Specific Performance of Contracts under SRA 1963

Submitted By:- Rashmi Pandey

Submitted To –Professor Rana Navneet Roy

Subject:- Law of Contracts II

Semester –2

Hidayatullah National Law University

Raipur (C.G)
 Declaration
I hereby declare that the project work entitled “Specific Performance of Contract
under Specific Relief Act 1963” submitted to HNLU, Raipur, is a record of an
original work done by me under the guidance of Professor Rana Navneet Roy
Faculty of Law, HNLU, Raipur.

Rashmi Pandey
LLM

HNLU Raipur

I
 Acknowledgements

I feel highly elated to work on the topic “Specific Performance of Contract under Specific Relief
Act 1963” The Project has been possible due to obligated assistance of several persons.

I express my deepest regard and gratitude to Professor Rana Navneet Roy,

Faculty of Law. There consistent supervision, constant inspiration and invaluable guidance
have been of immense help in understanding and carrying out the nuances of the project
report.

I would like to thank my family and friends without whose support and encouragement,
this project would not have been a reality.

I take this opportunity to also thank the University and the Vice Chancellor for providing
extensive database resources in the Library and through Internet.

I would be grateful to receive comments and suggestions to further improve this project report.

RASHMI PANDEY

LLM

HNLU Raipur

2
 List of Cases

1. Chand Rani V/s. Kamal Rani AIR 1993 SC 1743

2. Mrs. Saradamani Kandappan V/s. Mrs. S. Rajalakshmi and Ors AIR 2011 SC 3234
3. N. P. Thirugnanam (Dead) by Lrs. V/s. Dr. R. Jagan Mohan Rao and Others (1995) 5
SCC 115
4. P. C. Varghese V/s. Devaki Amma Balambika Devi and Ors Appeal (civil) 1984 of
2002]

5. Satyabrata Ghose v. Mugneeram Bangur 1954 AIR 44

6. Taylor v Caldwell (1863) 3 B & S 826;
7. Tsakiroglou & Co. Ltd. v. Noblee Thorl Gmb: Civil Appeal Nos.5399-5400 of 2016
8. Umabai and Anr. V/s. Nilkanth Dhondiba Chavan (Dead) by LRs and Anr 2005) 6 SCC
243

3
 TABLE OF CONTENTS

Declaration

Acknowledgement

List of Cases

1. INTRODUCTION ……………………………………………………………………………5

1.1 Meaning of Specific Performance ……………………………………………………………5

1.2 Doctrine of Mutuality…………………………………………………………………………5

2. THE EFFECT OF 2018 AMENDMENT IN SRA 1963………………………………………6

2.1. The Changes Brought By 2018 Amendment Act…………………………………………….6

2.2 Exceptions as of present Can’t be Enforced…………………………………………………. 8

[Link] of Substituted Performance……………………………………………………...9

2.4. Repeal of Sec 20 of the Un-Amended SRA 1962………………………………………….. 10

2.5. Time Limit Fixing………………………………………………………………………….. 11

[Link] of Sec 23 in the Amendment Act 2018……………………………………………12

3. SPECIFIC PERFORMANCE OF CONTRACT; FORCE MAJURE AND COVID 19

IMPACT………………………………………………………………………………………... 12

4. SPECIFIC PERFORMANCE OF CONTRACT BASED ON RATIO DECIDENDI ……….15

4.1. Time is of essence to contract……………………………………………………………….15

[Link] relief of Refund of Earnest money ………………………………………………..16

CONCLUSION…………………………………………………………………………………. 16

4
 1. INTRODUCTION

Meaning of Specific Performance The law relating to equity, in India today, is contained in the
Specific Relief Act, 1963 (Act 47 of 1963 "Act"). “It is called "specific" because under this
procedure, the plaintiff gets his relief in specific, rather than a general relief or damages or
compensation that is, the very thing which the other party was bound to perform or forbear from
performing. Specific relief finds its roots in equitable principles. The mission of the Act is to
provide a remedy for every wrong done”1.

