Amended act reduces court’s discretionary powers

By Deepak Sabharwal, Deepak Sabharwal & Associates
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The Specific Relief (Amendment) Act, 2018 (act), which received presidential consent on 1 August 2018, attempts to facilitate rapid economic and infrastructural growth. It removes the discretionary powers of the courts to stay applications for specific performance of contracts. By making enforcement a mandatory rule the act allows companies to enter into contracts with a legislative and judicial assurance that they will be specifically performed. This nullifies previous advantages enjoyed by defaulting parties of evading their obligations, and gives the enforcing party maximum advantage.

Deepak SabharwalManaging partnerDeepak  Sabharwal & Associates
Deepak Sabharwal
Managing partner
Deepak Sabharwal & Associates

The act amends the Specific Relief Act, 1963 (SPA), as described above and, in a major development, inserts a new schedule of infrastructure projects. This provides that courts may not grant injunctions to prevent the application for, and grant of orders for specific performance in disputes over contracts for such projects.

The highlights of the act are:

Compulsory specific performance. The act amends sections 10 and 11 of SPA, so that, save for specific exceptions, it is mandatory for courts to grant orders for specific performance of contracts. Courts no longer have discretionary power to refuse to issue such orders.

Exceptions. Amended section 14 of SPA now allows only four exceptions to the mandatory issuance of a specific performance order. These are where a) a party has already obtained an order for substituted performance of a contract (see below); (b) the performance of a contract involves continuous obligations which the court cannot supervise; (c) there is a contract that is so dependent on the personal qualifications of the parties that the court cannot order specific performance of its material terms, and (d) where there is a contract that is, by its nature, determinable.

Experts. Inserted section 14A, of the SPA gives a court the power to engage experts where it decides it needs assistance.

Limited liability partnerships (LLP). Sections 15(fa) and 19(ca) are additions to SPA and allow a new LLP formed by the amalgamation of two existing LLP, to apply for, and be subject to orders for specific performance in contract disputes.

Section 16(a) and (c). These substituted sections disallow specific performance of a contract where a party has already obtained an order under section 20 for substituted performance of a contract.

Ready and willing. The act amends the SPA to abolish the mandatory requirement to aver that the party is ready and willing to perform the contract; parties are now only required to prove this evidentially.

Substituted performance of contracts. Amended section 20 of SPA gives relief to a party alleging breach of contract by allowing it either to sue for specific performance of contract or to opt for substituted performance of the contract by a third party, or through its own agency, recovering the expenses and other costs actually incurred, spent or suffered by him, from the party committing such breach. An application for the latter right must follow stipulated procedures and is subject to certain limitations. These are set out in section 20. A party may claim compensation whether it applies for specific or substituted performance.

Injunctions. Added section 20A of SPA states that a court should not grant an Injunction where an Infrastructure project contract is involved, and where such grant would impede or delay its progress or completion. To ensure that the legislative intent is carried out, a new section 41(ha) has been inserted in the SPA, enacting that an injunction shall not be granted in cases subject to section 20A. Section 14 of the act also inserts the new schedule of infrastructure projects into the SPA. Under section 20A of the SPA the government may, if it considers it necessary or expedient to do so, by notification in the Official Gazette, amend the schedule relating to any category of projects.

Special courts. Inserted section 20B of the SPA establishes special courts to try cases involving infrastructure project contracts; under section 20C, cases must be concluded within twelve months from the date of summons with a possible extension of six months.

A key factor is whether the amendments to the SPA will operate retrospectively. For this to be the case the legislature must enact a saving or transition clause.

The act clearly brings positive changes to ease doing business and aims to bring certainty to conditions relief for specific performance of contracts. The parties will not be allowed to evade their commitments and will have to carry out their contractual obligations. A defaulting party may face the consequences including substituted performance.

Deepak Sabharwal is the managing partner of Deepak Sabharwal & Associates.

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