The Specific Relief (Amendment) Act 2018: Applicable to Pending Proceedings? – Part I

[Rahul Sibal is an advocate who graduated from NALSAR Hyderabad. The author thanks Nilima Bhadbhade, and Varun Malik for their comments on the draft. However, the views expressed are the author’s alone.]

An Expert Committee was constituted on 28 January 2016 with the purpose of reviewing the Specific Relief Act, 1963. The Committee recommended several substantive changes to the Act, with one of the significant recommendations being the shift towards the conceptualisation of specific performance as an alternative remedy, as opposed to an exceptional remedy. Subsequently, only some of these recommendations were incorporated into the Specific Relief (Amendment) Act, 2018, which has been in force since 1 October 2018.

Interestingly, the amendment does not contain a savings clause, thereby leaving open the question of whether it would be retrospectively applicable, with several practitioners expressing distinct views (here, here and here). Before delving into the question of the retrospective operation of the amendment, it would be apposite to restate the foundational principle of statutory interpretation: amendments that impact substantive rights and liabilities (as opposed to matters of procedure), would be construed to be prospective in application, and not retrospective. This principle has been affirmed in several decisions, that can be accessed here, here, and here. However, this principle is inapplicable where the amendment expressly specifies that it would be retrospective in operation.[1]  

It follows, therefore, that the question of whether the amendment would be retrospectively applicable would be significantly dependent on the enquiry of whether the amendment alters substantive rights. This enquiry would involve the determination of whether the amendment disturbs vested rights and imposes new duties in respect of past transactions.

In this context, it would be apposite to analyse the changes introduced by the Amendment, to ascertain whether the rights affected are of procedural or substantive nature.

 Amendment Effect
Deletion of clauses (a) & (b) of section 10. Section 10, prior to the amendment, required the following to be satisfied for specific performance to be granted: that there exists no standard for ascertaining the actual damage caused by non-performance of the act.that compensation would be an inadequate relief.the court, in its discretion, is satisfied that specific performance may be granted. On account of the amendment, it will no longer be necessary to satisfy the abovementioned requirements while seeking specific performance.
Substitution of section 14 with a new provision which does not contain some of the exceptions to specific performance that were previously enshrined in the pre-amended section 14.                                              Section 14, prior to the amendment, inter alia, provided for the following exceptions, which were: that compensation in money constitutes adequate relief.that the contract is premised on the volition of parties.that the contract runs into minute details.the contract by its nature is such that the court cannot enforce specific performance Prior to the amendment, the existence of the above conditions barred the relief of specific performance from being granted. Pursuant to the amendment, the existence of the above conditions will not prevent the grant of specific performance.
Section 20 has been substituted. Further, certain exceptions against specific performance under sub-section (2) (as reproduced below), have been omitted: Where specific performance would result in inequity.Where specific performance would result in the plaintiff acquiring an unfair advantage in view of the terms, conduct or other circumstances between the parties at the time of entering the contract. Previously, the unamended provision granted the courts the discretion to not grant specific performance, on the basis of judicially developed exceptions, even where it would be lawful to do so. Now, such judicially created exceptions have been excluded.[2] Further, specific exceptions enumerated under sub-section (2) against the grant of specific performance have been omitted. Because of the amendment, the relief of specific performance has ceased to be a discretionary relief.
Section 20A has been inserted which stipulates that no injunction would be granted with respect to contracts relating to certain specified infrastructure projects.   The provision bars the grant of injunction with respect to certain specified infrastructure projects. It is important to note that the amended provision is worded in such a manner that the operation of the bar is not limited to contracting parties but is also applicable to third parties. Therefore, the bar would not merely operate against suits based on contractual rights, but also rights premised on other laws, such as Tort Law. This view has been affirmed by the Delhi High Court in Hari Ram Nagar v. Delhi Development Authority.                                       
Amendment to Section 21 of the Act  The expression “either in addition to, or in substitution of” has been replaced with the phrase “in addition to”. The amendment removes the possibility of the plaintiff including the remedy of compensation ‘in substitution’ of specific performance. The amendment severely restricts the right to claim compensation. According to prior practice, plaintiffs, in suits of specific performance, included the alternative claim of compensation in case specific performance was denied. This was because no separate claim for compensation could be instituted since both specific performance and damages arise from the same cause of action. Therefore, on account of order 2 rule 2 of the Code of Civil Procedure, 1908 which requires plaintiffs to seek all claims arising from the same cause of action in one suit, plaintiffs would include the claim of compensation, as an alternative to the grant of specific performance. Moreover, section 24 of the Specific Relief Act restricts the plaintiff from filing another suit for compensation in case the suit for specific performance is dismissed. Given that compensation cannot be granted, unless specifically pleaded (see section 21(5)), the plaintiff’s inability to claim compensation as an alternate claim (on account of the amendment) will result in an inequitable scenario where the plaintiff would be unable to claim compensation despite his claim of specific performance being rejected. Therefore, the amendment, the author submits, substantively alters the plaintiff’s position    

