The Specific Relief Act is made more ‘specific’

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India ranks 77th amongst 190 economies in Ease of Doing Business, 2018 ratings issued by the World Bank: a marked improvement from the previous 100th. Uncertainty and delay in enforcement of contracts was one of the reasons for our lagging performance. The antiquated Specific Relief Act, 1963 which lays down the provisions regarding specific performance of a contract was partly to be blamed for the situation.

Specific performance is legalese for honouring one’s promises under a contract. Should a party go back on its word, the aggrieved can knock the doors of the Court and obtain a decree directing the defaulter to make good his promise. However, for obtaining such a decree, even against an out and out ruse, it had to be first proved that monetary compensation would not heal the hurt.  Wide discretions were given to the courts in the matter. Hence, a decree of specific performance was the exception rather than the rule. It was more of an equitable rather than a legal one.

In order to make out a good case in equity veering towards specific performance, appreciation of technical evidence was a must. Engineering, procurement, and construction contracts often faced this challenge.

A typical Catch-22 situation would arise at the time of drafting the contracts. Should damages be specified would it mean that specific performance would outrightly be denied by the courts. The very mention of damages in the contract would imply that monetary compensation is adequate relief. If, therefore, the defaulter is willing to fork out specified damages there is no need for him to perform his obligations. Quantification of damages was another Pandora’s Box. In engineering/procurement contracts, the matter would get as compounded as the complexity of the technicalities.

As far as building/development agreements pertaining to land were concerned, the problem was not any simpler. In such cases as per the old Section 14 (3) (c) it had to additionally proved that:

 

  • the building or other work is described in the contract in terms sufficiently precise to enable the court to determine the exact nature of the building or work;
  • the plaintiff has a substantial interest in the performance of the contract and the interest is of such a nature that compensation in money for non-performance of the contract is not an adequate relief; and
  • the defendant has, in persuance of the contract, obtained possession of the whole or any part of the land on which the building is to be constructed or other work is to be executed.

With so many ifs and but one can imagine the extent to which the legal profession must have benefitted. The poor business rankings were also undesirable.   It is highly unlikely that such a jurisdiction would be the first destination for Foreign Director Investment.

 

In order to make out a good case in equity veering towards specific performance, appreciation of technical evidence was a must. Engineering, procurement, and construction contracts often faced this challenge.

Quantification of damages was another Pandora’s Box. In engineering/procurement contracts, the matter would get as compounded as the complexity of the technicalities.

With so many ifs and but one can imagine the extent to which the legal profession must have benefitted. The poor business rankings were also undesirable.   

Since the texture of the relief of specific performance has been changed from equitable to legal, the courts shall have little say over what the parties have deliberated in their written contracts.

Even a casual look at the exceptions brings to fore their necessity and the plain common sense behind carving them out from the general applicability of Section 10.  

 

In August, 2018 this backward state of affairs was sought to be remedied with the enactment of Specific Relief (Amendment) Act, 2018 (18 of 2018). The Central Government had appointed October 1, 2018 as the date on which the provisions of the said Act shall come into force.

Henceforth, specific performance of a contract shall be a general rule rather than an exception subject of course to certain limited grounds. Since the texture of the relief of specific performance has been changed from equitable to legal, the courts shall have little say over what the parties have deliberated in their written contracts. The role of the Courts is thus streamlined to upholding the written word.

For once we have learnt the art of minimalism. The amendment has thus achieved more and more by less and less.  The erstwhile wordy Section 10, the very pith and substance of the Act, has been truncated to a meaningful one line. Section 14 of the newly amended Specific Relief Act, 1963 stipulates the contracts which cannot be specifically enforced. Relevant extracts are verbatim given below:

“(a) where a party to the contract has obtained substituted performance of contract in accordance with the provisions of Section 20;

(b) a contract, the performance of which involves the performance of a continuous duty which the court cannot supervise;

(c) a contract which is so dependent on the personal qualifications of the parties that the court cannot enforce specific performance of its material terms; and

(d) a contract which is in its nature determinable”

 

Even a casual look at these exceptions brings to fore their necessity and the plain common sense behind carving them out from the general applicability of Section 10.

 

The legislature has gone a step further by inserting Section 14-A. The Courts can now engage experts, secure their attendance etc. etc.

 

The bulk of the complaints highlighted above have been sorted. A watertight contract is now more possible than ever before. A draftsman can provide for damages and at the same time rest assured of a decree of specific performance of so stated in the contract. With this India’s Ease of Doing Business Ranking for 2019 is slated to notch up. At home this small step is but a giant leap.

 

(The writer is a Principal Associate at Kochhar & Co., Advocates and Legal Consultants. The views expressed in this article are her own and not that of the firm).