The Viewpoint: Paramountcy of Performance: Specific Relief (Amendment) Act, 2018November 27 2018
“One of the market’s virtues, and the reason it enables so much peaceful interaction and cooperation among such a great variety of people, is that it demands of its participants only that they observe a relatively few basic principles, among them honesty, the sanctity of contracts, and respect for private property.”
After more than half a century of its enactment, the Specific Relief Act of 1963 has undergone a most prominent amendment in order to suit the needs of the ever-changing environment of the 21st Century Indian economy. In the words of Ravi Shankar Prasad, the Minister for Law and Justice in India,
“Today the world has changed, India has changed…this bill is an agent to recognise the changing needs of India in infrastructure, railway, education, healthcare, cold chains…we are trying to make in India the execution of contracts more sober and more responsible.”
The amendment comes at a juncture where India’s global standing in terms of enforcing contracts and ease of doing business ranked at 164 and 100 respectively, according to figures published by the World Bank. Taking into consideration the conspicuous upsurge in FDI flowing into the infrastructure sector as well as the popular preference of the public-private partnership (PPP) model, the Parliament found it imperative to re-examine the act and make it more hospitable for smoother execution of contractual endeavours. What followed was the constitution of a six-member expert committee- comprising a member of a think tank, partners from various law firms, an academician and an additional secretary to the Ministry of Law. On the 15th of December, 2017, the Union Cabinet approved the recommended changes to the act. It received the nod of assent from the Lok Sabha on the 15th of March, 2018 and subsequently from the Rajya Sabha on the 23rd of July, 2018. Finally, it has received Presidential assent on the 1st of August, 2018.
Preliminary Changes: Expanding the Scope of the Act
The first notable stroke of amendment came by way of insertion of Section 15 (fa), which expanded the scope of the act to include LLPs which may now prefer specific performance or against whom specific performance may be sought.
Through the amendment of Section 6, the act now allows persons, through whom a dispossessed person initially obtained possession, to initiate proceedings for the recovery of possession of immovable properties. Such a development was the need of the hour as it clarified that a person in De-jure possession of the immovable property may indeed maintain an action under the act.
Performance is Paramount: Specific Performance v. Damages
Proceeding to the centrepiece of the impugned amendment, the amended Section 10 seeks to considerably limit the bulk of discretionary powers vested in courts in granting specific performance of contracts. Specific performance is now to be conferred the status of a general rule rather than an exception, subject to a limited set of grounds embedded within Section 11(2), 14 and 16 of the act. The court must merely inquire whether a contract falls under the purview of any of the conditions housed in the mentioned sections and if not- as a general rule, shall order for the specific performance of the contract.
Damages, which are essentially assessed from a theoretical point of view, do not fulfil the ultimate purpose of a contract – the execution and performance thereof. It fails to achieve what the parties originally sought to achieve, and also exposes promisees to the risk of inordinate delays and indirect losses which damages may not sufficiently cover, even if awarded.
The introduction of the concept of Substituted Performance further fortifies the intent of ensuring performance of obligations under a contract. The entirety of Section 20 of the act has been amended to incorporate such principle wherein a party aggrieved by the breach of contract may opt to have the (breached) contract performed by a third party, or by its own agency, at the cost and expense of the defaulting contracting party. A notice must be served upon the defaulting party providing a cure period of not less than 30 days to rectify the breach involved. Upon failure by the defaulter to curate the breach, the promisee is empowered under law to avail of substitution of performance.
Additionally, as per the amendment of Section 16 (c) of the Act, a party need not aver and plead the readiness and willingness to perform contractual obligations. The statute now treats the same as implied and mere proving of the said willingness is deemed sufficient.
Thus, in the event of a breach, resorting to either specific or substituted performance (whichever is applicable) may just be the most efficacious remedy for an aggrieved party – inasmuch as it is aligned to the utmost fulfilment of obligations.
Expedience and Expeditiousness: The Infrastructure Sector
The amendment is also focused on the development of the Infrastructure Sector. It caters to infrastructure projects in the sectors of transport, energy, water and sanitation, communications, social and commercial sectors, and any other sector notified by the Department of Economic Affairs by way of amending the Schedule to the act. Some of its pivotal segments come as a treat to all stakeholders of infrastructure projects both big and small.
- Injunctions: By the insertion of Section 20A courts are now barred from granting an injunction in a suit relating to contractual breaches in infrastructure projects, where granting the injunction would cause an obstruction or delay in the progress or completion of such project.
- Special Courts with stringent timelines of disposal: The amendment, through the insertion of Section 20B, calls for the constitution of special civil courts dedicated exclusively for the adjudication of contractual disputes under this act which relate to infrastructure projects. Additionally, it imposes a fixed time limit of twelve months (and a further maximum extension of 6 months, with reasons duly recorded) for disposal of cases under the act- through Section 20C.
- Reference to Experts: For sound and effective resolution of disputes in the domain of infrastructure projects, Section 14A empowers the courts to engage experts for extending of technical opinions on any significant issues in the suit.
Accounting for the staggering number of cases in pendency relating to the infrastructure sector, this amendment would come as a breath of fresh air for investors, litigants as well as potential stakeholders to infrastructure projects, both foreign and domestic. The amendment also focuses on limiting the interference of courts so as to not unnecessarily prolong infrastructure projects.
The Specific Relief Amendment Act of 2018 is well-intended step to promote promptness and efficacy in the arena of contractual performance, as well as largely curb the uncertainty in projects involving public and private stake-holding. The Act brings forth a refined level of objectivity in the remedial laws of the contractual breach and only an appropriate implementation of the provisions can do justice to the intent and spirit of the Act.
About the authors: The authors are advocates working at S Jalan & Company. Sourav Ghosh is a partner at the firm. Sanlap Roy is an associate at the firm.
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