1.1 Meaning of Specific Performance

The law relating to equity, in India today, is contained in the Specific Relief Act, 1963 (Act 47 of
1963 "Act"). It is called "specific" because under this procedure, the plaintiff gets his relief in
specific, rather than a general relief or damages or compensation that is, the very thing which the
other party was bound to perform or forbear from performing. “Specific relief finds its roots in
equitable principles. The mission of the Act is to provide a remedy for every wrong done. A
contract is an agreement upon sufficient consideration to do or not to do a particular act, and
the party on whom this contractual obligation rests must not fail to discharge such obligations,
failing which, the other party will have a right to sue for performance of the contract, and this is
called specific performance”.

Order of specific performance is granted by the Courts when the damages are not an adequate
remedy, and in some specific cases, such as sale/ transfer of land. “Such orders are discretionary,
so the availability of this remedy will depend on whether it is appropriate in the circumstances of
the case. Under current law, courts grant specific performance when they perceive that damages
will be inadequate compensation. Specific performance is deemed an extraordinary remedy,
awarded at the court's discretion”

1.2 Doctrine of Mutuality

No person can sue for specific performance of contract if he cannot be sued for it, whether
because he is minor or for any other reason. The jurisdiction is discretionary; The contract to

1
[Link] (visited on
26-03-2021)
5
be specifically enforced must be mutual. The doctrine of mutuality means the contract must be
mutually enforceable by each party against the other.

2. THE EFFECT OF 2018 AMENDMENT IN SRA 1963

The topic of Specific performance of contract is dealt in 2 statutes, The Specfic Releif Act 1963
and the Indian Contract Act 1972 both of which contain provisions which would be relevant with
respect to the enforcement of contract, what we call specific performance of contracts. Now this
law which was framed in SRA which specifically concerns the enforcement of the contracts, this
law underwent a great change in the year 2018 and there was an amendment brought in this
statue in Oct 2018, which lead to several substantial changes we made in the enforcement of the
contract.

2.1. The Changes Brought By 2018 Amendment Act

The amendment of 2018 and what has happened subsequent thereto and what is the current
position. Prior to the amendment of specific relief Act, the courts were provided with a huge
amount of discretion in whether as to enforce a contract or not to enforce a contract. A to
whether the contract was to be specifically performed or not to be performed. This discretion
which was granted to the courts were culled out in the provisions Specific Relief Act itself which
was at that point of time Sec 10; which provision itself made it discretionary on the courts to
grant or not to grant enforcement of contracts. The provision read as

“The courts may grant enforcement of the contract….”,

The word may that was used itself granted discretionary power to the court whether to enforce a
contract or not to enforce a contract. This discretion was also culled to be made in certain
circumstances which were enumerated in the section itself which said,

“ ….. where there existed certain standards of ascertaining , or where monetary compensation
was not adequate”

So the provision which were contained itself granted the court enough leverage that in the event
the breach could be sufficiently compensated by monetary consideration then the courts would
grant damages to the party rather than enforcing the contract, and also if there is a situation

6
where there were no standards to ascertain the actual damage which is caused to a party in the
event of a breach, in that situation also it was up to the court not to or grant enforcement or
performance of the contract, so the general rule was not to grant enforcement of the contract or
the specific performance of the contract but the rule was it was the damages which were to be
granted to parties rather than enforcing the contracts.

This lead to a lot of problems in as much as the courts could easily find ways and excuses, by
saying that any breach of contract would be adequately compensated by damages and there can’t
be a breach which can’t be compensated in terms of money, courts could always find one or the
other reason by saying there are sufficient standards existing by which the damages can be
ascertained so therefore there is no need to grant specific performance or enforce the contract
and a party can easily be compensated in case of a breach committed by the other party.

This resulted in the contracts law being plagued with insufficient contract enforcement
mechanisms which lead to incomplete projects, delay in projects, it lead to additional cost being
incurred, it lead to litigation and the result was that India was pecked as one of the Worst
performing Contract Countries in the way it facilitated business-. In the rank of World Banks
Ease of doing Business India stood at 130 th in the report published in 2016, One of the primary
concerns which lead to this ranking was the Non enforcement of the Contracts in which India
stood at 178th which was worse than several underdeveloped countries, this lead to the legislature
amending the Specific Relief Act 1963, to provide that it should be binding on the courts in most
of the events, to enforce the contract rather than, providing or granting Damages to a party in a
event of a breach.

