2018 Amendment To Specific Relief Act Prospective ; Cannot Apply To Transactions Which Took Place Prior To 1.10.2018: Supreme Court

The Supreme Court held that the 2018 amendment to the Specific Relief Act is prospective and cannot apply to those transactions that took place prior to its coming into force [1.10.2018].

The bench of CJI NV Ramana, Justices Krishna Murari and Hima Kohli observed thus while allowing an appeal arising out of a specific performance suit. In this case, the trial Court dismissed the suit holding that the plaintiff is not entitled for the relief of specific performance. While allowing the appeal, the Telangana High Court held that specific relief in essence is a part of the law of procedure, and hence 2018 amendment is retrospective.

Therefore one of the issues raised in the appeal was whether the amended Section 10 of the Specific Relief Act is prospective or retrospective in operation?

Section 10 of Specific Relief Act

Section 10 reads as follows: Specific performance in respect of contracts.—The specific performance of a contract shall be enforced by the court subject to the provisions contained in sub­ section (2) of section 11, section 14 and section 16. The effect of this amendment is that the discretion to grant specific performance was taken away and it is mandatory for Courts to grant such relief, unless the 13 case at hand falls within the statutorily carved out exceptions.

Created new rights and obligations

The court observed that the amendment carried out in 2018 was enacted to further bolster adherence to the sanctity of contracts. The court noted that after the 2018 amendment, specific performance, which stood as a discretionary remedy, is not codified as an enforceable right which is not dependent anymore on equitable principles expounded by judges, rather it is founded on satisfaction of the requisite ingredients as provided under the Specific Relief Act.

"This approach was radical and created new rights and obligations which did not exist prior to such an amendment... This provision, which remained in the realm of the Courts' discretion, was converted into a mandatory provision, prescribing a power the Courts had to exercise when the ingredients were fulfilled. This was a significant step in the growth of commercial law as the sanctity of contracts was reinforced with parties having to comply with contracts and thereby reducing efficient breaches.. Under the pre-­amended Specific Relief Act, one of the major considerations for grant of specific performance was the adequacy of damages under Section 14(1)(a). However, this consideration has now been completely done away with, in order to provide better compensation to the aggrieved party in the form of specific performance.", the court observed.

 2018 amendment was not a mere procedural enactment, hence prospective

The court therefore noted that the 2018 amendment was not a mere procedural enactment, rather it had substantive principles built into its working. The bench observed:

When a substantive law is brought about by amendment, there is no assumption that the same ought to be given retrospective effect. Rather, there is a requirement for the legislature to expressly clarify whether the aforesaid amendments ought to be retrospective or not.. In the light of the aforesaid discussion, it is clear that ordinarily, the effect of amendment by substitution would be that the earlier provisions would be repealed, and amended provisions would be enacted in place of the earlier provisions from the date of inception of that enactment. However, if the substituted provisions contain any substantive provisions which create new rights, obligations, or take away any vested rights, then such substitution cannot automatically be assumed to have come into force retrospectively. In such cases, the legislature has to expressly provide as to whether such substitution is to be construed retrospectively or not. 

The court further noted that the amendment act contemplates that the said substituted provisions would come into force on such date as the Central Government may appoint, by notification in the Official Gazette, or different dates may be appointed for different provisions of the Act. 01.10.2018 was the appointed date on which the amended provisions would come into effect. In view of the above discussion, we do not have any hesitation in holding that the 2018 amendment to the Specific Relief Act is prospective and cannot apply to those transactions that took place prior to its coming into force, the court observed.

The bench also answered other issues against the plaintiff while allowing the appeal. It was found that the contract was breached due to the conduct of the plaintiff/purchaser, who were not willing to perform the contract after entering into a time sensitive agreement.

Case details

Katta Sujatha Reddy vs Siddamsetty Infra Projects Pvt. Ltd. |  2022 LiveLaw (SC) 712 | CA 5822 -5824 OF 2022 | 25 August 2022 | CJI NV Ramana, Justices Krishna Murari and Hima Kohli

Counsel: Sr. Adv Dushyant Dave and Sr. Adv Harin P. Raval, Sr. Adv Mukul Rohatgi and Sr. Adv Harish Salve

Headnotes

Specific Relief Act, 1963; Section 10 - 2018 amendment to the Specific Relief Act is prospective and cannot apply to those transactions that took place prior to its coming into force.

Legislation - Amendment - Retrospective or Prospective - Ordinarily, the effect of amendment by substitution would be that the earlier provisions would be repealed, and amended provisions would be enacted in place of the earlier provisions from the date of inception of that enactment. However, if the substituted provisions contain any substantive provisions which create new rights, obligations, or take away any vested rights, then such substitution cannot automatically be assumed to have come into force retrospectively. In such cases, the legislature has to expressly provide as to whether such substitution is to be construed retrospectively or not. (Para 54)

Specific Relief Act, 1963; Section 16 - In order to prove readiness and willingness, the burden is on the purchaser to prove that they were always ready and it is only the vendor who refused to perform the contract for extraneous consideration - When the purchaser was not ready or willing to perform his part of the contract within the time stipulated and accordingly, specific performance cannot be granted for the entire contract. (Para 63-69)

Limitation Act, 1961 ; Article 54 - Article 54 of the Limitation Act provides for two consequences based on the presence of fixed time period of performance. It is only in a case where the time period for performance is not fixed that the purchaser can take recourse to the notices issued and the vendors' reply thereto. (Para 37)

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