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On July 23, 2018, the Parliament passed the Specific Relief (Amendment) Bill, 2018 (“Bill”). The Bill considerably strengthens the law on specific performance by making the provisions for relief more efficacious.
The amendments are in line with the UNDROIT Principles of International Commercial Contracts and attempt to make India a business-savvy jurisdiction by improving its position on the enforceability of contracts. The key highlights of the Bill are discussed below:
The ‘Rule’ rather than the ‘Exception’
Section 10 of the Bill substitutes the words “may, in the discussion of the court” with “shall be enforced by the court”. This amendment makes the relief for specific performance a statutory remedy instead of an equitable discretionary remedy.
The primacy given to the relief for damages over specific performances has been removed. The Bill has dispensed with the settled grounds that specific performance can only be granted when either the damage cannot be ascertained or when monetary compensation is not adequate.
Moving forward, the Courts no longer have the discretion and must grant specific performance unless expressly barred by the provisions stated in the Specific Relief Act, 1963 (“Act”) i.e. Sections 11(2), 14 and16.
Engagements of experts
Section 14 of the Bill empowers the Court to engage one or more experts to assist and report on issues arising out of a suit for specific performance. The opinions of such experts shall form a part of the suit record and parties may, subject to Court’s permission, examine the expert in open Court on any matter referred to him or mentioned in his report.
The practice of engaging experts has seen exponential growth in the institutional/commercial arbitration sector. The said growth is mainly attributable to the regulated and institutionalized manner in which experts are on-boarded to testify on important issues arising out of a conflict.
The Courts may have to direct the concerned government(s) to formulate rules specifying, modalities such as minimum qualifications/experience, making of declarations specifying the availability of an expert and conflict of interests, if any.
The inclusion of Limited Liability Partnerships (“LLP”)
The newly inserted Sections 15(fa) and 19(ca) provide that an LLP which is created out of one LLP amalgamating with another can sue or be sued in a suit for a specific performance.
By way of this amendment, the Bill has introduced a new category of entities who are entitled to claim specific performance of contract i.e. amalgamated LLPs
Introducing the concept of “Substituted Performance”
Section 20 of the Bill entitles a party that is affected due to the non-performance of another party, to get the contract performed by a third party or its own agency.
This is subject to the affected party issuing a written notice, of not less than thirty (30) days, calling upon the party in breach to perform the contract within such time as specified in the notice. The party suffering the breach is entitled to recover the cost and the expenses for the substituted performance by the third party or through its own agency from the party committing the breach.
The proposed amendment is likely to deter the occurrence of the breach in a contract. Further, the notice period of 30 days may result in parties choosing to perform or renegotiate the contract thereby not only restoring relationships but also reducing litigation.
Special Civil Courts and Timelines
Section 20B of the Bill mandates that the State government(s) in consultation with the Chief Justice of the concerned High court to establish Special Civil Courts to try cases under this Act. Further, Section 20C stipulates a maximum period of twelve (12) months to dispose off suits filed under the Act. This can be further extended by a maximum period of six (6) months and that too after recording reasons for doing so.
The establishment of Special Civil Court would come as a much-needed respite to the existing civil courts that are already choked with pendency. As regards the timeline of twelve (12) months is concerned, the potential conflict with the timelines prescribed under the Commercial Courts Act, 2015 may have to be clarified.
Special Provisions for Infrastructure Projects
Section 20A of the Bill provides that no injunction shall be granted by a Court in matters relating to infrastructure projects (as specified in the schedule) where granting an injunction would cause an impediment to or delay in the completion of the project.
This amendment aims not only to improve the current investor sentiment but is also intended towards public interest. This crystallizes the perception that public works/ infrastructure projects inherently have an element of public interest affixed to them and ought not to be stayed at the instance of one party.
Thinking ‘substance’ over ‘form’
The amendment to Section 16(c) dispenses with the plaintiff’s requirement to make a specific averment reflecting his readiness and willingness to perform the contract. It would suffice if the averment in substance and spirit indicate a willingness on the part of the plaintiff to perform its part of the contract.
De hors its minor glitches that are subject to clarification, the amendments to the Specific Relief Act, 1963 have finally given some meaningful purport to the relief of specific performance, which was, for the longest time subject to the whims of the judicial discretion.
Apart from the President’s assent, what is also keenly awaited are certain important clarifications. Apart from those stated above, the date of applicability of the proposed amended law is unclear, i.e. whether it shall be applicable w.e.f the date on which the contract was signed, date of breach or the date on which proceedings are instituted.
Be that as it may, the Bill is certainly poised to bolster contract enforcement and restore the confidence-deficit in commercial litigations as an effective mode of dispute resolution.
The author, Arush Khanna, is a Partner at Trinaya Legal, New Delhi.