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Specific Performance: New Amendments to the Specific Relief Act. – A critical Legal Study.

By Y. SRINIVASA RAO, PRINCIPAL SENIOR CIVIL JUDGE, TIRUPATI .

TABLE OF CONTENTS :-

  1. Introduction
  2. Statement of Objects and Reasons for the 2018 Bill
  3. Substituted performance and specific performance, as amended by the 2018 Act.
  4. Suit for breach of contract u/sec.58 of the Sale of Goods Act, 1930
  5. Benefits to Promisee
  6. Criticism
  7. Is there any change in applying well-settled principles?
  8. Conclusion

Introduction:— New Amendments to the Specific Relief Act, 1963 invite tremendous changes in the existing law relating to contractual remedies. The Specific Relief(Amendment) Act, 2018 came into force w.e.f. 01-10-2018. This Act is more beneficial remedies to the Promisee if contract is breached. The concept of “the discretion of the court” as was existed before amendment in 2018, is now not existed as it is modified. These new amendments hardly follow English Law principles. These new amendments gives wider scope to the victim to obtain substituted performance.

Statement of Objects and Reasons for the 2018 Bill:— Besides other, the relevant portions of the Statement of Objects and Reasons for the 2018 Bill reads as follows:

The 1963 Act also confers wide discretionary powers upon the courts to decree specific performance and to refuse injunction, etc. As a result of wide discretionary powers, the courts in majority of cases award damages as a general rule and grant specific performance as an exception… In view of the above, it is proposed to do away with the wider discretion of courts to grant specificperformance and to make specific performance of contract a general rule than exception subject to certain limited grounds. Further, it is proposed to provide for substituted performance of contracts, where a contract is broken, the party who suffers would be entitled to get the contract performed by a third party or by his own agency and to recover expenses and costs, including compensation from the party who failed to perform his part of contract. This would be an alternative remedy at the option of the party who suffers the broken contract.

Substituted performance and specific performance, as amended by the 2018 Act:—

Section 14 of the Act deals with the contracts that cannot be specifically enforced. Section 14(a) enumerates that where the promisee has obtained substituted performance of the contract as per Section 20 of the Act, the contract is not specifically enforceable. Section 16(a) says that specific performance cannot be enforced in favour of a person who has obtained substituted performance of contract. One of the significant changes in the law relating to Specific Relief Act, 1963 is such that substituted performance is now considered as a statutory right and Section 20A of Act has been introduced.

Under the new provisions, specificperformance should be refused –

  • where the party seeking specific performance can “reasonably obtain substituted performance from another source on comparable terms, including price and time;
  • The other ground which is now available for refusal of specific performance  is hardship.

Majors changes are :

  1. New Section 14 of the Act speaks about the contracts which cannot be specifically enforced.
  2. Clause (a) of new section 14 of the Act makes it clear that where the promisee has obtained substituted performance of the contract as laid down under new Section 20, the contract cannot be specifically enforced.
  3. While do, nee Section 16(a) of the Act states that specific performance is not enforceable in favour of a person who has obtained substituted performance of contract.

Further,

  • New Section 10 of the  Act substitutes Section 20 (old section) and a new Section 20 is introduced.
  • New section 20 is introduced with 4 (four) sub-sections.
  • ‘Substituted performance of contract’ is the title for the newly amended section 20 of the Act.

Let us see what these provisions say as to specific Performance. New Section 20 (1) of Act can be understood as infra:

– Where the contract is broken due to non-performance of promise by any party, the victim of the breach shall have the option of substituted performance through a third party or by the victim’s own agency.

-That the victim can recover the expenses and other costs actually incurred, spent or suffered by him, from the party committing such breach.

Three essential conditions under New section 20 (2) :—

  1. The victim has to give a written notice of a minimum of thirty days to the perpetrator of breach.
  2. The notice should call upon the perpetrator to perform the contract within time specified in the notice, which shall not be less than thirty days.
  3. The perpetrator should have refused or failed to perform the contract within such time.

However, there is a proviso to section 20(2). The proviso to Section 20(2) makes it clear that unless the contract is performed through a third party or by his own agency, the victim will not be entitled to recover the expenses and costs mentioned in Section 20(1).

Suit for breach of contract u/sec.58 of the Sale of Goods Act, 1930:— When specific performance would be available and would not be available is dealt in Chapter-II. There is a remedy to obtain decree for breach of contract, under Section 58 of the Sale of Goods Act, 1930, to deliver specific or ascertained goods. But, such remedy is subject to Chapter- II of the Specific Relief Act, 1963 (Previously Act of 1877).

