HOW DOES 2018 AMENDMENT TO SPECIFIC RELIEF ACT IMPACT CONTRACT ENFORCEMENT?

The Specific Relief Act, 1963 (Act for short) was amended by the Specific Relief
(Amendment) Act, 2018 (Amending Act for short)
(http://www.egazette.nic.in/writereaddata/2018/187919.pdf) which came into effect from
01.10.2018 (http://egazette.nic.in/WriteReadData/2018/189830.pdf).

1. BACKGROUND OF THE AMENDMENT

1.1 The Ministry of Law and Justice constituted an Expert Committee on 28.01.2016 consisting
of six members including the Additional Secretary, Ministry of Law and Justice as the Member
Secretary of the Expert Committee. The Expert Committee was constituted for the purpose of
making suggestions for amending the Specific Relief Act, 1963. The Expert Committee deliberated
and submitted a report containing its recommendations to the Minister of Law and Justice on
26.05.2016 (http://practicalacademic.blogspot.com/2018/05/download-expert-committee-report-
on.html).

1.2 The report is consisting of eight chapters with the Chapter I being the Introduction. Chapter
I contains the terms of reference which are stated hereunder in brief:

1.2.1 To review the Act from the point of view of enforceability of contracts in the context of
tremendous developments and the present changed scenario involving contract based infrastructure
projects, PPPs and other public projects involving huge investments;
1.2.2 To study the remedies so that specific performance is granted as a general rule and the grant
of compensation or damages as an exception;
1.2.3 To examine and suggest amendments to ensure that discretionary relief is done away with;
1.2.4 To examine amendments required to be made to the Act for ensuring ease of doing business

1.3 The Expert Committee decided in its first meeting to

(a) To have a carve-out for Government contracts-

(b) To introduce provisions for rights of third parties
(c) To change the approach to make the specific performance the rule
(d) To provide guidelines for reducing the discretionary granted to courts and tribunals while
granting performance and injunctive reliefs
(e) To provide for the “right to cover”
(f) To encourage taking assistance of experts (although the committee also discussed that this
is more of procedural rather than substantive law).
(g) To consider addressing unconscionable contracts, unfair contracts, reciprocity in contracts
etc., and implied terms.

1.4 At paragraph 4.2 of the report, the Committee decided that the there was a need to classify
diverse Public Utility Contracts as a distinct class recognizing the inherent public interest/importance
to be addressed in the Act;

2. CHAPTER II: PUBLIC UTILITY CONTRACTS

2.1 At paragraph 7.1.4, the report states that that it is considered imperative that certain
overreaching principles must be incorporated in the statute to guide judicial discretion qua public
works contract. At paragraph 7.1.5, it is observed that the Act permits parties to buy back their way
out of the commitment/contractual obligation by availing the discretionary relief available under
Section 20 of the unamended Act. It was further observed that Section 20 of the unamended Act
posed serious challenges to the underlying public interest and welfare objectives, since these
facilities are inherently “monopolies for provision of essential services”. It is further observed in the
same paragraph that as such, there is a need to curb the perverse incentive to the parties to
negotiate their way out, mainly due to the following reasons:-

(a) Delay in courts deciding the matter

(b) Failure to aware actual costs and damages
(c) Ineffective enforcement of decrees
(d) Indiscriminate grant of injunctive relief without linkage to cost of capital, value for money,
inflation, opportunity, cost etc., in the terms and conditions of the injunctive relief.

2.2 Author’s comments on paragraph 7.1.5 of the report:

2.2.1 The observation at paragraph 7.1.5 is not accurate in as much as Section 20 is applicable
only in cases seeking specific performance of the contract. The need for seeking specific
performance arises only in cases wherein either the work is not progressing like in a development
agreement or the obligation is not being performed like execution of a sale deed. Most of the cases,
if not all, are related to specific performance of agreement to sell and the application of Section 20
arises in such a situation. How Section 20 has been utilised by the courts which have ultimately led
to the delay in the execution of the public utility contracts is not explained by the report. Most of
the public utility contracts are given by Government or Governmental authorities. It is difficult to
understand that a contractor who applied for the tender would stop the work without the
government not having any power to terminate the tender for such stoppage. The number of cases
wherein the Government or Governmental Authorities have approached the court seeking the
specific performance of the contracts awarded by them under the tenders is very less. The author is
not personally aware of any case wherein the government or governmental authorities have filed
cases seeking specific performance, except for case at 9.1 of the report, muchless usage of Section
20 by the Courts to let the contractor escape from the work on ground of discretion. If the stays are
given due to acquisition of land procedures, then the same cannot be attributed to Section 20 of the
unamended Act. Section 20 of the unamended Act was inapplicable to the land acquisition
proceedings and injunctions given in those matters are in no way referable to Section 20 of the
unamended Act. The courts have exercised writ jurisdiction irrespective of Section 20 of the
unamended Act and the amendment does not have any impact on such writ jurisdiction. The courts
have been cautious in granting stay in respect of public utility projects unless there was justification
of public interest. Those stays could not be attributed to Section 20 of the unamended Act. The
reasons like delay, failure to award actual costs and damages, ineffective enforcement of decrees
and indiscriminate grant of injunction etc., are not attributable to Section 20 of the unamended Act
and hence, to vilify Section 20 of the unamended Act was unnecessary. The cases cited from 8.1. to
8.9 have no reference to Section 20 at all. It is only case of Adani Power PPA termination Case at 9.1
that could be said to be referring to Section 20 though it was more on the interpretation of the
contractual clauses like Force Majeure. Hence, the recommendation could have been that Section
20 is not applicable to Public Utility Contracts instead of its entire substitution by proposal of
Substituted Performance.
2.3 At Paragraph 10.3, the recommendations for the Public Work Contracts are reduced herein
briefly:

