by the parties, where the contract is broken due to non-performance of promise by any party, the party who suffers by such breach shall have the option of substituted performance through a third party or by his own agency, and, recover the expenses and other costs actually incurred, spent or suffered by him, from the party committing such breach. (2) No substituted performance of contract under sub-section (1) shall be undertaken unless the party who suffers such breach has given a notice in writing, of not less than thirty days, to the party in breach calling upon him to perform the contract within such time as specified in the notice, and on his refusal or failure to do so, he may get the same performed by a third party or by his own agency: Provided that the party who suffers such breach shall not be entitled to recover the expenses and costs under sub-section (1) unless he has got the contract performed through a third party or by his own agency. (3) Where the party suffering breach of contract has got the contract performed through a third party or by his own agency after giving notice under sub-section (1), he shall not be entitled to claim relief of specific performance against the party in breach. (4) Nothing in this section shall prevent the party who has suffered breach of contract from claiming compensation from the party in breach.
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Conflict In Judicial Approach
Approach By The Supreme Court
In the recent judgment of Sughar Singhv. Hari Singh, the Supreme Court ("SC") endorsed the view that compliance of 'readiness and willingness' u/s 16(c) of the unamended Act must be gathered from the spirit and substance rather than letter and form, of the suit. Hence, it strengthened the post Amendment effect of the provision, which expects the 'readiness and willingness' to be proved but not specifically averred. Nonetheless, after touching upon the contours of amended position of the Act, the Apex Court deliberately left the question of retrospective or prospective nature of the Amendment open.
Earlier in 2020, the SC in its judgment of B.Santoshamma & Anr. v. D. Sarala & Anr, observed the post Amendment status of sections 10 and 12, bearing the diluted discretion of the Courts in the cases of specific performance. Nevertheless, it did not provide concrete findings over the retrospective or prospective application of the Amendment and premised its judgment on section 12 of the Act, which is largely unaffected by the Amendment.
Approach By The High Court Of Calcutta
The judicial current in this jurisdiction can be said to be tilted in favor of rendering retrospective application to the Amendment. The same can be seen in the judgment by the High Court in the case of Churchof North India v. Ashoke Biswas, wherein the issue before the Court was – whether the bar to allow specific performance for personal service contract u/s 14(1)(b) of the unamended Act apply after the Amendment? The High Court unequivocally held that since the Act is procedural in essence, therefore, the Amendment would apply retrospectively. Thus, in view of amended section 14(c), the volition of the Appellant will no longer be a yardstick to preclude the suit for specific performance.
Approach By The High Court Of Allahabad
In re Mukesh Singh & Ors. v. Saurabh Choudhary & Ors., (2019 SCC OnLine ALL 5523) the High Court of Allahabad had the opportunity to scrutinise whether the benefits of unamended section 20 where the Court had the discretion to decline the relief of specific performance, when it would be inequitable or cause undue hardship to the Defendant, be available to the Appellant (Defendant in original suit) in the facts and circumstances of case therein. After a wholesome analysis of precedents, the Court adjudged that since the Amendment expressed a different intention than the repealed section 20, the provisions of section 6 of the General Clauses Act, 1897, which aims at saving the unamended position, would not be attracted. Therefore, holding that the Amendment will apply retrospectively to all the pending cases.
Approach By The High Court Of Karnataka
The High Court of Karnataka, in the judgment of M. Suresh v. Mahadevamma and Ors., (2020 SCC OnLine Kar 3425), cited two reasons for upholding the interpretation of the Amendment that reads it prospectively. Drawing an analogy from the prior judgments, the Court primarily held that despite the Act in general is construed to be procedural, certain provisions of the same carry a substantive import. Therefore, the amendment to each provision, whether procedural or substantive, has to be examined dehors the Act in general. Moreover, according to the High Court, the right/privilege accrued to the Defendant u/s 20 of the unamended Act was a substantive right. Secondly, since the Amendment lacks a Savings Clause, the applicability of section 6 of the General Clauses Act, 1897 is attracted because the Amendment does not expressly manifest an intention to destroy the rights or liabilities of the older Act.
Independent Analysis
The High Court of Patna in Girdhar Das Anandji and another vs.Jivaraj Madhavji Patel and Ors., (1970 SCC OnLine Pat 10) observed that: "It may be that the Specific Relief Act, by and large, may be said to deal with procedural aspect of the law of specific performance; but that in itself does not mean that none of the provisions of the Act deal with or confer rights on the parties." In order to contemplate the effect of the Amendment, it is vital to scrutinize the nature of the provisions amended independent of the procedural theme of the Act in general. In the above-mentioned judgment, the Court further held that section 12 of the Act deals with the parties' mutual rights and, therefore, is substantive in import. It is a matter of common understanding, also held in catena of judgments, that amendment to any statute which has an effect on the substantive right or liability of the parties involved, will be prospective in nature unless there is an express contradicting intention in the amendment itself.
Furthermore, the effect of the Amendment rests in toto upon the intention of the legislature, and the same can be gathered from the Expert Committee Report, 2016, which conceived the changes brought through the Amendment. The Report[1] firmly canvassed that despite specific relief being one of the remedies available at the breach of the contract, it was not available as a matter of right because it was within the realm of the discretion of the Court. To remedy this mischief, massive Amendments were brought forth in sections 10 and 20 of the Act that wiped the courts' discretion, not wholly but substantially, thereby conferring specific relief as a matter of right. In a latter segment of the Report[2], while discussing the right of obtaining substitutive performance, it observed, "Indian law does not give him (plaintiff) the right to cover as a substantive right. The amendment proposes to give this right and is referred to in the amendment as 'Compensation Pursuant To Substituted performance'." Pursuant to this, the right to obtain substituted performance was incorporated in section 20 of the Act through the Amendment.
Keeping in view the varied opinions and reasonings adopted by the Court's all over India, the author is inclined to concur with the view of the High Court of Karnataka because few provisions of the Act affect the rights and liabilities of the parties. It is strongly felt that the entire Amendment cannot be painted in the hue of 'procedural and hence retrospective' or 'substantive and hence prospective.' On the touchstone of the principles of law culled out by Karnataka High Court, after extensive scrutiny of past judgments, it can equally be stated that if an amended provision alters or affects the substantive right of a party, it must be applied prospectively unless the Amendment explicitly manifests a contrary intention. It may well be argued that Defendant never had a right to avoid specific performance. However, it is humbly submitted that creating specific performance as a matter of right, on the flip side, leads to the genesis of a liability of the Defendant. This alters the position of privilege that the Defendant earlier enjoyed. Therefore, any Amended provision that alters the Defendant's position shall also be effective prospectively.
Specific relief traces its roots in the law of equity. However, now it can rightly be called a primary remedy that gives the party to a contract a right to seek whichever remedy he/she chooses, either compensation or specific or substituted performance. Since the theme of the entire Act stands revamped, in the respectful submission of the author, it should be applied prospectively in the light of the above analysis.
The author is an Advocate practicing at High Court of Delhi. Views are personal.