Specific Relief Act (‘SRA’) is the law governing specific
performance of contracts, injunctions and other related matters. Recently SRA
has been amended significantly and the amended law is well positioned to change
the way in which litigation will be conducted in India. The amendments may be
summarized as follows:
performance of contracts, injunctions and other related matters. Recently SRA
has been amended significantly and the amended law is well positioned to change
the way in which litigation will be conducted in India. The amendments may be
summarized as follows:
·
To change the approach from damages being the rule and specific
performance being the exception, to specific performance being the rule, and
damages being the alternate remedy;
To change the approach from damages being the rule and specific
performance being the exception, to specific performance being the rule, and
damages being the alternate remedy;
·
To provide guidelines for reducing the discretion granted to Courts and
tribunals while granting performance and injunctive reliefs;
To provide guidelines for reducing the discretion granted to Courts and
tribunals while granting performance and injunctive reliefs;
·
Introduction of the concept of substituted performance;
Introduction of the concept of substituted performance;
·
To treat contracts of public importance at a different level and provide
for special rules for enforceability of such contracts.
To treat contracts of public importance at a different level and provide
for special rules for enforceability of such contracts.
Suit for recovery of possession
– who can bring
– who can bring
Sections 5 to 8
of SRA deals with recovery of property. Section 6 talks of dispossession of a
person of immovable property without his consent and that such person may, by a
suit, recover possession, notwithstanding any other title. Therefore, a person
in possession of a property, when disposed of such property otherwise in due
course of law, may recover possession by a suit. Person claiming possession
must be the person who is in juridical possession. Hence agent, employee,
servant, relative cannot claim relief under section 6 unless they had legal
possession to begin with.
of SRA deals with recovery of property. Section 6 talks of dispossession of a
person of immovable property without his consent and that such person may, by a
suit, recover possession, notwithstanding any other title. Therefore, a person
in possession of a property, when disposed of such property otherwise in due
course of law, may recover possession by a suit. Person claiming possession
must be the person who is in juridical possession. Hence agent, employee,
servant, relative cannot claim relief under section 6 unless they had legal
possession to begin with.
Supreme Court in
a 2010 case decided that a landlord can file a suit under section 6 if the
tenant has been forcibly dispossessed, although landlord was not in actual
possession. The present amendment to section 6 codifies this position that the
person who can bring the suit may be the person who was in possession, a person
who claims through him or
a person through whom the plaintiff was in possession.
a 2010 case decided that a landlord can file a suit under section 6 if the
tenant has been forcibly dispossessed, although landlord was not in actual
possession. The present amendment to section 6 codifies this position that the
person who can bring the suit may be the person who was in possession, a person
who claims through him or
a person through whom the plaintiff was in possession.
Specific performance
Sections 10, 14
and 16 provide for cases in which specific performance is enforceable, in what
cases it may not be enforceable and in whose favour the specific performance
cannot be enforced. In cases, where specific performance is enforceable such as
where there is no standard of ascertaining damages or where damages will not
afford adequate relief etc., courts were given discretion as to whether to
award specific performance or not and there was a fair chance of proving to
contrary that damages will be adequate relief, even in cases such as agreements
for transfer of immovable property. The present amendment to Section 10 makes
it compulsory for the courts to enforce the contracts compulsorily subject to
sections 11 (Trust related contracts), 14 and 16. Even of Section 11, specific
performance has been made compulsory, except in case where trustee has acted
out of its scope of powers.
and 16 provide for cases in which specific performance is enforceable, in what
cases it may not be enforceable and in whose favour the specific performance
cannot be enforced. In cases, where specific performance is enforceable such as
where there is no standard of ascertaining damages or where damages will not
afford adequate relief etc., courts were given discretion as to whether to
award specific performance or not and there was a fair chance of proving to
contrary that damages will be adequate relief, even in cases such as agreements
for transfer of immovable property. The present amendment to Section 10 makes
it compulsory for the courts to enforce the contracts compulsorily subject to
sections 11 (Trust related contracts), 14 and 16. Even of Section 11, specific
performance has been made compulsory, except in case where trustee has acted
out of its scope of powers.
Contracts where
compensation is adequate relief could not be specifically enforced. Such a
situation gave the courts discretion to decide on the facts of the case whether
damages are adequate relief or not. However, with the present amendments in
Section 14 (1), this has been removed and replaced with the concept of
substitute performance which is another amendment in Section 20(discussed below).
It is important to note that rest of erstwhile Section 14 has been deleted
which included specific performance for construction contracts or execution of
works on land provided certain conditions were fulfilled such as contract was
precise enough about what works are to be done, plaintiff had substantial
interest and defendant was in possession of the land on which construction or
other works were to be done.
compensation is adequate relief could not be specifically enforced. Such a
situation gave the courts discretion to decide on the facts of the case whether
damages are adequate relief or not. However, with the present amendments in
Section 14 (1), this has been removed and replaced with the concept of
substitute performance which is another amendment in Section 20(discussed below).
