SRA 2018 Made Specific Performance Of Contract General Rule Rather Than Exception, Legislative Shift Towards Stronger Enforcement Of Contracts: Delhi HC

The Delhi High Court has observed that the Specific Relief (Amendment) Act, 2018, has changed the nature of specific relief from an equitable, discretionary remedy to a statutory remedy and has made specific performance of a contract a general rule rather than an exception.

A division bench of Justice Manmohan and Justice Saurabh Banerjee said that the 2018 Amendment Act has brought the Indian Specific Performance Act in line with the UNIDROIT Principles of International Commercial Contracts, as it aspires to achieve “harmonization in international law governing commercial contracts.”

The court said that the primary intent behind the 2018 Amendment Act is to introduce a “greater certainty” in the enforcement of contracts and consequently improve India’s ranking in “Enforcement of Contracts’ and ‘Ease of Doing Business.”

“This Court is of the view that the Amendment Act, 2018 introduces a paradigm shift in law regarding contractual enforcement in India. A glaring instance of the legislative shift is the amendment of Section 14 of Act, 1963 which deletes the earlier sub-clause (a) which prescribed that the contracts for the non-performance of which compensation in money was an adequate relief would not be specifically enforced, meaning thereby that the plea that a party could be compensated in monetary terms as damages for breach of the contract and resultant refusal of interim injunction on the said ground, is no longer a ground to refuse specific performance of the contract,” the court said.

Furthermore, the bench observed that courts are not precluded from granting an injunction to perform a negative covenant and the same is in no manner controlled or affected by Section 14 of the Specific Relief Act, 1963.

It added that the 2018 Amendment Act does away with the primacy given to damages as a relief over specific performance and shifts the focus from previous default remedy of award of damages for breach of contract to enforcing specific performance of contracts.

“This Court is of the view that by virtue of the changes brought about by the Amendment Act, 2018, the Courts will now grant specific performance unless the claim for relief is barred under limited grounds prescribed in the statute. This change is aimed at providing greater protection of contractual expectations by ensuring that a non-defaulting party can obtain the performance it bargained for,” the court said.

It added, “The Amendment Act, 2018 intends to discourage errant parties who may deem it more viable to breach a contract than perform it, as the cost of damages may still be less than the cost of the performance.”

The court made the observations while dealing with an appeal filed by a music company, Global Music Junction Private Limited, challenging a single judge order vacating an interim order in its favour in its suit alleging infringement of its copyright in literary and musical works, cinematographic films and sound recordings by a Bhojpuri singer Shatrughan Kumar also known aa Khesari Lal Yadav.

The parties entered into a production agreement in 2021 for creation of 200 songs within 30 months (till November 30) for Rs. 5 crores. Under the Original Agreement, all intellectual property in the content or songs created by the singer vested with Global Music, thereby granting ownership rights to the music company.

The term of the arrangement was extended till September 30, 2025, subject to further extension, if the total songs delivered by the singer during the term of the Addendum were less than 100. The number of songs to be delivered were changed to 8 songs per month during the modified term.

The singer was also allowed to engage with third parties for monetization of songs, subject to the ‘right of first refusal’ being granted in favour of the music company. However, there was no modification, amendment or alteration of any other terms especially those relating to the ownership of the copyright and intellectual property rights in the content in favour of Global Music.

On October 14 last year, the single judge restrained various entities from releasing, airing or monetizing all contents created by the singer due to breach of the copyrights and intellectual property rights of the music company granted under the agreements on platforms like YouTube, Spotify, Jio Saavan, Wynk etc. The singer was further restrained from creating any third-party rights in contravention of the Original Agreement read with the Addendum.

However, vide the impugned order, the single judge vacated the said order entirely observing in the that the Original Agreement being a ‘contract of service’ was dependent on the personal qualifications of the singer and that such agreement fell within the category of contracts which are not specifically enforceable in terms of Section 14(c) of the Specific Relief Act, 1963.

Disposing of the plea, the bench observed that there was a negative covenant in the Addendum executed between the parties and that Global Music, by way of the appeal, sought to enforce the said negative covenant alone.

“Accordingly, Section 14 is inapplicable to the present case as the Appellant/ Plaintiff is not seeking specific performance of any agreement, as erroneously assumed by the learned Single Judge, but is only seeking to enforce a negative covenant,” the court said.

Furthermore, the court said that neither the Agreement nor the Addendum between the Appellant parties was barred by Section 27 of the Indian Contract Act, 1872, as the said provision applies to restrictions in post contract period. In the present case, the period after the promised term was till September 30, 2025 of the Addendum and not after unilateral termination of a contract by one of the parties.

“Section 42 of Act, 1963 will be rendered nugatory if it is held that because a party has unilaterally terminated a contract prematurely, Courts cannot enforce a negative covenant,” the court said.

The bench clarified that the singer can continue to act, sing, dance in the Bhojpuri Film Industry as well as on national TV channels, social media platforms and on stages, but he can’t sell his new songs to distributors, music companies, producers or third parties till the music company refuses to accept delivery of the said new songs.

“…the impugned judgment is set aside and this Court injuncts the Respondent No.1/ Defendant No.6 from engaging with any third person including Respondents No.2 to 5 and/ or Appellant/ Plaintiff’s competitor for monetising of any new song till 30th September, 2025, except when the Appellant/ Plaintiff refuses to accept delivery of the said song subject to the Appellant/ Plaintiff proving its bonafides by depositing the balance fee (i.e. Rs.2.20 crores) with the Registry of this Court,” the court said.

Case Title: GLOBAL MUSIC JUNCTION PVT. LTD. v. SHATRUGHAN KUMAR AKA KHESARI LAL YADAV & ORS.

Citation: 2023 LiveLaw (Del) 795

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