Institute of Management Technology, Ghaziabad
Post-Graduate Diploma in Management, 2022-24
Legal Aspects of Business
Prof. Shashwat Bansal
Specific Performance of a Contract as a Relief Latest Developments
Presented by –
Abhi Agarwal
Roll no – 220102001
Pgp id – pgp22abhiagarwal@imt.ac.in
1. Introduction
The Specific Relief Act of 1877 was the first Act in India to codify the Specific Relief Act.
This Act's provision was taken into consideration by the Law Commission in its Ninth Report,
which was then updated and replaced by the present Act of 1963. The 1963 Specific Relief Act
focuses on the remedies provided by court rulings to preserve individual civil rights. The
exclusive remedy accessible to the person injured due to a breach of contract is restitution for
damages for the harm done. Under the legislative provision in Section 73-75 of the Indian Act
1872 about the agreement, legal action is taken against the culprit who has disregarded their
responsibility or obligation under the terms of the contract.
However, there are situations when monetary compensation is insufficient to appease the
claimant, in which case he may request a particular remedy. Imagine, for instance, if someone
unlawfully seized a person without getting permission to occupy the space peacefully. Then,
rather than pursuing a claim for monetary compensation, a specific treatment may entitle them
to joint ownership of an asset.
The Act affects over 70% of civil cases in India's lower courts, and the reliefs made available
under it are. The following remedies are often open to the opposite party in cases where one
party has breached an agreement:
1. Rescission of contract
2. Suit for Damages
3. Suit for Specific Performance
4. Suit for Injunction
2. Enforceability
According to Section 10 of the Specific Relief Act of 1963:
(1) there is no accepted method for calculating the actual harm resulting from failure to carry
out the agreed-upon Act
(2) the agreed-upon Act means that monetary compensation for failure to perform it would not
provide sufficient relief.
Section 11: Situations where the particular fulfillment of agreements involving trusts is
upheld:
(1) Unless otherwise specified in this Act, a contract's particular performance shall be enforced
where the Act to be performed is in a form that is entirely or partially that of a trust.
(2) A trustee's contract signed more than his authority or violation of the trust cannot be
explicitly enforced
The Specific Relief Act of 1963's Section 12 states: Specific compliance with a clause in
the contract:
(1) Unless otherwise specified in this section, a court cannot order a specific contract
component to perform.
(2) The court may, at the request of either party, order the specific performance of that portion
of the contract that can be performed and grant compensation in money for the deficiency when
a party to an agreement cannot complete the entirety of his part of it. Still, the amount left
unperformed must be only a tiny percentage of the total value.
(3) A party to a contract is not permitted to carry out all of his obligations under the agreement.
(4) The court may order the particular execution of a contract where that provision stands on
its own independent and distinct footing from a condition of the same agreement that cannot
or should not be explicitly fulfilled. An explanation for this section, a party to a contract is
regarded as incapable of fulfilling the entirety of it or his portion of it if any of its subject matter
still exists at the time of the performance but is no longer alive.
A contract cannot be specifically performed in certain situations, according to Section 14
of the Specific Reliefs Act of 1963, including:
(1) when a party to the contract has obtained substituted performance
(2) when the performance of the contract requires the performance of an ongoing duty that the
court cannot supervise.
(3) a contract so reliant on the parties' backgrounds that the court cannot order an exceptional
performance of any of its crucial provisions; and (4) an agreement that is by its very nature
determinable.
3. Amendments
The Specific Relief (Amendment) Act, 2018 shifts the general law governing contractual
enforcement in India by focusing on enforcing specific performance of contracts rather than
the prior default remedy of awarding damages for breach of contract.
The Amendment Act limits the previously granted courts' extensive power in giving an
individual performance. A new "substituted performance" remedy for contract breach is also
introduced, recognizing the ability of a non-defaulting party to have the contract executed via
him or a third party at the expense of the defaulting party. The changes are intended to realign
the current rules to make business in India easier while offering more vigorous enforcement
and investor protection.
Significant changes include the following:
(a) Specific Performance is no longer optional
The Amendment Act has made a significant shift in that it now requires courts to uphold
specified performance of contracts, except those agreements where the such undertaking is not
legally enforceable. Before this change, the two conditions under which individual
performance may be ordered and the discretion provided to courts in delivering the remedy
were abolished.
(b) Reduced number of contracts that aren't expressly enforceable
The kinds of contracts that are not particularly enforceable have been narrowed under the newly
replaced Section 14 in keeping with the transition to a pro-performance framework. The revised
Section 14 now recognizes only four categories of contracts that cannot be specifically
enforced, namely (a) contracts where a party has obtained "substituted performance" under
Section 20, (b) contracts involving the performance of an ongoing duty that courts cannot
supervise, (c) contracts so dependent on the parties' qualifications that the court cannot enforce
specific performance of material terms, and (d) contracts of a deductive nature.
(c) An additional substitute performance cure
By introducing the "substituted performance" remedy, the Amendment Act has given statutory
recognition to the idea of "Right to Cover" in contracts (typically an agreed-upon contractual
term between parties), which enables an aggrieved party in the event of non-performance of an
agreement to obtain performance from a third party while also recovering the associated costs
or loss from the breaching party.
(d) Power to consult experts
The Amendment Act now expressly grants courts the authority to consult with technical
specialists to help with any technical concerns that could arise in action for exceptional
performance. This amendment would improve the courts' capacity to hear disputes involving
complex construction, utility, development, or redevelopment concerns.
