Parliament Passes Specific Relief Amendment Bill Making Specific Performance of Contract Compulsorily Enforceable

The Parliament has passed the Specific Relief (Amendment) Bill 2018, proposing to bring significant amendments to Specific Relief Act 1963.  On July 23, the Rajya Sabha passed Amendment Bill, which was passed by the Lok Sabha on March 15, 2018.

One of the major features of the amendment is that it takes away the discretionary power of courts in ordering specific performance of contract,  by stating that specific performance of contract should be compulsorily enforced by the Court. As per Section 10 of the Act (as it stood before amendment) specific performance of contract ‘may’ be enforced by the Court in its discretion.  As a result of wide discretionary powers, the courts often award damages for breach of contract as a general rule and grant specific performance as an exception. As per the present scheme of the Act, to obtain a decree of specific performance, the plaintiff has to appeal to the discretionary powers of the Court on the basis of grounds in Section 20. Section 20( as it stood before amendment) states  that 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. This Section 20 has been totally done away with by the amendment, by substituting it with another provision.

The amendment wholly substitutes Section 10 by stating thatspecific performance of a contract shall be enforced by the court.Similar discretionary power of Courts as per Section 11 in granting specific performance in relation to trusts is also taken away by the amendment, by making it compulsory even for trusts.

The effect of the amendment will be that the plaintiff can seek specific performance of contract as a matter of course, without having to prove special circumstances.

Also, Section 21, which had earlier stated that "in a suit for specific performance of a contract, the plaintiff may also claim compensation for its breach, either in addition to, or in substitution of, such performance" has been amended by substituting the words "either in addition to, or in substitution of" with "in addition to". Therefore, compensation need not be sought for as an alternate relief, and can be claimed in addition to specific performance.

The other noteworthy features of the amendment bill are given below:

Substituted performance.

Section 20 of the Act which deals with the guidelines for exercising discretion for granting specific performance is substituted wholly with another provision which deals with ‘substituted performance’.

The amendment introduces the concept of ‘substituted performance’. As per this, 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.  This concept is sought to be introduced in the Act by substituted Section 20.  It is also clarified that a party by obtaining substituted performance forfeits his right to get specific performance of contract enforced through Court.

No need to plead readiness and willingness to perform contractual obligations.

As per Section 16(c) of the Act (before amendment), a party has 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.  The Explanation to the Section states that he plaintiff must aver performance of, or readiness and willingness to perform, the contract according to its true construction.

Courts have been very strict regarding this requirement of S.16(c) of the Specific Relief Act which provision has been couched in negative terms. The judicial decisions state that S.16(c) is not an empty formality and readiness and willingness are to be proved right from the date of the contract till the date of the decree. Even if it is established in evidence that the plaintiff has always been ready and willing to perform his part, in the absence of a plea in the plaint regarding readiness and willingness,  no Court will grant decree for specific performance to the plaintiff. Several cases have got dismissed solely because of the failure to make such a plea in the plaint.

The amendment relaxed this stringent condition by stating that the party need only prove readiness and willingness. The specific requirement to ‘aver’ is sought to be removed by the amendment.  The words “who fails to aver and prove” in Section 16(c) is substituted by the words “who fails to prove” .

 Infrastructure Projects.

The amendment introduces a special categorization of ‘infrastructure projects’ .  The new Schedule introduced by the amendment contains the list of activities which will be treated as ‘infrastructure projects’.  Such activities are in the sectors of transportation, energy, water & sanitation, communication and social & commercial infrastructure.

The Department of Economic Affairs is the nodal agency for specifying various categories of projects and infrastructure sub-sectors, which is provided as Schedule to the Bill and it is proposed that the said Department may amend the Schedule relating to any such category or sub-sectors

No injunction to be granted against infrastructure projects.

Section 20A proposed to be introduced by the amendment restrains Courts from granting injunction in a suit involving contract relating to an infrastructure project, where granting injunction would cause impediment or delay in the progress or completion of such infrastructure project.

 Special Courts for infrastructure projects.

Special Courts are proposed for determination of suits relating to infrastructure projects.

Fixing time limit of twelve months for case disposal.

The amendment fixes a time limit of twelve months for disposal of cases under the Act, through the newly proposed Section 20C.

Power of court to engage experts.

The newly introduced Section 14A confers power on the courts to engage experts to seek opinion on any issues in the suit.

As per the Statement of Objects and Reasons of the Amendment Bill, the Act is not in tune with the rapid economic growth happening in our country and the expansion of infrastructure activities that are needed for the overall development of the country. 

The amendment will come into force with effect from the date of notification of the same by the Central Government in the official gazette.