Introduction

The Specific Relief (Amendment) Bill 2017 proposes to amend the settled jurisprudence on the remedies available to a claimant following a breach of contract. Typically, in the event of a breach, a claimant can seek damages from the defaulting party. Alternatively, the courts may permit specific performance of the contract, where damages do not form an adequate remedy, subject to their discretion.

On 15 March 2018 the Lok Sabha approved the bill proposing amendments to the Specific Relief Act 1963. Interestingly, the act has not been amended since its enactment. In order to keep pace with rapid economic growth, the bill proposes to introduce certain provisions to facilitate the enforcement of contracts – particularly in relation to infrastructure projects. Among other things, the bill also proposes to:

  • remove the courts' discretionary power to decree specific performance;
  • permit substituted performance by a third party;
  • set up special courts for dealing exclusively with suits relating to infrastructure claims; and
  • prevent the courts from granting injunctions in contracts relating to an infrastructure project.

Most significantly, the bill is a drastic step towards ensuring that obligations under a contract are not unnecessarily delayed and are enforced in a timely manner. The bill is a welcome move, as it is expected to promote investor confidence and the ease of doing business in India. Some of the salient features of the bill are set out below.

Discretionary power of courts

Under major common law jurisdictions, specific performance is an equitable remedy and is usually granted only in exceptional circumstances, where the loss cannot be adequately compensated in the form of damages. Akin to other common law jurisdictions, the unamended act confers wide discretionary power over the courts to enforce specific performances of a contract. Therefore, the courts are not bound to decree specific performance of a contract solely because it would be lawful to do so. However, while exercising their discretion, the courts will ordinarily ensure that the decree of specific performance:

  • does not result in any special hardship to the defaulting party;(1) and
  • is not used as an instrument of oppression, thereby giving the claimant an unfair advantage.(2)

In practice, the court will evaluate whether the claimant's conduct (eg, delay, acquiescence, breach on its part or some other circumstance outside the contract) may render it inequitable to decree specific performance of the contract. Even the appellate court will not ordinarily challenge the discretion exercised by the lower court. However, in cases where the court has acted arbitrarily or unreasonably, the appellate court may interfere with the discretion exercised by the court. Owing to the discretionary power conferred on the courts, the enforcement of contracts in India suffers from uncertainty and ambiguity.

The bill seeks to bring certainty and objectivity to the enforcement of contracts – in particular, by doing away with the courts' discretionary power. The bill proposes to make the enforcement of contracts the norm, such that the courts may permit specific performance even in cases where the claimant could be adequately compensated in the form of damages. However, there are certain exceptions under the unamended act which may obstruct specific performance of a contract – for example, where:

  • the contract involves performance of a continuous duty which the court cannot supervise;
  • the contract is dependent on personal qualifications of the parties; and
  • the contract is determinable in nature.

In addition to these exceptions, the bill proposes to permit substituted performance of a contract by a third party, in which case specific performance by the defaulting party will not be decreed.

Substituted performance

The bill permits claimants to opt for substituted performance of their contracts through a third party or by their own agency and recover the expenses actually incurred from the defaulting party. In order to ensure that claimants are not granted both specific performance and substituted performance, the bill proposes that claimants will not be entitled to specific performance after obtaining substituted performance of their contract from a third party.

Special provisions for infrastructure projects

The unamended act sets out certain conditions for the enforcement of construction contracts – namely:

  • the building must be sufficiently described in the contract;
  • the claimant must have substantial interest in the performance of the contract and cannot be compensated in monetary terms; and
  • the defaulting party must have obtained possession of the contract land.

The bill proposes to eliminate these conditions, as they act as a major impediment to the enforcement of construction contracts.

Hitherto, the courts have generally been reluctant to grant interim relief in construction contracts. While granting injunctions, the courts will evaluate the competing interests of the parties and the public detriment which may be caused by granting an injunction.(3) The bill proposes to restrict the courts from granting injunctions – particularly in suits where such injunctions may hinder the completion of infrastructure projects. The bill also sets out a detailed list of infrastructure sub-sectors comprising of the following categories:

  • transport;
  • energy;
  • water and sanitation;
  • communications; and
  • social and commercial infrastructure.

Further, the bill proposes to designate some civil courts as special courts which will exclusively deal with suits arising from contracts relating to infrastructure projects. The jurisdiction of these special courts will be restricted only to claims arising under the act.

Fixed timeline

In order to facilitate the timely disposal of suits filed under the act, the bill proposes to direct the courts to dispose of suits within a strict 12-month timeline from the date on which the defaulting party is served. This period may be extended for up to another six months. A similar provision setting out a fixed 12-month timeline was introduced under the Arbitration and Conciliation Act 1996 for the disposal of arbitration disputes. Although this provision is a welcome move, implementing a strict timeline appears impractical in the Indian context.

Comment

The bill will introduce a sweeping change in Indian jurisprudence in relation to the enforcement of contracts. It is expected that specific performance of a contract will become the norm. At present, this is decreed only in exceptional cases – particularly where the party cannot be compensated in monetary terms. Certainly, the bill is a promising move to facilitate the enforcement of contracts, particularly those relating to infrastructure projects. However, there are certain impediments to the implementation of the bill.

First, the courts do not ordinarily grant specific performance of contracts for erecting or repairing buildings because these contracts require time, special knowledge and personal supervision.(4) Therefore, specific performance of infrastructure projects may face obstacles, as the enforcement of such contracts involves continuous judicial supervision.

Second, the bill proposes to designate civil courts as special courts designed to deal with disputes involving infrastructure projects. Certainly, this will expedite the enforcement of suits relating to infrastructure contracts. However, the legislature must ensure that the judges appointed in these special courts are also specialised and experienced in construction and engineering-related issues.

Third, suits filed under the bill must be disposed of within 12 months. However, a fixed timeline for disposing cases is unrealistic as each case must be evaluated based on its specific facts. Accordingly, in order to facilitate the implementation of this timeline, the legislature must consider incorporating provisions akin to the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act 2015 – particularly case management hearings – to expedite the disposal of suits arising under this act.

For further information on this topic please contact Binsy Susan Baby or Neha Sharma at Shardul Amarchand Mangaldas & Coby telephone (+91 11 4159 0700) or email ([email protected] or [email protected]). The Shardul Amarchand Mangaldas & Co website can be accessed at www.amsshardul.com.

Endnotes

(1) Om Prakash v Ram Kishan Guptav, 2007 (66) ALR 885.

(2) Parakunnan Veetill Joseph's Son Mathew v Nedurnbera Kuruvila's Son and Ors, AIR 1987 SC 2328.

(3) Raunaq International Ltd v IVR Construction Limited, AIR 1999 SC 393.

(4) Her Highness Maharani Shantidevi P Gaikwad v Savjibai Haribai Patel and Ors, etc, (2001) 5 SCC 101; Prem Kumar Bansal v Ambrish Garg, 2016 (157) DRJ 659.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.