The Legislature therefore made these changes and a substantial change has been brought in SRA
and the most important change which has been brought is in Sec 10. Where the word “may” was
substituted with “shall enforce a contract.”

There are very limited provisions under which the contract can’t be enforced, which are
specifically provided in that section itself and it is only in the provisions contained in Sec 11(2)
or Sec 14 or Sec 16 if the terms and contents contained in those provisions are fulfilled, it is only
those events that the court will not enforce the contract rest the court is bound to enforce a
contract, in the way the parties had intended and penned out in the agreement itself.

7
2.2 Exceptions as of present Can’t be Enforced

 Sec 11(2) contemplates that in a case of a contract entered into by a trustee of a trust, in
that eventuality a contract will not be specifically performed, only in the event if trustee
Acted in excess of his power or he acted in Breach of trust, so in that situation a contract
entered into by a trust wouldn’t be specifically enforced, otherwise it would be
specifically enforced.
 Sec 14 contemplates that a contract wouldn’t be specifically enforced when a party has
attained substituted performance under Sec 20. So in the event if the party has obtained a
substituted performance in that event the contract will not be specifically performed.
 2nd condition under Sec 14 :- A contract which involves a continuous duty which the
court can’t monitor or supervise in that eventuality also a contract can’t be specifically
enforced. This provision was already existing in the pre-amendment Act also.
 The 3rd condition was, if the contract is dependent on the personal qualification of the
person.
 4th condition in the event if the contract is determinable in nature, in that case also the
contract can’t be specifically enforced. Determinable in nature means if the contract
contains a clause giving right to both the parties to terminate the contract, in that event
the courts will not specifically enforce the contract.
 Sec 16:- Specific Contract will not be granted if the plaintiff itself becomes incapable of
performing or he violates certain material terms of the contract, or on account of some
fraud the contract can’t be enforced.
The other provision under section 16 is if one fails to prove that he was ready and willing
and continues to be ready and willing to perform the contract, even in that case the
contract will not be specifically enforced.
Barring these exceptions, only if one is falling under one of these exceptions the court
will not enforce a contract and would grant damages if they are made available but in all
other cases, no discretion is granted to the court and if one doesn’t come under any of
these exceptions, the court is bound under the provisions of the current section 10 to
enforce a contract and there is no discretion left with the court to either enforce or not to
enforce a contract.

8
This a huge step towards giving parties great power to actually conduct buissness in the
sense that they are pretty much sure while entering into the contract that the courts will
come to their help as an when it comes to enforcing a contract.
[Link] of Substituted Performance

Substituted performance is what one knows as getting the contract executed at the risk
and cost of the party. This situation arises in the event there is breach by one of the
parties, then the other party has a right under certain circumstances to get it performed
through a third party or through its own agencies. This was not clear earlier prior to
amendment and there were approaches which was adopted by courts in India, because of
no specific provisions being made to risk and cost in the specific relief earlier.
The New Act, i.e the Amended Act has brought in the statutory provision of Sec 20. Sub
Sec (1) of Sec 20 provides the 1 st category where in the event of a contract being broken
by one of the parties , then on account of non performance of certain part of contract or
the entire contract, in such a situation, the victim of the contract will have a right to get
the contract performed through Substituted performance, through a third party or through
its own agency, and get the cost and expenses incurred in that substituted performance
recovered from the third party.

So in a way it was a choice given to parties that in case of Non-performance of contract

he may get substituted performance of the contract, but there was a pre-condition laid that
this substituted performance can’t and wouldn’t be involved without giving 30 days prior
notice to other party which is at default. So a 30 days notice is to be given by the victim
to the defaulting party calling upon the defaulting party either perform the contract which
is not performed or which is in breach and in the event of the other party or defaulting
party still refusing or failing to perform the contract in that event the victim party would
have a right to have the contract specifically performed or substituted –ly performed
through a third party or through its own agency and then recover the cost and expenses,
incurred thereto.
This is a precondition in invoking substituted performance.
9
 This provision also lays down that in substituted performance despite a notice being
given of 30 days, the party still opts not to actually get the work executed from an agency
or third party in that event it will not be entitled to recover any cost or expenses, because
actually it has not incurred.

