SPECIFIC RELIEF ACT, 1963
The Specific Relief Act was adopted in 1963 when it was determined that when a person withdraws from the fulfillment of a specific promise or contract concerning another person, the aggrieved party is entitled to relief under the Specific Relief Act, 1963. The Indian Contracts Act of 1872 includes this Act as one of its branches. It superseded an earlier 1877 Act. Various remedies are offered under the provisions of the Specific Relief Act. One of them is the specific performance of contracts.
The base of practically all business ties is composed of contracts. A contract binds every profession. Contracts bind property, whether it belongs to businesses or individuals. Contracts bind money in banks. As a result, contracts are the modern equivalent of wealth. They are sacrosanct in and of themselves.
Furthermore, a contract is not a one-time transaction. It is frequently a link in a network of numerous agreements. A breakdown in one site could cause significant economic and social disruption. Contracts must be upheld. However, the contract law can only enforce a contract by giving compensation to an aggrieved party.
On the other hand, compensation frequently fails to serve the contract's economic aim. A hospital, for example, is more concerned with meeting its criteria than with getting reimbursement from a failed supplier. As a result, a remedy that would compel a defaulting contractor to complete his contract was required.
SPECIFIC PERFORMANCE OF CONTRACTS
Specific performance of contracts involves many sections which deal with a broad ambit. Section 10 mentions that specific performance of the contract is generally at the discretion of the court, but there are a few conditions that must be met:
a) When the extent of the damage or loss caused by the contract's non-performance is unknown.
b) When money is not enough to make up for the contract's failure to perform.
On the contrary, Section 14 lists the contracts that cannot be expressly enforced, which involves the following:
a) When the Act is not performed, and money is not sufficient compensation.
b) A contract with many specifics and a unique nature to the parties cannot be specifically enforced.
c) The contract calls for constant work that the court cannot oversee.
d) The court whose nature can be predicted.
SECTION 19- RELIEF TO PARTIES THROUGH SUBSEQUENT TITLE
Section 19[1] of the Act lays down the relief against parties and persons claiming under them by subsequent title. This section involves four sub-clauses as to whom specific performance by authority of subsequent title could be enforced.
● Sub-clause (a): either party thereto-
This clause mentions that if a contract is under the influence of subsequent title, i.e., a person who acquires real property through a transfer from someone other than the property's seller, then any of the contracting parties are in the position to be held liable for performing the contract in force.
● Sub-clause (b): any other person claiming under him by a title arising subsequently to the contract, except a transferee for value who has paid his money in good faith and without notice of the original contract.
This clause enlarges the circle of performance by mentioning that any other party or person who has a hold of the property subsequently could also be asked to perform the contract due to some contractual obligation. However, the transferee, i.e., the provider of the property, is exempted from this duty only if they have performed in bona fide nature and were unaware of the original contract.
Illustration: A agrees to sell a piece of land to B for taka 5,000. A then sells the land to C for taka 6,000, having received notice of the original contract. In the case of C, B may seek particular execution of the contract.
A caveat that could be brought upon this clause is that this provision would not be maintainable if the legal representative lacks competence under the applicable personal law. A vendor died shortly after signing the contract. His widow received more money from the vendee after he died. According to the Muslim Law that applies to the vendor, the widow (mother) is not the legal guardian of her minor children. Her advance for the alienation of her little children's property was not binding on them. According to the ruling in Amar Ahmad Khan v. Shamim Ahmad Khan[2], she could not be forced to carry out the sale based on the advance she received.
Another characteristic of this clause is its bonafide nature. "Section 19 (b) of this Act protects the bona fide purchaser[3] in good faith or value without notification of the original transaction," according to R.K. Mohammed Ubaidullah v. Hajee C. Abdul Wahab[4] . This safeguard functions as an exception to the general rule. As a result, the purchaser who claims to be an innocent purchaser bears the burden of proof of good faith.
● Sub-clause (c): any person claiming under a title which, though before the contract and known to the plaintiff, might have been displaced by the defendant.
This provision goes beyond the boundaries of privity. It explains that any party that was a contracting party earlier before the contract was enforced and was not known to the plaintiff but was replaced by the defendant, the alleged party in certain circumstances, can also be called upon to perform the specific contract.
Illustration: A, the tenant for life of an estate with remainder to B, agrees to sell the property to C, who has notice of the settlement, in the due authority of a power provided by the settlement under which he is tenant for life. A passes away before the sale is completed. C may hold B liable for specific fulfillment of the contract.
Recently many amendments have been introduced in this Act for its betterment. The eighth amendment was made to Section 19 of the Act in 2018 by inserting clause (ca), which allows for specific performance of a contract to be enforced against a limited liability partnership that arises out of amalgamation when a limited liability partnership that had entered into a contract was later amalgamated with another limited liability partnership.
● Sub-clause (d): when a company has entered into a contract and subsequently becomes amalgamated with another company, the new company arises out of the amalgamation.
This can be understood through an illustration. For example, X is a company that is one of the contracting parties through subsequent ownership. In the upcoming future, it may be due to lack of administration or any reason whatsoever; X company merges with another company named Y, then X, Y, and both as a whole are liable to perform the contract if asked.
● Sub-clause (e): when the promoters of a company have, before its incorporation, entered into a contract for the company and such contract is warranted by the terms of the incorporation, the company: Provided that the company has accepted the contract and communicated such acceptance to the other party to the contract.
Before proceeding, one must be clear with the term promoters of a company; it can be referred to as a person who has direct or indirect authority over its affairs, whether as a shareholder, director, or otherwise. While the incorporation of a company means the legal procedure for forming a company or a corporation.
The case of Shri Ramji Mandir Narsinhji and others v. Narisnh Nagar Cooperative Housing Society Ltd. Navsari and others[5] explains that after its incorporation, the Narsinh Nagar Co-operative Society Ltd. sought specific performance of an agreement entered into by the society's promoters before its incorporation. The Division Bench of the Gujarat High Court decided that the Co-operative Society could not demand particular execution of an agreement entered into by its promoters before the society was formed, based on several English precedents enunciating the principles of English common law. The above-mentioned common law norm, previously recognized by the English Courts in England, no longer holds the field in view. A person who contracts on behalf of a corporation that has not yet been incorporated is later found to be personally liable for the contract.
This clause clarifies that if the promoter of the company, before receiving its status of the corporate entity, entered into a contract for the sake and purpose of the corporation and the contract includes the terms laid down by the incorporation, then also the company has to perform the contract specifically. However, this premise is only valid if the company has accepted the contract and provided this acceptance to the other contracting parties.
[1]https://www-manupatrafast-in.eu1.proxy.openathens.net/ba/dispbot.aspx?nActCompID=63537 [2] Amar Ahmad Khan v. Shamim Ahmad Khan [AIR 2012 Jhar 39] [3] https://districts.ecourts.gov.in/sites/default/files/ponduruwrkshopdt31082019.pdf [4] R.K. Mohammed Ubaidullah v. Hajee C. Abdul Wahab [(2000) 6 SCC 402]. [5] Shri Ramji Mandir Narsinhji and others v. Narisnh Nagar Cooperative Housing Society Ltd. Navsari and others 1991 (3) BomCR 351
This article is written by Ananya Gupta of Symbiosis Law School, Pune.