20 September, 2019
The Specific Relief (Amendment) Act, 2018 (“Amendment Act”), effective from October 1, 2018, introduced significant amendments to the Specific Relief Act, 1963 (“1963 Act”), with the intended objective of providing a higher level of certainty when it comes to enforcement of contracts in India. In this article, we have discussed some of the key amendments brought about by the Amendment Act.
Courts no longer have discretion in granting specific relief
Under the 1963 Act, the courts had the discretion to grant specific relief, and as a result, this relief was granted only in exceptional circumstances. Pursuant to the Amendment Act, Section 10 now states that specific performance of a contract shall be enforced by the court, subject to the limited grounds of refusal prescribed. This is a marked departure from the earlier principle where specific relief was the exception and not the norm. With this amendment, granting of specific relief has now been made the norm and refusal thereof the exception. The very nature of specific relief as a remedy has been altered from an equitable and discretionary one to a statutory one.
Cases where specific performance can be refused
The Amendment Act has narrowed the list of grounds on the basis of which specific performance can now be refused. For instance, under the 1963 Act, it was a settled principle that specific performance could not be granted or enforced where monetary compensation was an adequate relief – this premise has been done away with entirely. There are now only four categories of contracts that cannot be specifically enforced, i.e., (i) contract where a party has obtained ‘substituted performance’; (ii) contract involving performance of a continuous duty which cannot be supervised by courts; (iii) contract so dependent on the personal qualifications of the parties that the court cannot enforce specific performance of material terms; and (iv) contract of a determinable nature.
Specific performance has therefore been made a general remedy available to any person who wishes to claim it, unless barred under the aforesaid grounds. This change, along with the fact that the courts no longer have the discretion to grant specific relief, seems to indicate that the intent behind introducing these amendments is to ensure greater chances of success to the aggrieved parties in obtaining specific relief.
Substituted performance of contract
The Amendment Act has introduced the concept of ‘substituted performance’. As a result, a party suffering from a breach of contract is now permitted to have the contract performed by a third party/ its agent and recover the costs and expenses actually incurred in substituting such performance, from the defaulting party. A detailed mechanism in this regard has also been prescribed, including the requirement to provide a 30 days’ prior notice to the defaulting party. If the non-defaulting party opts for the substituted performance route in accordance with the provisions of the Amendment Act, then such party gives up its right to seek specific performance of contract. From a practical perspective, what this means is that the non-breaching party could potentially avoid long drawn and cumbersome litigation proceedings in Indian courts and still ensure the performance of the intended contractual obligations.
While the likely effects of the amendments to the 1963 Act should be reduced litigations, higher degree of success in specific relief claims and performance of contracts in a timely manner, the actual impact of the Amendment Act is largely predicated on its effective implementation, as is with any legislative overhaul of this nature. Needless to say that it also still remains to be seen how the courts will interpret the various provisions of the Amendment Act.
For further information, please contact:
Pankhuri Govil, AZB & Partners
pankhuri.govil@azbpartners.com