(e) Contracts for Infrastructure
The Amendment Act adds Section 20A, which prohibits courts from issuing injunctions in
lawsuits involving contracts for infrastructure projects where doing so may delay the project's
completion. The changes also call for the creation of Special Courts to hear cases involving
contracts for infrastructure projects.
(f) Time-bound decision-making
The Amendment Act sets a lofty deadline of 12 months from the day the defendant was served
with the summons for the resolution of action for a specified performance. The court may
extend this time frame another six months.
4. Efficacy of the regulatory framework & relevance of the Act in the
Business Community
CASE 1: M/S Gujarat Bottling Co. Ltd v. Coca-Cola Co & Ors
In the case of M/S Gujarat Bottling Co. Ltd v. The Coca-Cola Co. & Ors, the Supreme Court
of India opined that because the relief granted by the court in terms of specific performance is
of an equitable nature, the party requesting the court's jurisdiction must demonstrate that he
was not responsible for creating the situation, his acts were not carried out by using unfair
means, and the handling of the parties involved have been done in a manner consistent with
fairness. These factors must be taken into account,
1. Who requests a restraining order under Order 39?
2. Who requests that the ad interim injunction be lifted in court?
The case offers insight into the Specific Relief Act of 1963's Section 42. An injunction to carry
out the negative agreement is provided under Section 42. An unfavorable deal between the
plaintiff and defendant firms lies at the heart of the case's circumstances. The grounds for which
an injunction cannot be enforced are listed in Section 41 of the Act. According to Section 41(e),
a request will not be granted to stop a contract breach for those contracts that are never
particularly enforceable.
When a contract contains an affirmative agreement to carry out a specific action that includes
a hostile deal, the court will grant an injunction for the negative agreement while taking the
provision provided under Section 41(e) into consideration. In these situations, the court would
not be able to declare specific performances for the affirmative agreement.
CASE 2: The East India Hotels Ltd vs. Syndicate Bank
Because it determined the destiny of Section 6 of the Specific Relief Act of 1963, the case of
The East India Hotels Ltd v. Syndicate Bank is significant. The lawsuit centers around the
assertion that the defendants were given space on leave and a license by the plaintiff. This
business owns and operates hotels in several locations for a predetermined period of 12 years.
The defendant consented to lend the plaintiff a certain sum of money in exchange for these
terms. Meanwhile, the plaintiff sent a letter to the defendant requesting that they vacate the
premises after the allotted time had passed.
In exchange, the defendant had requested a renewal of the deed. One day, a fire broke out at
the plaintiff's hotel, which spread to the courthouse. Shortly after, the defendant left the
location. Later, the defendant requested to regain ownership of the area, but the plaintiff said
the time limit had already passed. Under Section 6 of the Specific Relief Act of 1963, the
defendant had instituted legal action. A person who has had immovable property disposed of
may initiate a lawsuit to get it back, according to Section 6.
In addition, the plaintiff filed an injunction according to Section 6(4) of the Act. The court
noted this and stated that, following the particular law, the plaintiff might get the remedy of
ownership of the land but not an injunction. There have been proposals that an injunction
lawsuit may be filed under Section 6 by adhering to the principle of harmonious construction
for Sections 6(1) and 6(4). (4). Considering this instance, it may be concluded that a lawsuit
seeking an injunction can undoubtedly be brought if the party still possesses the property.
The court came to the following conclusions:
1. The defendant is in possession after the allotted time has passed in the same way as someone
with no legal standing and is appropriately referred to as a trespasser.
2. The lawsuit the defendant brought will not be advantageous to him. The plaintiff did not
break the law or do anything else in violation of it. The lawsuit seeking an injunction can thus
be maintained.
CASE 3: Parag Engineering Works vs. Union of India and Ors
The Gauhati High Court considered the interpretation and use of Section 14 of the Specific
Relief Act, 1963, which addresses contracts that are not explicitly enforceable, in the case of
Parag Engineering Works v. Union of India. The matter in question concerns the petitioner
company's membership in a telephone.
The telephone provider failed to perform its duties promptly whenever the petitioner required
them. The Telephone Department had previously said that a cable defect caused the petitioner's
issue. It is a persistent issue that may be reduced if the apparatus's indicator is replaced with a
new one. The petitioner submitted a writ petition to the High Court with several claims centered
on the Telephone Department's incompetence.
To decide this matter, the court took into account Section 14. According to Section 14(d) of
the Specific Relief Act of 1963, the court shall refrain from making any orders where the
performance requires constant labor and is difficult for the court to monitor. Because the
working mechanism was new to the company and the claims made in the writ petition required
continuous court supervision, which is not physically possible, the court in the case concluded
that the petitioner is not supposed to receive specific performance from the telephone company.
5. Conclusion
The Specific Relief Act of 1963 is a unique, extensive, and helpful law that safeguards a
contract between two parties. Instead of being a subjective law, it is a procedural one. The Act's
provisions have a real sense of possibility to them. Justice, in the total sense, is what this Act
seeks to secure.
To determine the relief to be given to the harmed party, the courts in our nation have resorted
to various parts of the Act in several judgments. The Act aims to promote interchange between
the two parties to the contract. The Act can only be used in select rare circumstances since it
does more than only give relief to the parties.
A relief in kind is more efficient than financial relief. This Act upholds this idea in the process
of controlling contract violations.