2.3.1 Courts should refuse injunction that will impede or stop public works
2.3.2 A public works contract asset must always be made to sweat i.e., operate at maximum
capacity irrespective of disputes and claims amongst the parties.
2.3.3 The government should establish the PPP contract monitoring mechanism.

3. Chapter III: Analysis of the Provisions of the Act

3.1 At paragraph 11 of the report, it is observed that the changes in some provisions of the Act
will improve the ease of doing business, and will encourage parties to perform their contracts.
Primarily, the recommendations enable any party to the contract to seek whichever remedy he
chooses. Hence, specific performance or injunction will be available by choice, and will no longer be
exceptional or discretionary.

3.2 At paragraph 11.7 of the report, amendments were proposed that the Section 10 must be
amended to make the specific performance a regular relief and not just an exceptional one. It was
also proposed that the grounds for refusal of the relief must be merged into one Section i.e., Section
14 instead of the grounds being diverse in Section 14 and 20. The new relief of compensation
pursuant to substituted performance was also to be created.

3.3 Paragraph 11.9 of the report deals with refusal of the remedies and states that the relief can
be refused under the new Section 14, 16 and 41.

3.4 Paragraph 11.10 of the report deals with Unfair advantage and undue hardship. 11.10.2
deals with circumstances which might make the enforcement of the contract inequitable. The
circumstances include the terms of the contracts, the circumstances surrounding the parties at the
time of making it, or the unequal bargaining powers among the parties. Such circumstances vitiate
the contract itself if their existence shows the lack of free consent. These become relevant while
granting reliefs of specific performance and injunction.

3.5 At paragraph 11.11, it is recommended that the rise or fall in prices or market value or
change in circumstances after entering into the contract shall not be a factor for refusal of relief.

4. Chapter IV: Discretion of Courts

4. At paragraph 12.1.1, it is observed in the report that the there is a lack of certainty for those
asking for this remedy, and creates the need for limiting the discretion. At paragraph 12.1.2, it was
proposed that the grounds on which specific performance may be withheld should be clearly
delineated in the statute. It was further observed that once the plaintiff successfully meets the
conditions for obtaining specific performance, the relief must be granted unless the defendant can
prove that the case falls squarely within the negative grounds or exceptions.

4.2 At paragraph 12.2.4, the exceptions which are to be allowed for enforcement are
mentioned. Some of them are as under
4.2.1 Hardship on the defendant which he did not foresee, whereas its non-performance would
involve no such hardship on the plaintiff. It was observed that when it is unreasonably burdensome
for the contract to be enforced, then the contract need not be enforced and that was something out
of the ordinary.
4.2.2 The terms of the contract or conduct of the parties at the time of entering the contract gives
the plaintiff an unfair advantage over the defendant.

5. Chapter V: Role of Expert

5.1 Paragraph 13.4 of the report gives the reason for recommending the role of experts. It
observes that the courts should have the power to summon expert evidence not only on the facts
but also on technical/scientific issues. In India, it is observed that, the Evidence Act and CPC do not
have specific provisions authorising Courts to summon expert evidence so as to enable the court to
seek expert assistance at its own instance on complex technical/scientific issues requiring specialised
knowledge/expertise from the experts in various fields. Considering the growing number of
transactions involving complex or technical issues requiring specific technical or scientific
understanding or knowledge, in addition to the authority to take evidence on facts, for effective
redressal of the disputes, it would be appropriate to make provisions in the Act empowering the
Courts to examine experts in the relevant fields. This would assist the court in appropriately
determining the issues in expeditious and efficient manner.

6. Chapter VII: Amendments required to address certain contracts

6.1 The report states that the committee considered whether amendment to the Act was
required to address unconscionable contracts, unfair contracts, reciprocity in contracts etc., The
committee concluded that the current provisions in the Act deal with these issues adequately, and
no amendment was required. At paragraph 17.10.2, it was concluded that Section 20(1) of the
unamended Act specifically grant wide discretion to the court whilst decreeing specific performance
and hence no separate provision was required as the current provisions of Section 20(1) were
proposed to be incorporated into Section 14 as grounds for refusal of relief.

7. Chapter VIII: Recommendations for amendment

7.1 Chapter VIII of the Expert Committee report contained the recommendations for
Amendment with brief explanations (pages 92-107). All the Sections were considered and in
respect of few sections, recommendations for amendment were made. Only a few of those
recommendations with regard to the specific performance are considered herein.

