This is certainly another revolutionary change in the Indian laws. Under the existing regime, as a thumb rule, breach of contractual obligations is addressed by awarding damages instead of granting specific relief, owing to the discretionary powers conferred to the courts as per the provisions of Section 10 of the Specific Relief Act, 1963 (“Act”), barring exceptions where the court may grant specific performance of the contracts.

It is pertinent to note that the specific performance of any contract could not be claimed as a matter of right as the courts were not bound to grant relief merely because it is lawful to do so but because it is discretionary. Through the years case laws have also suggested that before exercising their discretion in granting specific relief, the Indian courts often consider several factors such as hardship to parties, unfairness, inadequacy of consideration, conduct of claimant and impossibility of performance and owing to these considerations, one could never be certain if the party will be entitled to a decree of specific performance or merely award of damages.

There is merit in expanding the availability of specific performance as it ought to produce certain advances, for instance it would minimize the inefficiencies of undercompensation (or risk of over-compensation), reduce the need for liquidated damages clauses in commercial contracts, minimize strategic behavior, difficulties of mitigation and save the costs of litigation seeking adequate damages and compensation. In addition to saving cost and time, this will surely help in eliminating uncertainties of contract enforcement.

On July 23, 2018, the Parliament passed the Specific Relief (Amendment) Bill, 2018 (“Bill”) and on August 1, 2018 the Bill received the assent of the President of India and has been published by the Central Government bringing the same into force. The Specific Relief (Amendment) Act, 2018 (“Amendment”) aims to considerably strengthen the law on specific performance by making the provisions for relief more effective and accessible.

The proposed amendments are in line with the UNDROIT Principles of International Commercial Contracts and endeavor to make India a business-friendly state by reinventing its position on the enforceability of contracts.

One of the major features of the Amendment is that it makes the grant of specific performance of contracts compulsory, by taking away the discretionary power of courts. As per Section 10 of the Act of 1963, specific performance of contract ‘may’ be enforced by the court in its discretion, thus affording wide discretionary powers to the courts, which as rule of thumb awards damages and grants specific performance as an exception. The Amendment proposes to change this by stating that specific performance of a contract ‘shall’ be enforced by the court. Similar discretionary power of courts as per Section 11 of the Act in granting specific performance in relation to trusts is also now withdrawn by the Amendment by making it compulsory even for trusts to receive specific performance.

Section 20 of the Act, which deals with the guidelines for exercising discretion for granting specific performance, has now been substituted wholly with another provision which provides for ‘substituted performance’ according to which, a party who is affected by the breach of contract can choose to get the contract performed by a third party, or by its own agency, at the cost of the non-performing party. The affected party has to give prior notice of thirty days to the other party expressing its intention to seek substituted performance. It is also clarified that a party by obtaining substituted performance forfeits its right to get specific performance of the contract through court.

The Amendment attempts to relax the stringent condition under the earlier Section 16(c) by stating that the party need only prove readiness and willingness to perform its part of the contract. The specific requirement to ‘aver’ is now removed by the amendment. The words “who fails to aver and prove” in Section 16(c) of the Act have been substituted by the words “who fails to prove”. It must be pointed out that currently in order to achieve a remedy of specific performance, the plaintiff must “allege and prove” his readiness to perform the contract. Considering the large number of cases on this singular point, the Amendment has dropped the mandatory condition of “alleging or averring” the willingness by the plaintiff to perform his part in his plaint. Debatably, readiness, willingness and ability need not be specifically pleaded, because it is implied in the pleading.

The Amendment introduces a special categorization of ‘infrastructure projects’. The new Schedule introduced by the Amendment contains the list of activities which shall be treated as ‘infrastructure projects’. Such activities are in the sectors of transportation, energy, water & sanitation, communication and social & commercial infrastructure. The Department of Economic Affairs is the nodal agency for specifying various categories of projects and infrastructure sub-sectors, which is provided as Schedule to the Amendment and the said Department may amend the Schedule relating to any such category or sub-sectors.