It is important to note that rest of erstwhile Section 14 has been deleted
which included specific performance for construction contracts or execution of
works on land provided certain conditions were fulfilled such as contract was
precise enough about what works are to be done, plaintiff had substantial
interest and defendant was in possession of the land on which construction or
other works were to be done.
With the court
discretion and conditions to specific performance gone and specific performance
made compulsory, assuming other conditions of Section 14 (1) are met, it will
be interesting to see the fate of development agreements in the courts. Also,
this will prove to be a bounty for flat owners to get their allotment
agreements etc. specifically enforced, hoping to get the construction
completed, provided the courts first settle the bigger issue as to whether the
flat owners can have access to civil courts/arbitration for specific
performance and whether the civil courts/arbitration are ousted due to
RERA.
discretion and conditions to specific performance gone and specific performance
made compulsory, assuming other conditions of Section 14 (1) are met, it will
be interesting to see the fate of development agreements in the courts. Also,
this will prove to be a bounty for flat owners to get their allotment
agreements etc. specifically enforced, hoping to get the construction
completed, provided the courts first settle the bigger issue as to whether the
flat owners can have access to civil courts/arbitration for specific
performance and whether the civil courts/arbitration are ousted due to
RERA.
An interesting
situation will also arise with respect to enforcement and specific performance
of investment agreements, shareholders agreements etc where servicing the exit
of an investor is generally the obligation of the investee company and/or the
promoters. Now that the specific performance has been made compulsory, it can
mean that the investor have a right to get the exit obligations specifically
enforced.
situation will also arise with respect to enforcement and specific performance
of investment agreements, shareholders agreements etc where servicing the exit
of an investor is generally the obligation of the investee company and/or the
promoters. Now that the specific performance has been made compulsory, it can
mean that the investor have a right to get the exit obligations specifically
enforced.
With the
amendments in Section 16, specific performance has been made unavailable in favour
of a plaintiff if he has availed substituted performance as per the new Section
20. Also, proof (and not proof and averment) of performance or readiness of
performance of plaintiff’s obligation is required for him to get a specific
performance in his favour.
amendments in Section 16, specific performance has been made unavailable in favour
of a plaintiff if he has availed substituted performance as per the new Section
20. Also, proof (and not proof and averment) of performance or readiness of
performance of plaintiff’s obligation is required for him to get a specific
performance in his favour.
Other important
amendments in relation to specific performance are contained in Sections 20B,
20C and 21. Section 20B provides for designation of civil courts or special
courts by state government to try a suit in relation to infrastructure projects
(discussed below).
amendments in relation to specific performance are contained in Sections 20B,
20C and 21. Section 20B provides for designation of civil courts or special
courts by state government to try a suit in relation to infrastructure projects
(discussed below).
Section 20C prescribes a period of 12 months from service of
summons to defendant to dispose off a suit filed under the SRA, which may be
extended by another 6 months, giving reasons for such extension. To be noted
that the time limit applies to all suits under the Act and not just for
specific performance and keeping in mind that specific performance has been
made compulsory and discretion of the courts has been removed, it will be
interesting to see how most litigation shifts towards asking for specific
performance rather than damages and hence becomes subject to the prescribed
time limit.
summons to defendant to dispose off a suit filed under the SRA, which may be
extended by another 6 months, giving reasons for such extension. To be noted
that the time limit applies to all suits under the Act and not just for
specific performance and keeping in mind that specific performance has been
made compulsory and discretion of the courts has been removed, it will be
interesting to see how most litigation shifts towards asking for specific
performance rather than damages and hence becomes subject to the prescribed
time limit.
Section 21 is
also an important amendment which entitles Plaintiff to claim damages alongwith
specific performance and not in substitution thereof.
also an important amendment which entitles Plaintiff to claim damages alongwith
specific performance and not in substitution thereof.
The above
amendments bring in finality to the question of enforceability of agreements
and will also change the way lawyers draft agreements. In case your client is
in a position that it can clearly claim specific performance as per the new
provisions, should the need arises, the need for having heavy indemnity
clauses, damages, LD, performance securities, guarantees etc. will to a large
extent be rendered irrelevant, better so as enforcement of such clauses have
their own reasons to give back-pains to clients and lawyers. Also, the need to
provide ‘specific performance’ as a boiler plate clause in the agreements will
no longer be required.
amendments bring in finality to the question of enforceability of agreements
and will also change the way lawyers draft agreements. In case your client is
in a position that it can clearly claim specific performance as per the new
provisions, should the need arises, the need for having heavy indemnity
clauses, damages, LD, performance securities, guarantees etc. will to a large
extent be rendered irrelevant, better so as enforcement of such clauses have
their own reasons to give back-pains to clients and lawyers. Also, the need to
provide ‘specific performance’ as a boiler plate clause in the agreements will
no longer be required.
