Proposed amendment to Specific Relief Act: Need to deal with impact of lapse of time and escalation of price in specific performance cases

The proposed amendment to section 20 of Specific Relief Act

Section 20 of the existing Specific Relief Act 1963 recognizes that grant of relief of specific performance is discretionary. The court is not bound to grant such relief merely because it is lawful to do so.

On 15.03.2018, the Lok Sabha passed Specific Relief (Amendment) Bill, 2018. The Bill seeks to inter alia substitute section 20, by altogether different provision for 'Substituted performance of contracts, etc.” The Bill in essence seeks to do away with the discretion vested with the courts in allowing or refusing specific performance; and permit specific performance as a general rule.

Scope of discretion of courts under Section 20 of Specific Relief Act 

The discretion of the court under Section 20 of the Specific Relief Act is not arbitrary but sound and reasonable, guided by judicial principles and capable of correction by a court of appeal. The courts have acknowledged that the yardstick for the exercise of the discretion conferred under Section 20 of the Specific Relief Act, cannot be exhaustively laid. The exercise of discretion always depends on the facts and circumstances of each case; the ultimate test being the principles of fairness and reasonableness[1].

Challenge presented by efflux of time in litigation and escalation of price

Often the litigation to enforce an agreement for sale by way of specific performance consumes considerable time running into years. It is common that in the interregnum, the price of the subject matter of agreement for sale, particularly when the same comprises real estate or even shares of a company, increases manifold. The existing Specific Relief Act has no express provision dealing with the effect of such rise in price. 

The courts have consistently held the view that escalation in the price of the property cannot, by itself, be a ground for denying relief of specific performance.[2] Construing efflux of time and escalation of price as a bar to the grant of specific performance when issues arising are answered in favor of party seeking the relief would amount to penalizing such party for no fault on his part[3]. The discretion to grant specific performance of an agreement after elapse of a long period of time, has to be exercised on sound, reasonable, rational and acceptable principles. However be the efflux of time and escalation of price of property, by itself, cannot be a valid ground to deny specific performance.[4]

Court's discretion to allow additional amount to defendant on account of price rise

A three-judge Bench of the Supreme Court[5] considered a case where the defendants had committed breach of agreement to sell real estate to the plaintiff; the plaintiff had proved her readiness and willingness to perform her part of the agreement; but there was phenomenal increase in the market price of the property during the pendency of litigation which spanned over three decades. The Bench held that there was no reason why the plaintiff, who was not a defaulting party, should not be allowed to reap to herself the fruits of manifold increase of the value of property. At the same time the Bench acknowledged that the court in its discretion could impose any reasonable condition including payment of an additional amount by one party to the other while granting or refusing decree or specific performance.  The Bench held:

'Whether the purchaser shall be directed to pay an additional amount to the seller or converse would depend upon the facts and circumstances of a case. Ordinarily, the plaintiff is not to be denied the relief of specific performance only on account of the phenomenal increase of price during the pendency of litigation. That may be, in a given case, one of the consideration besides many others to be taken into consideration for refusing the decree of specific performance. As a general rule, it cannot be held that ordinarily the plaintiff cannot be allowed to have, for her alone, the entire benefit of phenomenal increase of the value of the property during the pendency of the litigation. While balancing the equities, one of the consideration to be kept in view is as to who is the defaulting party. It is also to be borne in mind whether a party is trying to take undue advantage over the other as also the hardship that may be caused to the defendant by directing the specific performance. There may be other circumstances on which parties may not have any control. The totality of the circumstances is required to be seen.”

In another instance[6], a Division Bench of Supreme Court noticed inadequacies of the law to deal with the long delays that could occur while rendering the final decision in a given case. It took a view that delay and escalation in price may justify an award of additional compensation to the vendor by grant of a price higher than what had been stipulated in the agreement which price, in a given case, may even be the market price as on date of the order of the final court.

However, there appears to be no clear guideline as to the quantum of additional compensation and the mode of determination thereof, which have remained in the realm of discretion[7].

Impact of the proposed amendment

Amendment proposed to the Specific Relief Act now while omitting existing section 20, does not address the existing inadequacies of law as to quantum of additional compensation payable to vendor on account delay in litigation and price rise. In fact, in its zeal to do away with discretionary power seems to do away with the power of the court to allow such additional cost to the vendor, when warranted. This may prove to be inequitable in cases particularly where the delay is not the doing of the vendor and during the pendency of the litigation the substantial consideration had remained in the hands of the plaintiff.

The way forward

Certainty being a facet of rule of law, the law makers need to bestow attention and incorporate a clear statutory provision dealing with cases of grant of specific performance when there is phenomenal increase in the market price of the property during the pendency of litigation.

[1] Satya Jain v. Anis Ahmed Rushdie (2013) 8 SCC 131

[2] Narinderjit Singh vs. North Star Estate Promoters Ltd. MANU/SC/0417/2012; P.S. Ranakrishna Reddy vs. M.K. Bhagyalakshmi and Anr MANU/SC/7148/2007; P. D'Souza vs. Shondrilo Naidu MANU/SC/0561/2004

[3] Satya Jain v. Anis Ahmed Rushdie (2013) 8 SCC 131

[4] Satya Jain v. Anis Ahmed Rushdie (2013) 8 SCC 131

[5] Nirmala Anand vs. Advent Corporation (P) Ltd. and Ors. MANU/SC/0845/2002

[6] Satya Jain v. Anis Ahmed Rushdie (2013) 8 SCC 131

[7] See Zarina Siddiqui vs. A. Ramalingam MANU/SC/0975/2014 where a lump sum amount was allowed to the defendant and Rajinder Kumar vs. Kuldeep Singh and Ors. MANU/SC/0085/2014 where increased value as per subsequent circle rate for directed to be paid to defendant.