Sub Sec (3) of Sec 20 lays down that if you have opted for substituted performance of the
contract, in that event you will not be entitled to specific performance of the contract.
Sub sec 4 lays down that substituted performance having been called upon or invoked by
a victim party, will not deprive the victim party from claiming compensation for any loss
that it may have incurred on account of this breach, which was called by the defaulting
party.

Now this means that compensation can be on several counts, because breach occurred by
party who has defaulted, would have several other consequences also like, the party
which was the victim, it loses its client because of non-performance at a particular time,
etc
This provision also grants the victim party a right to get compensation in addition to the
actual cost which has been incurred.
So these are the fundamental provisions which have been made wrt Substituted
Performance.

2.4. Repeal of Sec 20 of the Un-Amended SRA 1962

It provided that the specific relief will be refused by the courts if the, it gave unfair
advantage to one of the parties, or the performance of the contract involved hardship to
the defendant and the enforcement of the contract would not be equitable.
This gave a lot of leverage to the court to actually stall the enforcement of the contracts
because everywhere we will find that some kind of hardship or unfair advantage can be
endlessly argued in the courts.
 This was also one of the grounds where courts actually used their discretion by
declining specific performance or granting damages or annulling the contract all
10
 together. This provision, earlier Sec 20 has been scrapped by the 2018 amendment
giving huge relief for those looking for enforcement of the contracts.
The previous or the un-amended Act provided that the plaint filed or instituted by the
victim party should contain an averment to the fact that victim party was always ready
and willing to perform it’s contract or it’s part of the contract or continues to be willing
and perform its contract or part of the contract, so there has to be specific averment made
in this regard in the plaint itself and after making this avernment party which was the
victim had to prove that in a trial, that he actually was ready and willing and continues to
be ready and willing to perform his part of the contract.
The provision precisely reads as parties must “aver” and “prove”
 This word “aver” has been deleted from the current amended Act and now the
parties only have to “prove” that he is ready and willing and continues to be ready
and willing to perform his part of the contract.

So this non-pleading of “ readiness” and “willingness” has been done away with and the plaints
used to be rejected under the provisions of Order 7 rule 11 which was a very technical provision
but still plaints were rejected on this ground because the law required that you needed to aver
that you were “aver” that you always were ready and willing to perform which has now been
done away with, and now one needs to prove and not aver.

2.5. Time Limit Fixing

One more positive thing through amendment has been the fact that there has been a time limit to
decide specific performance of the contract. This time limit is one year in which the courts are
bound now to decide suit instituted for enforcement of the contract. This one year is further
extendable by a further period of 6 months but beyond that there is no extension and suits have to
be decided, so this New law may give a lot of comfort to the business community, in enforcing
the contracts and see that a remedy is obtained as early as possible

[Link] of Sec 23 in the Amendment Act 2018

This section provides that even if in a contract there is a provision made that an amount is to be
paid or can be paid by a party, in the event of default committed by the defaulting party, it is not
necessary that the courts would interpret that clause and say that specific performance can’t be
11
granted and since an amount has already been categorically stated in the contract by saying that
if the performance is not done then it can be substituted by money, it is not necessary that you
need to pay that amount and you will get away with the enforcement of the contract2.

Courts are bound to see under that provision that whether what has been stated in the contract
was that only for the purpose of securing performance of the contract or whether the parties
actually intended that the performance can be substituted by payment of money as damages.

3. SPECIFIC PERFORMANCE OF CONTRACT; FORCE MAJURE AND COVID 19

IMPACT

Covid-19 or the Corona Virus was declared as a pandemic on March 11, 2020. This has
prompted lockdowns and monetary log jam the nation over in all areas. The effect on the
organizations has been serious, and the power majeure provisions will assume a pivotal part if
the organizations can't play out their legally binding commitments in the midst of this
emergency.