From a review of the amendments to the above provisions of the Specific Relief Act, it is clear that the rights and liabilities of the parties would be affected in, inter alia, the following manner:

  1. It is no longer a defense, in a suit for specific performance that:

    • there exists a standard for ascertaining the actual damage caused by non-performance of the contract.

    • the act agreed to be done is such that, for its breach, compensation in money would be an adequate relief.  (Amendment to Section 10).

  2. A defendant in a suit for specific performance can no longer plead that specific performance ought not be granted on the grounds that:

    • performance of a contract, by its nature is based and depends on the volition of parties.

    • the contract runs into minute details; or

    • that compensation in money constitutes an adequate relief for the nonperformance of the contract. (Amendment to Section 14).

  3. The discretion of the court to deny specific performance, based on judicially guided principles, has been excluded. Therefore, it can no longer be pleaded, as a defense against specific performance, that the grant of specific performance:

    • would be inequitable;

    • would result in the plaintiff acquiring an unfair advantage in view of the terms of the contract, the conduct, or other circumstances between the parties at the time of entering the contract;

    • would result in the rights acquired by the defendant on account of delay by the plaintiff, being frustrated; and

    • would result in hardship to the defendant, and where no hardship would be caused to the plaintiff on account of non-performance.
(Amendment to Section 20).

4. A plaintiff in a suit for specific performance would no longer be able to plead damages in alternative to the grant of specific performance, and would therefore be left without any remedy, in case specific performance is denied.

(Amendment to Section 21).

As can be derived, the Amendment Act materially alters the nature of the relief to be granted under the Specific Relief Act and, as a consequence, several defences which were previously available to defendants are now unavailable. It is submitted that the removal of such defences, which were previously available, should necessarily be understood as resulting in an alteration of the ‘substantive’ rights previously available. Consistent with Hohfeldian jurisprudence,[3] the absence of such defenses would result in the creation of the liability to specifically perform in scenarios where such exceptions would previously have been attracted. Reference in this regard may be had to the observations of the House of Lords in Plewa v. Chief Adjudication Officer [1995] 1 AC 249. This case revolved around the question of whether the repeal of section 119 of the Social Security Act, 1975 would operate retrospectively. This section provided that overpayments of benefits payable under the legislation were recoverable, subject to the defense that the claimant had used due diligence and care to avoid overpayment. However, the said defense was no longer available following its amendment. The question that arose was whether the amendment could be applied retrospectively. It was observed:

“……I would have been inclined to attach more importance to section 53’s possible retrospective unfair effect than the Court of Appeal did in Tunnicliffe. This is because it removed the defence of due care and diligence. If recipients would not have been under a liability in fact to make a repayment under the former machinery then from the practical point of view they were being placed under a liability which did not previously exist by the change in the law. This is a situation where the presumption against retrospectivity should apply.” [Emphasis Supplied]

As the above extract demonstrates, in Plewa it was observed that to hold the said amendments to be retrospective would result in the unfair imposition of liability which, but for the amendment, would not have been imposed. Similarly, the Constitution Bench of the Supreme Court of India in Commissioner of Income Tax v. Vatika Township Private Limited  has alsorelied on the ground of fairness to observe that enactments which impose new obligations or duties would be construed to be prospective, unless specified to the contrary.