Now, the latest law, after Amendments in 2018, is that new sec. 20 of the Act, as to substituted performance of contract, is also applicable to sale of Goods. From this analogy , it is so clear that Section 58 of the Sale of Goods Act, 1930 can be applied subject to newly amended provisions of secs. 10, 14(a), 16(a), and 20 of the Specific Relief Act, 1963.

Benefits to promisee:- Under new amendments of 2018, promisee can avail certain benefits:

  • Substituted performance keeps the promisee in such a position like the contract is performed; indeed, awarding damages under contract law is one of its objectives.
  • An effective, sure-enough and real method to compute losses suffered because of non-performance or failure by the promisor to perform his part of contract.
  • The concept of substituted performance becomes a substantive statutory right and so it is now a reform in the legal history.
  • showing an option to avail the remedy of specific performance of contract is another reformative action under branch law of specific performance.
  • Under the new section 14, a contract is not specifically enforceable if a party to the contract obtains substituted performance of the contract as per the amended Section 20 of the Act.

Criticism :— Issues covering commercial and non-commercial are not distinguished in the new amendments of 2018 Act as to their applicability is concerned. Some injustice would be caused to promisor as promisee avails bundle of alternative remedies. There is no much scope to promisor put forth the his bonafides for such non-performance of his part of contract. the language of Section 14(a) of Act, 2018 permits the promisee to force the promisor to perform the contract, ignoring the issue that even if the promisor is unable to perform his party of contract for some valid grounds. New Section 10 of the Specific Relief Act as amended by the Specific Relief(Amendment) Act, 2018 is an attempt to reduce the discretion of the Court relating to enforcement of specific performance of contracts.

Is there any change in applying well-settled principles? :—
Although the amendments as above, the Court has to still consider the following well-settled principles while granting or denying specific performance.

  1. Readiness and Willingness:- Despite Section 16(c) of the Act as amended by the Specific Relief (Amendment) Act, 2018, appears that, no longer requires the plaintiff to plead readiness and willingness, it is still mandatory for the plaintiff to establish that he has already performed or is always ready and willing to perform the essential terms of the contract. See also. Vijay Kumar v. Om Parkash, (2018) SCC ONLINE 1913.
  2. Conduct of the plaintiff in performance of the contract:— As was held in Aniglase Yohannan v. Ramlatha, (2005) 7 SCC 534, any person seeking benefit of the specific performance of contract must manifest that his conduct has been blemishless throughout entitling him to the specific relief. 
  3. The plaintiff had to seek appropriate relief. As was held in the provisions of Section 22  must also be considered when seeking relief in cases where the plaintiff is not in possession of the land or property in dispute. See.I.S. Sikandar v. K. Subramani, (2013) 15 SCC 27.
  4. Necessary parties to a suit for specific-performance. See. Kasturi v. Iyyamperumal, (2095) 6 SCC 733. Rounds
  5. Limitation : Under art. 54 of the Limitation Act, 1963, the period of limitation for a suit of specific performance is three years from the date fixed for performance or if no such date is fixed, when the plaintiff has notice that performance is refused. See. Rathnavathi v. Kavita Ganashamdas, (2015) 5 SCC 223;

Conclusion:— Even prior amendment of these provisions in 2018, the Specific Relief Act, 1963 is based on common law principles. Where damage is an adequate remedy, Specific performance cannot be sought. Under common law position, damages are considered as a default remedy wherein specific performance is as an exception, of course, these are available only in certain recognised cases or when damages will not adequately be compensated the victim for the of breach of contract. Prior 2018 Amendments, damage is in the status of general preference. Specific relief would not be available when compensation is an adequate relief for breach of contract under purview of section 14 of the Act. Specific performance of a contract may be enforced where there existed no standard of ascertaining actual damages caused by non-performance of the promise or where monetary compensation would not afford adequate relief for non-performance is s as another rule as seen from section 10 of the Act.

Now, owing to amendments in 2018 of the Act, the general rules in contract law that “damages will be the default remedy” and “ specific-performance will be the exception” are changed. The victim of breach has to decide on whether the victim wants specific performance or damages. But, it is being criticised that rights of promisor has been ignored in this context substituted performance. Section 10 of Act as amended by the Specific Relief(Amendment) Act, 2018 is an attempt to reduce the discretion of the Court relating to enforcement of specific performance of contracts inasmuch as it is departure of circumstances as set out in Sections 11, 14 and 16 of the Act.

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