Examining Retrospectivity and Discretionary Relief of Specific Performance Post-2018 Amendment
[Payal and Shivansh are students at National Law Institute University, Bhopal. The following post is one of the winning entries in the Second IRCCL Blog Writing Competition (2021-22), organised in association with Khaitan & Co.]
The first-ever law of specific relief codified in India was the Specific Relief Act 1887. The Ninth Law Commission Report recommended certain changes to this enactment; which then ultimately led to the passing of the Specific Relief Act 1963 (Act). Slowly and steadily as the times demanded, the Act underwent several amendments in the years 1964 and 1974. The latest amendment to this Act was made in 2018 after the recommendations of an Expert Committee constituted for this purpose.
The Specific Relief (Amendment) Act 2018 (Amendment Act) brought about various changes to the Act. Some of the major changes included removal of discretion of the courts while granting the relief of specific performance, no injunction against infrastructure projects, delimiting timeline for the disposal of the case, seeking expert opinion, substituted performance of contract, addition of limited liability partnership within the ambit of parties who can seek specific performance, and contracts that cannot be specifically enforced.
With all these amendments and changes in place, there are some changes which are in debate for quite a while now. These include the retrospective application of the Amendment Act and the discretionary power of the court to render the specific performance relief. In this article, the authors have tried to make a detailed analysis of these issues along with highlighting the latest developments in these issues.
Retrospective Application of the Amendment Act
A question of importance that has emerged since the inception of the Amendment Act relates to the nature of the Amendment, i.e., is it retrospective or prospective?
The amendments that have been brought through this Act align with the UNIDROIT Principles of International Commercial Contracts. This has been done in a bid to improve the enforceability of contracts. The amendments so introduced are not procedural, but substantive in nature. For instance, the remedy for specific performance can now be claimed as a matter of right and is no longer a relief at the discretion of the courts.
It is trite law that if the amendment is substantive in nature or if it affects the vested rights of parties, then it will have a prospective effect but if it is procedural in nature, i.e., if the amendment changes jurisdiction, affects evidence, pleadings, or practice only, then it can have a retrospective effect too.
It has also been held by the Supreme Court in the case of K.C. Arora v. State of Haryana that if the statute does not specifically provide for the retrospective application, then the statute will be said to have prospective effect only.
The Amendment Act did not specifically mention whether it will have a retrospective effect or not. This sparked a debate on the nature of the amendment that has not reached its finality to date. There are various scholars and jurists that weigh their claim in favour of the prospective effect of the amendment while there are many who have reasoned that the amendment should have a retrospective effect.
Various arguments in support of the prospective application have been brought to the fore. These are:
The amendment tries to bring substantive change in law when it states that the remedy of specific performance can now be claimed as a matter of right. More so, the amendment does not confine itself to be only declaratory or clarificatory in nature.
Section 6(b) of the General Clauses Act 1897 (General Clauses Act) provides that the repeal of any enactment shall not affect the previous operation of such enactment so repealed unless a different intention appears, and Section 6 (c) of the General Clauses Act provides that the repeal of any enactment shall not affect any right, privilege, obligation or liability accrued under the previous enactment. Since the Amendment Act has substituted provisions of the Act and it does not clearly mention as to whether or not these amendments shall have retrospective effect, therefore the amendment cannot affect the operation of the repealed provisions, nor it can affect any rights, liabilities, obligations, or privileges accrued under the repealed provisions. This would mean that the amendment shall have prospective effect only.
On the other hand, there are also various arguments in favour of retrospective application of the Amendment Act. These are:
In the case of Gottumukkala Venkata Krishamraju v. Union of India, the Supreme Court tried to distinguish between ‘amendment’ and ‘substitution’ and stated that that the term ‘substitution’ means replacement or obliteration of the existing provision while making new provision operative, which enables the retrospective application of the amendment. Since the Amendment Act substitutes certain provisions of the Act, therefore it has to be retrospective in nature.
In the case of B. Santoshamma v. D. Sarala (B. Santoshamma), the Supreme Court held that courts are now supposed to grant the relief of specific performance keeping in mind only the conditions mentioned under Section 11 (2), Section 14, and Section 16 of the Act and hence the relief of specific performance is no longer discretionary. This observation here is pertinent because the suit for specific performance, in this case, was filed before the Amendment Act came into force; despite which, specific performance was awarded.
The Calcutta High Court in the case of The Church of North India v. Rev. Ashok Bisvas, when posed with the question of the applicability of the amended Section 14 to a case pending before it even prior to the Amendment Act coming into force, stated that the way in which Section 14 has been worded would mean that the amendment is retrospective in application since the phrase used in the concerned Section is “the following contracts cannot be specifically enforced…” and not a non-obstante clause like, “no suit can be filed for specific performance of the following contracts…”.
Since we do not have any provision in the amendment that could clearly tell us the nature of the amendment, we have no other option but to go by the word of the Judiciary, which in the present scenario seems to be in favour of the retrospective application of the amendment. Moreover, recently in the case of Sughar Singh v. Hari Singh (Sughar Singh), the Supreme Court has again stated that though the amendment is not applicable retrospectively, it can be a guide to the courts while they grant the relief of specific performance.
In light of all the observations made hereinabove, it can be stated that courts have more often than not favoured the retrospective application of the amendment. Additionally, since the Supreme Court has made regular references to the positions of law pre and post-Amendment Act and explained its significance while granting the relief of specific performance in recent judgements, it would be safe to say that the Supreme Court is tilted in favour of the retrospective application of the amendment.
