This issue of LexCognito, which in Latin means 'awareness about law', seeks to provide you an insight into significant legal and regulatory developments that have taken place very recently in India.
Date: 25 July 2018
Indian Contract Law & Specific Relief – Parliament Passes Pathbreaking Amendments
The Parliament of India has passed the Specific Relief (Amendment) Bill, 2018 on 23 July 2018 (the "Amendment Bill"), proposing to bring significant amendments to Specific Relief Act, 1963. These amendments, upon coming into force, will bring path-breaking changes as to how the contracts will now be enforced by courts in India.
The Statement of Objects and Reasons of the Amendment Bill itself admits that the Act (i.e. The Specific Relief 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 of the country.
The amendment will come into force with effect from the date of notification of the same by the Central Government in the official gazette after the Amendment Bill gets Presidential Assent.
Award of Specific Performance of Contracts Made Compulsory:
The Amendment Bill abolishes the discretionary power of courts in awarding specific performance of a contract. Thus, specific performance of contracts will now be compulsorily enforced by the Court if pleaded by the plaintiff. Presently, because of the peculiar language of the law, the courts often award damages for breach of contract as a general rule and they grant specific performance as an exception.
The amendment will now enable the plaintiffs to seek specific performance of contracts as a matter of course, without having to prove special circumstances.
Compensation/Damages In Adition To Specific Performance:
The Amendment Bill has also changed the provisions relating to claim of compensation/damages for breach of contracts. The present law allows plaintiffs to claim damages either in addition to or in substitution of specific performance. The Amendment Bill now enables award of damages in addition to specific performance. In other words, now compensation/damages need not be sought for as an alternate relief, and it can be claimed in addition to specific performance.
Introduction of Concept of ‘Substituted Performance’:
Another significant change is that the Amendment Bill introduces the concept of ‘substituted performance’. Accordingly, a party who is affected by the breach of contract will now have the option to get the contract performed by either a third party or by its own agency, at the cost of the other contracting party at default. The affected party has to give prior notice of thirty (30) days to the defaulting party expressing his intention to seek substituted performance. It has, however, been provided that a party by obtaining substituted performance forfeits his right to get specific performance of contract enforced through court.
Specific Pleading of Readiness and willingness to Perform Contractual Obligations by Plaintiff No Longer Mandatory:
Further, the amendments will no longer require the plaintiff to specifically plead readiness and willingness to perform his contractual obligations while approaching court seeking specific performance. The present law provides that a party has to aver and prove that he has performed or has always been ready and willing to perform the essential terms of the contract which are to be performed by him and the courts have been very strict regarding this requirement of the Specific Relief Act and in the absence of a plea in the plaint regarding such readiness and willingness, no Court would grant decree for specific performance to the plaintiff. Several cases have got dismissed in past solely because of the failure to make such a plea in the plaint.
The amendment has provided a relief by relaxing this requirement and now the plaintiff merely needs to prove his readiness and willingness and it will no longer be mandatory to specifically plead the same in the plaint.
Significant Relief for Infrastructure Projects:
Another path breaking amendment is introduction of a special category of ‘infrastructure projects’. The new Schedule to the Specific Relief Act introduced by the amendment contains the list of activities which will be treated as ‘infrastructure projects’. Such activities are in the sectors of transportation, energy, water & sanitation, communication and social & commercial infrastructure. The Department of Economic Affairs (DOE) has been designated as the nodal agency for specifying various categories of projects and infrastructure sub-sectors, as provided in Schedule, and DOE has been empowered to amend the Schedule relating to any such category or sub-sectors
The new Section 20A introduced by the amendment restrains Courts from granting injunction in a suit involving contract relating to an infrastructure project, where granting injunction is likely to cause impediment or delay in the progress or completion of such infrastructure project. Further, Special Courts are proposed for determination of suits relating to infrastructure projects.
Introduction of time limit of twelve months for case disposal:
The new Section 20C of the Amendment Bill fixes a time limit of twelve months for disposal of cases under the Specific Relief Act.
Court can engage experts:
The newly introduced Section 14A confers power on the courts to engage experts to seek opinion on any issues in the suit.
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