The above argument can be characterised differently. Presuming that the availability of certain defences is by itself nota substantive right, it could be argued that the absence of such defenses would result in the creation of liability, and that the absence of such liability would amount to a ‘right’ or ‘privilege’. This line of reasoning was adopted in State of Punjab v. Bhajan Kaur  in which the Supreme Court held that an amendment mandating payment of enhanced compensation under the Motor Vehicles Act, 1988 would not have retrospective effect. The Court relied on the following observations from one of its own previous decision:[4]

“……. an exemption from payment of tax in favour of the appellants herein would also `constitute a right or privilege. The expression “privilege” has a wider meaning than right. A right may be a vested right or an accrued right or an acquired right. Nature of such a right would depend upon and also vary from statute to statute. It has been so held by this Court, while construing Section 6 of the General Clauses Act, in Gurcharan Singh Baldev Singh v. Yashwant Singh in the following terms: (SCC p. 432, para 3) ‘The objective of the provision is to ensure protection of any right or privilege acquired under the repealed Act’ .”

As the table produced above and the precedents discussed demonstrate, the amendment to the Specific Relief Act alters substantive rights, and therefore should be construed to operate prospectively. For this reason, and for reasons to follow in the coming posts in the series, the author is of the view that the amendment should be prospectively applicable. However, some practitioners have adopted the view that the amendment should be construed to be applicable retrospectively (here and here). Their views are premised on the arguments mentioned below.

First, although amendments that alter substantive rights are presumed to operate prospectively, since the Specific Relief Act is essentially a procedural law, the amendment must be construed to operate retrospectively. Second, the rule against retrospectivity is limited to scenarios where the provision is merely amended, as opposed to cases where the entire provision is substituted. Third, that the Amendment was intended to be retrospectively applicable.

The final (and the most appealing) argument, provided by one of the reviewers in favour of retrospective operation, is that the defendant or promisee is already under a contractual obligation to perform her promised tasks, and therefore the omission of the defences available or conditions prescribed in provisions such as sections 10 and 14 does not result in the imposition of new duties, and does not attract the rule against retrospective operation.

All four arguments, and the relevant cases cited in favour will be explored in greater depth in the subsequent posts in the series.

[continued here]

Rahul Sibal

[1] See the Finance Act, 2012 wherein certain amendments were held to be in force from 1962, in order to override the decision of the Supreme Court in Vodafone International Holdings BV v. Union of India, (2012) 6 SCC 613.

[2] It is interesting to note that while the Expert Committee Report on the Specific Relief Act, 1963 recommended that discretion under section 20 be done away with, it recommended that the statutory, and some of the judicially developed, exceptions under section 20 be incorporated in section 14. See ‘Report of the Expert Committee on the Specific Relief Act, 1963’, pp.52-54 (paragraph 11.7),Government of India, Ministry of Law and Justice (Legislative Department), (26 May 2016). However, the text of the amendment reveals that the exceptions enshrined in section 20 have not been incorporated in section 14. See The Specific Relief (Amendment) Act 2018: A Hurried Legislation, Bar and Bench – Indian Legal news.

[3] One of the central themes of this jurisprudence is that each right bears a correlative duty to perform. Therefore, where the removal of exceptions to specific performance in scenarios where such exceptions would otherwise have been attracted creates a right in favour of the plaintiff, it also correlatively creates an obligation to specifically perform on the defendant. This line of reasoning can be traced to the works of Wesley Newcomb Hohfeld. See Hohfeld, W.N., 1913. Some fundamental legal conceptions as applied in judicial reasoning. Yale LJ, 23, p.16.

[4] Southern Petrochemical Industries Co. Ltd. v. Electricity Inspector & ETIO (2007) 5 SCC 447.

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