7.2 Section 10 was to be substituted by Section 10 (1), (2) and (3). Section 10(1) was to be as
follows:
(1) Notwithstanding anything contained in any other law for the time being in force, a party to a
contract, or any person so entitled under Section 15, shall be entitled to specific performance of a
contract or injunction, unless such relief can be refused under Sections 14, 16 or 41.

7.3 Section 14 (1) to be substituted. Some of its important recommendations were:-

7.3.1 Where the party or person seeking specific performance can reasonably obtain substituted
performance from another source on comparable terms, including price and time
7.3.2 The provisions of Section 20(2) of the unamended act were to be incorporated into Section
14(1) except for Section 20(2)© which dealt with the enforcement being inequitable. In the
explanation 1: to Section 20 (2), along with mere inadequacy of consideration, any rise or fall in
prices or market value or any change in circumstances after entering into the contract were also
included.

7.4 Section 14A inserted providing for statements of opinion and expert evidence

7.5 Section 16: in subsection ©, the words “aver and” were to be deleted.

7.6 Section 20A: Compensation pursuant to substituted performance.

8. DIFFERENCES BETWEEN EXPERT COMMITTEE RECOMMENDATIONS AND ACTUAL

AMENDMENT CARRIED OUT IN RESPECT OF SPECIFIC ENFORCEMENT

Section Expert Committee recommendations Actual Amendment

14 (1) The recommendations to include Sections The recommendations have not been
20(2) (a) and (b) along with the followed and there are no provisions in
explanations thereof amended Act relating to the provisions of
Section 20(2) of the unamended Act.
14 (3) The court shall not refuse specific The whole of Section 14(2) and (3) has been
performance of a contract for the discarded and the recommendations are not
construction of any building or the followed.
execution of any other work on land if:

…subject to conditions…

8.1 Effect of these differences

8.1.1 The Expert Committee in Chapter VII of its report had extensively dealt with the need for
dealing with unfair or unconscionable terms and had felt that Section 20 specifically deals with it and
it was recommended to incorporate the provisions of Section 20 within Section 14. While doing so,
it had referred to provisions of the law in various countries including United Kingdom, United States,
Australia, Canada and New Zealand, and had also at various other places in the report referred to
Uncitral and Singapore provisions. In Paragraph 17.10.1, the Expert Committee had considered
whether to specifically cover unfair or unconscionable terms, a separate legislation on the lines of
the Unfair Contract Terms Act, 1977 prevalent in the UK and Singapore had to be recommended or
not. Ultimately, it stated in paragraph 17.10.2, that due to incorporation of the current provisions of
Section 20 into Section 14 as grounds for refusal of relief, a separate legislation was not necessary.

8.1.2. However, by virtue of the amendment, the provisions of Section 20 of the unamended Act
have been completely been disregarded. There seems to be no reason as to why that
recommendation was not followed. The only implication would be that the Legislature and the
Executive in general and the Ministry of Law and Justice in particular want even the contracts
containing unfair and/or unconscionable terms to be specifically enforceable as a matter of routine.
Since the courts cannot attribute this intention to the Legislature, the courts will now have to
consider the whole of the ‘specific performance’ relief from the pre-statutory law as to this
equitable relief. Even if this intention is attributed to the legislature and sought to be honoured, it
would be facing one more contention. Since the Legislature is attributed the knowledge of the
entire existing law and the effect of its amendments, the courts will be forced to consider the
question as to whether the legislature’s intention of making even the contracts with unfair and/or
unconscionable terms enforceable supersedes the basic conscience of justice which could ultimately
be attributed to Article 21 of the Constitution of India. Hence, instead of giving statutory guidelines
for the refusal of the relief of specific performance, the amendment has only made it more vague
than it could ever have been. This will only to more confusion in the years to come till it gets settled
by an authoritative judgment of the Hon’ble Supreme Court. Hence, the whole objective of the
amendment has been made to a nought as far as the provisions regarding the specific performance
is concerned.

9. Criticism of one of the Members of the Expert Committee as to the Amending Act

9.1 Mrs. Nilima Bhadbhade, one of the members of the Expert Committee, has criticised the
amending Act (https://barandbench.com/specific-relief-amendment-act-hurried-legislation/). Some
of the excerpts from that article are produced herein.

(a) The entire discussion in both Houses has overlooked the fact that the same amendment, and the Specific Relief Act as amended, is
not restricted to business contracts, but applies to the common man and his personal contracts. The Amendment grossly violates his expectations
of fairness and justice in enforcement of contractual remedies.

(b) The amending Act has not adopted all recommendations of the Committee relating to the changed approach of remedies, and has
disregarded recommendations that ensured fairness in procedure. The amendment has become a patchwork of some contradictory and
inconsistent provisions. The amendment has been rushed without consultation with the main stakeholders who administer this Act : advocates
and judges.

9.2 Hence, if the member of the Expert Committee, based on which the amending Act has been
passed, criticises the amending Act, then it definitely deserves a relook. This amending Act has
brought in more problems than it intended to solve.

10. Conclusion
The amending Act requires a relook immediately and comprehensively and till then the old
Act has to be followed.