To date, the legislature has not made an attempt to clear the air regarding the retrospective application of the amendment and there still remains a doubt over the same. It has been more than three years since the Amendment Act was brought into force but still there is no clarity with respect to this issue. Both the schools of thought have justified their stance by bringing to their support one or the other legal principles but courts have seemed to favour retrospective application of the amendment. This approach of the courts has also shown that they have tried their best to make the provisions of the amended Act work even in pending cases. As this seems to give justice to one party and injustice to the other, we need a legislative effort on this front to solve this issue. Not to say that the Judiciary cannot step in to solve this issue, but to settle its roots, a decision of the Constitution Bench of the Supreme Court is required. Given the pendency of the cases and the workload of the Supreme Court, it is not easy for the apex court to arrive at a decision sooner than the legislature or the executive.
Relief of Specific Performance: Mandatory or Discretionary
Another point of discussion after the Amendment Act has been around the discretionary power of the court to grant relief of specific performance to the plaintiff. Prior to the amendment, compensation was the rule and specific performance, an exception; however, with the amendment, the legislature seems to have taken a diagonal shift. The Expert Committee constituted in 2016 to revise and review the Act suggested that the specific performance should become a routine and should be denied only in limited cases which should be exhaustively laid down in the Act. In their opinion, the discretion has created an uncertainty on when the specific performance relief would be granted. Moreover, they observed that a legal system preferring compensatory relief over performance of the contract gives all the more reason to the promisor to not perform the contract if it is not their favour. Therefore, they concluded that if the specific performance becomes a statutory relief, it would encourage performance and discourage breach and would change contractual behaviour on the whole.
As a result of the Report of the Expert Committee, unamended Section 20 which laid down the directions for the court to exercise discretion while granting the relief of specific performance has been substituted with the provision providing for substituted performance of contract post amendment. Simultaneously, amended Section 10 provides that the specific performance of a contract shall be enforced by the court subject to Section 11 (2), Section 14, and Section 16 of the Act. The words that need attention here are ‘shall’ and ‘subject to’.
The Supreme Court in the case of B. Santoshamma had for the first time clarified that after the amendment, the remedy of specific performance no longer remains a discretionary relief. It noted that the earlier phrase of Section 10 has been replaced and the use of the word ‘shall’ in the current provision, lucidly gives the provision a mandatory character. Further clarification was provided by a very recent Supreme Court judgement in the case of Sughar Singh, where the apex court upheld the findings of B. Santoshamma. The Division Bench also added that if the execution of the contract, partial payment of the plaintiff's consideration, and willingness is proven in cases that date back to prior to the Amendment Act, then the court should go with the decision that favours the plaintiff for specific enforcement.
In the same vein, a very relevant remark was made by Justice Bhattacharya in the case of The All India Tea and Trading Company Limited v. Loobah Company Limited. The Calcutta High Court, agreeing with the non-discretionary nature of the relief, gave a rather branched interpretation to the amended Section 10. It opined that Section 11(2), Section 14, and Section 16 have diluted the mandatory nature of the provision and hence the relief is not absolute. The just remedy would be possible only when the significance of the key phrase ‘shall be enforced’ is understood in consonance with other amendments and the same is harmoniously read with the conditions or exceptions laid down in Section 11(2), Section 14, and Section 16 of the Act.
Justice Bhattacharya’s remark detangles the whole matter and makes it clear that discretion still exists in the hands of the courts. However, the way of exercising it needs to be changed after the amendment. Therefore, now we shall analyse how the discretion is to be exercised now as compared to the pre-amendment times.
In the case of Kamal Kumar v. Premlata Joshi, the Supreme Court had laid down the five material questions which need to be asked while granting the relief of specific performance to the plaintiff; however, the said judgement did not take into consideration the newly passed Amendment Act. The questions are:
Whether there exists a valid and concluded contract between the parties?
Whether the plaintiff has been ready and willing to perform his part of the contract and whether he is still ready and willing to perform his part of the contract?
Whether the plaintiff has already performed his part of the contract and if so, to what extent and in what manner he has performed and whether such performance was in conformity with the terms of the contract?
Whether it will be equitable to grant the relief of specific performance or will it cause any kind of hardship to the defendant and if so, how and in what manner and to what extent should such relief be granted to the plaintiff?
Whether the plaintiff is entitled to any alternative relief, such as refund of earnest money deposit, etc.?
These questions were reflections of the provisions already present in the unamended Act. With the Amendment Act, only the fourth question needs to be modified a little to give due regard to the letter and intent of the Amendment. Other principles are in conformity with the amended provisions. It must be modified to — whether it will be equitable to not grant the relief of specific performance or will it cause any kind of hardship to the plaintiff and if so, how and in what manner and to what extent should such relief be not granted against the defendant (which requires the defendant to justify the refusal)?
The modifications are needed to preserve the adequacy of the questions and keep them relevant. As explained earlier, the discretionary power of the courts has been reduced to an extent but they have not been completely abdicated from their responsibility to employ principles of equity, justice and good conscience while providing relief. Hence, these guiding principles can provide requisite aid to the courts to make decisions.
The substantive changes that have been brought about by the Amendment Act were much needed looking at the evolving industry size and operations and consequently, burgeoning rate of contractual relations entered into each day.
However, it is saddening that the Amendment Act created issues in terms of its application due to ambiguous drafting of the provisions. To make it functional, Judiciary has been following the unsaid rule of retrospective application but no attempts are being made to cure the disease of uncertainty once and for all. The most expeditious and reliable method is clarification from the legislature or interference by the executive to clear the mist.
Similarly for the exercise of discretion, as changing times bring its own challenges, different from the earlier ones, it is to be seen whether the legislature was truly successful in laying down the exhaustive guidelines vis-à-vis granting of relief of specific performance or the judicial interpretations and silent diversions will continue to lead the way.