“In the consequence of the closedown, numerous providers would not have the option to play
out their legally binding commitments and, no doubt, they would be postponed. The providers
are trying to postpone and additionally evade authoritative commitments/execution. They want
not to be held subject for their authoritative non-execution. The organizations probably won't
have the option to respect their client arrangements. The equivalent is valid for the thought,
which both of the gathering to an agreement probably won't have the option to satisfy under
the provisions of the agreement. Under such situations, the power majeure condition would be
a deciding component to comprehend the ramifications of these occasions”.

“On Feb.17, 2020, the China Council for the Promotion of International Trade (CCPIT),
revealed that it had already issued over 1,600 „Force Majeure certificates‟ to firms in
30 sectors, covering contracts worth over $15 billion”3

On February 19, 2020, the Department of Expenditure, Procurement Policy Division, Ministry
of Finance issued an Office Memorandum with respect to the „Manual for Procurement of

2
“ Vijay Pal Dalmia” [Link]
frustration-and-force-majeure-covid-19 (visited on 104-2021)
3
[Link]
12
 Goods, 2017‟, which serves as the dictum for procurement by the Government of India.

“This memorandum, in essence, states that the Covid- 19 could effectively be covered under
force majeure clause because it is a „natural calamity‟ and all the departments who should
invoke it by following the „due process.”

But this implication of Covid- 19 are not generalized and clauses need to be interpreted based
on circumstances”

“Force Majeure and the doctrine of frustration: “Frustration is an English contract law
doctrine that acts as a device to set aside contracts where an unforeseen event either renders
contractual obligations impossible, or radically changes the party's principal purpose for
entering into the contract4.”

Force Majeure (S.56 of the Indian Contract Act, 1872.): A force majeure clause relieve some
or the two players from risk to perform contract commitments when execution is forestalled by
an occasion or situation past the parties‟ control. Average force majeure occasions may
incorporate fire, flood, common agitation, or fear monger assault. Power majeure is a term
used to depict a "unrivaled power" occasion. The reason for a power majeure provision is two-
crease: it assigns danger and notifies the gatherings of occasions that may suspend or pardon
administration.

“The entire jurisprudence on the subject has been stated by Justice RF Nariman of the
Supreme Court in the case of Energy Watchdog vs. CERC” (20175).

“Force majeure” is governed by the Indian Contract Act, 1872” “In so far as it is relatable to
an express or implied clause in a contract, it is governed by Chapter III dealing with the
contingent contracts, and more particularly, Section 32 thereof. In so far as a force majeure
event occurs de hors the contract, it is dealt with by a rule of positive law under Section 56 of
the Contract”.

4
Taylor v Caldwell (1863) 3 B & S 826;
5
Supreme Court of India: Civil Appeal Nos.5399-5400 of 2016
13
 In Satyabrata Ghose v. Mugneeram Bangur6, “war condition was known to the parties while
entering into the contract such that they were aware of the possible difficulty in the
performance of the contract, in such circumstances, the requisition of property did not affect
the root of the contract. Secondly, no stipulation as to time was provided in the agreement such
that the work was to be completed within a reasonable time. Still, having regard to the nature
of the development contract and the knowledge of the war conditions prevailing during the
contract, such a reasonable time was to be relaxed. Therefore, the contract had not become
impossible of performance under S.56”.

“A contract is not frustrated merely because the circumstances in which it was made
are altered. The Courts have no general power to absolve a party from the
performance of its part of the contract merely because its performance has become
onerous on account of an unforeseen turn of events7.”

It has also been held that applying the doctrine of frustration must always be within narrow
limits. In an instructive English judgment namely, Tsakiroglou & Co. Ltd. v. Noblee Thorl
Gmb8, “despite the closure of the Suez canal, and despite the fact that the customary route for
shipping the goods was only through the Suez canal, it was held that the contract of sale of
groundnuts, in that case, was not frustrated, even though it would have to be performed by an
alternative mode of performance which was much more expensive, namely, that the ship would
now have to go around the Cape of Good Hope, which is three times the distance from
Hamburg to Port Sudan. The freight for such a journey was also double. Despite this, the House
of Lords held that even though the contract had become more onerous to perform, it was not
fundamentally altered. Where performance is otherwise possible, it is clear that a mere rise in
freight price would not allow one of the parties to say that the contract was discharged by the
impossibility of performance”.

