The Central government has introduced the Bill with sweeping changes in the existing regime. According to Mayur Shetty, Associate Partner, Rajani Associates, Specific Relief Act 1963 ("Act") as it stands, without the amendments, as referred in the Bill, focuses on providing monetary compensation as the primary relief for damages. While specific performance is granted only in exceptional circumstances where monetary compensation for damages cannot be termed as adequate relief.
What is the Specific Relief (Amendment) Bill 2018 and how will it impact the infrastructure sectors?
As per the Statement of Objects and Reasons of the Amendment Bill, the Act is not in tune with the rapid economic growth happening in our country and the expansion of infrastructure activities that are needed for the overall development. By way of the proposed amendment, legislature intends to change the settled legal position by way of introducing specific performance as a right, rather than being an alternative. In the existing provisions of the Act, court may grant specific performance, if it believes monetary compensation is not an adequate remedy.
The Amendment seeks to replace section 10 of the Act, which widely empowers the court to grant specific performance when the monetary compensation cannot be termed as adequate relief. These provisions in turn give wide discretionary powers to the Court to grant specific performance only in exceptional circumstances.
Section 14 of the Act has also been replaced, which further restricts the categories of contracts that can be specifically enforced. Hence, the Bill attempts to take away the discretion quotient from the ambit of the courts by making specific performance a primary relief.
Further, section 14(3)(c) of the Act allows courts to grant specific performance in relation to construction contracts upon fulfilment of the following conditions:
The Bill proposes to abolish conditions under section 14(3)(c) of the Act, as they were major obstructions to the enforcement of construction contracts. The Bill has introduced the concept of infrastructure projects for the first time. In relation to infrastructure projects, the Bill under the Schedule has introduced five categories, namely:
These five categories further include an exhaustive list of sub-sectors comprising infrastructure projects. It is important to mention here that the Bill maintains focus on the speedy disposal of disputes related to infrastructure projects. In furtherance of the same Bill, state governments have provisions to constitute special courts to try and adjudicate disputes arising out of contracts related to infrastructure projects, which shall be decreed within a period of 12 month from the date of service of summons upon the Defendant and can be extended further to a period of six months. The Bill also bars the court adjudicating disputes related to infrastructure projects from granting injunctions, where such the injunctions may lead to delay in the progress or completion of infrastructure project.
The Bill will introduce the concept of 'substituted performance of contract,' wherein the Plaintiff will be entitled to employ a third party or his own agency to complete the project that is left incomplete by the Respondent, after giving a due notice of 30 days to the Respondent. In situations, where the project is completed by a third party or the Plaintiff's own agency, the Plaintiff is entitled to claim for compensation from the Respondent for breach of contract. This would surely help in the timely completion of projects that lie incomplete only for the reason of a pending dispute.
In view of the proposed amendments, the Bill seeks to expedite the process of resolution of disputes in relation to infrastructure projects. The Central Government has introduced these amendments in order to ensure rapid economic growth and minimal hindrances in infrastructure projects. Further, 'substituted performance of contract' will also expediate the process of completion of projects without specifically waiting for resolution of dispute.
What kind of contracts and remedies will it cover?
The Act provides that the contract may only be ordered to be specifically performed in exceptional circumstances, namely: when monetary compensation is inadequate or when monetary compensation cannot be easily ascertained. The Act deals with certain kinds of equitable reliefs, which are:
In a suit for specific performance against the Defendant who has failed to perform his legal obligations as provided in a valid contract entered by and between the parties, the Plaintiff is entitled to file a suit claiming monetary damages or specific performance. The general remedy provided under the Act for breach of legal and contractually-binding duty is monetary reparation, legally termed as "damages" under section 10 and section 14 of the Act. In the current scenario under the Act, damage is a general rule while specific performance is an exception. Over the past 55 years of the enactment of the Act, it has been observed that the suits filed under the Act take quite long. This not only causes delay of justice, but also affects the timely completion of projects.
The Bill has inserted a new schedule by way of which "infrastructure projects" are introduced as a new category of contractsto be specifically dealt with under the Specific Performance Act. Further, the Bill seeks to take away the discretionary power of the courts and make specific performance a rule.
Will it give an edge to public sector infrastructure companies?
The Bill has introduced the concept of substituted performance of contract which means, public sector infrastructure companies would not rely merely on the decree of the court for completion of projects. Further, with the setting up of special benches to deal with infrastructure projects and stringent timelines of 12 months, extendable to maximum of six months, any breach will be dealt with in a stringent manner. Further, the Bill seeks to make specific performance as the primary relief in place of damages. This would also deter concessionaires from breaching the terms of contract. These proposed amendments will also reassure investors and stakeholders about the completion of projects, there by bringing in more public investments in infrastructure projects.
Recently, the Prime Minister of India emphasised the need for strengthening the infrastructure sector and said: "Infrastructure projects are crucial to the progress of the country, and India can no longer afford delays in infrastructure projects, especially connectivity projects." The proposed amendment in the Act, inter alia, aims to strengthen the infrastructure sector and reduce the delay in the infrastructure projects. These initiatives would in turn attract more investment in India in the infrastructure sector.
"By way of the proposed amendment, legislature intends to change the settled legal position by way of specific performance as a right, than an alternative."