Substituted Performance
Section 20 has
been replaced with the concept of substituted performance, which if undertaken
will not entitle plaintiff to claim specific performance. Substituted
performance is a popular method of risk mitigation used in agreements in case
of a breach, specifically in construction contracts, development agreements,
concession agreements, software development agreements and other types of
service agreements where if the developer/service provider (call him X) fails
or breaches, the performance seeker (call him Y) replaces X with Z at the cost
of X and has Z completes rest of the agreement. The substitution is
preceded with a reasonable cure period to enable X to cure the breach and if X
still fails to do so, Y has a right to replace X and bring in Z. More
sophisticated and high-stake agreements have elaborate provisions prescribing
the manner of selection of Z, identification of costs, replacement of
guarantees, lender’s consents, compensation for Z etc. depending on the
circumstances.
been replaced with the concept of substituted performance, which if undertaken
will not entitle plaintiff to claim specific performance. Substituted
performance is a popular method of risk mitigation used in agreements in case
of a breach, specifically in construction contracts, development agreements,
concession agreements, software development agreements and other types of
service agreements where if the developer/service provider (call him X) fails
or breaches, the performance seeker (call him Y) replaces X with Z at the cost
of X and has Z completes rest of the agreement. The substitution is
preceded with a reasonable cure period to enable X to cure the breach and if X
still fails to do so, Y has a right to replace X and bring in Z. More
sophisticated and high-stake agreements have elaborate provisions prescribing
the manner of selection of Z, identification of costs, replacement of
guarantees, lender’s consents, compensation for Z etc. depending on the
circumstances.
Erstwhile
Section 20 provided that Court shall always have discretion before awarding a
specific performance even if its legally tenable and gave guidelines to Court
to help them decide so. The new Section 20 only provides for Substituted
performance and the only condition that has been prescribed is service of a
minimum cure period notice of 30 days. Also, it specifies that the plaintiff
shall have a right to recover the costs and expenses actually incurred or
suffered by him and also right to claim compensation.
Section 20 provided that Court shall always have discretion before awarding a
specific performance even if its legally tenable and gave guidelines to Court
to help them decide so. The new Section 20 only provides for Substituted
performance and the only condition that has been prescribed is service of a
minimum cure period notice of 30 days. Also, it specifies that the plaintiff
shall have a right to recover the costs and expenses actually incurred or
suffered by him and also right to claim compensation.
It is however
not clear as to whether the Substituted performance has to be provided for in
the agreement for the plaintiff to be eligible to avail it or whether it will
be automatically available to the plaintiff or whether the plaintiff as to go
to court to ask for an order to enable it to undertake Substituted performance.
not clear as to whether the Substituted performance has to be provided for in
the agreement for the plaintiff to be eligible to avail it or whether it will
be automatically available to the plaintiff or whether the plaintiff as to go
to court to ask for an order to enable it to undertake Substituted performance.
In view of the
above and the limitations of new Section 20, it appears that the Parties will
still have to provide for elaborate Substituted performance in their agreements
and the Section will only remain as an enabling provision to enforce such
provisions in favour of the party seeking performance.
above and the limitations of new Section 20, it appears that the Parties will
still have to provide for elaborate Substituted performance in their agreements
and the Section will only remain as an enabling provision to enforce such
provisions in favour of the party seeking performance.
Infrastructure Projects
The Act has been
amended to include a schedule which provides for a list of projects which shall
qualify as ‘infrastructure projects’. Section 20A provides that no court shall
grant injunction in a contract relating to an infrastructure project if such
injunction would cause impediment or delay in the progress or completion of
such infrastructure project.
amended to include a schedule which provides for a list of projects which shall
qualify as ‘infrastructure projects’. Section 20A provides that no court shall
grant injunction in a contract relating to an infrastructure project if such
injunction would cause impediment or delay in the progress or completion of
such infrastructure project.
The verbiage of the section yearns for clarity and
comprehensiveness, specifically related to type of contracts contemplated, what
all will constitute an impediment or delay and whether such restriction is
applicable only cases of infrastructure project which are under development or
is also applicable in cases where projects are developed and are being
operated. Further, Section 41 has also been amended to restrict
injunctions against infrastructure project. The amended sub-clauses in Section
41 (ha) however specifically provides for infrastructure project which are
being developed and also those which are in operation and provides that the
injunction cannot be granted against an infrastructure project which would
impede or delay the progress or completion of the infrastructure project or
interfere with the continued provision of facility of such infrastructure
project.
comprehensiveness, specifically related to type of contracts contemplated, what
all will constitute an impediment or delay and whether such restriction is
applicable only cases of infrastructure project which are under development or
is also applicable in cases where projects are developed and are being
operated. Further, Section 41 has also been amended to restrict
injunctions against infrastructure project. The amended sub-clauses in Section
41 (ha) however specifically provides for infrastructure project which are
being developed and also those which are in operation and provides that the
injunction cannot be granted against an infrastructure project which would
impede or delay the progress or completion of the infrastructure project or
interfere with the continued provision of facility of such infrastructure
project.
Considering the current
situation of the infrastructure project in India and huge backlog of litigation
related to infrastructure project, it appears that the intention of introducing
a section to prohibit injunctions against infrastructure project may be
considered in public interest. However, the law makers could have had
considered using more comprehensive verbiage to take care of all other
situations considering the precedents, in order to avoid further litigation.