[Link] PERFORMANCE OF CONTRACT BASED ON RATIO DECIDENDI

(1) 'Ready and willing to perform' and 'Conduct of a plaintiff' in a suit for Specific Performance.

6
Satyabrata Ghose v. Mugneeram Bangur 1954 AIR 44
7
ibid
8
Tsakiroglou & Co. Ltd. v. Noblee Thorl Gmb
14
 In N. P. Thirugnanam (Dead) by Lrs. V/s. Dr. R. Jagan Mohan Rao and Others 9, the Supreme
Court held that "The continuous readiness and willingness on the part of the Plaintiff is a
condition precedent to grant the relief of specific performance. This circumstance is material and
relevant and is required to be considered by the Court while granting or refusing to grant the
relief. If the Plaintiff fails to either aver or prove the same, he must fail. To adjudge whether the
Plaintiff is ready and willing to perform his part of the contract, the Court must take into
consideration the conduct of the plaintiff prior and subsequent to filing of the suit along with
other attending circumstances."

In Umabai and Anr. V/s. Nilkanth Dhondiba Chavan (Dead) by LRs and Anr 10. , the Supreme
Court observed that "It is now well-settled that the conduct of the parties, with a view to arrive
at a finding as to whether the Plaintiff-Respondents were all along and still are ready and willing
to perform their part of contract, as is mandatorily required under Section 16 (c) of the Specific
Relief Act, 1963 must be determined having regard to the entire attending circumstances. A bare
averment in the plaint or a statement made in the examination-in-chief would not suffice."

4.1. Time is of essence to contract

In Chand Rani V/s. Kamal Rani11 the Supreme Court held that "It is well-accepted principle that
in the case of sale of immovable property, time is never regarded as the essence of the contract.
In fact, there is a presumption against time being the essence of the contract."

In the case of Mrs. Saradamani Kandappan V/s. Mrs. S. Rajalakshmi and Ors12. the Supreme
Court reaffirmed the position of law that was held in Chand Rani V/s. Kamal Rani and observed
that "The question whether time is the essence of the contract, with reference to the performance
of a contract, what generally may arise for consideration either with reference to the contract as a
whole or with reference to a particular term or condition of the contract which is breached. In a
contract relating to sale of immovable property, if time is specified for payment of the sale price
but not in regard to the execution of the sale deed, then time will become the essence only with
reference to payment of sale price but not in regard to execution of the sale deed."
9
N. P. Thirugnanam (Dead) by Lrs. V/s. Dr. R. Jagan Mohan Rao and Others (1995) 5 SCC 115
10
Umabai and Anr. V/s. Nilkanth Dhondiba Chavan (Dead) by LRs and Anr 2005) 6 SCC 243
11
Chand Rani V/s. Kamal Rani AIR 1993 SC 1743
12
Mrs. Saradamani Kandappan V/s. Mrs. S. Rajalakshmi and Ors AIR 2011 SC 3234
15
[Link] relief of Refund of Earnest money

In the case of P. C. Varghese V/s. Devaki Amma Balambika Devi and Ors13. he Supreme Court
held that "merely because an alternative plea of refund of earnest amount and damages has been
raised it cannot constitute a bar to claim a decree for specific performance of contract."

CONCLUSION

The most conventional condition under most force majeure provisos is the „Act of God‟, and
the Covid-19 can be brought under the ambit of the equivalent. However, the impact of this
statement can be relieved through the „duty to mitigate‟ and „exercise due perseverance
clause.‟ The emotional norms looking into it to case premise must be applied to decide their
impact on the general agreement. The „best endeavor‟ statements may likewise assume an
essential part to characterize the ambit and ramifications of the force majeure condition, as the
presence of the equivalent would wind up alleviating the impacts of power majeure provisions.
The predictability of the occasion must be checked as well, particularly for the agreements
entered after the long stretch of December 2019 with respect to the power majeure provisions to
become successful, the occasion should not be predictable generally, and the Covid-19 episode
had adequately started from December 2019 onwards

13
P. C. Varghese V/s. Devaki Amma Balambika Devi and Ors Appeal (civil) 1984 of 2002]
16