Amendment to the Specific Relief Act in 2018: whether retrospective?

Introduction

The Specific Relief Act, 1963 (the Principal Act) was enacted to define and amend law relating to certain kinds of specific reliefs.  It contained provisions concerning inter-alia specific performance of contracts; contracts not specifically enforceable; the Parties who could obtain; and against whom specific performance could be obtained etc. Under the Principle Act, specific performance could not be claimed where damages could afford adequate remedy. The Principle Act also conferred discretion to the courts to decree specific performance. On a construction of the provisions of the Principal Act and by exercising the discretion vested, the courts in a large number of cases have awarded damages as a general rule, while specific performance is granted as an exception.

The rationale behind Amendment

Taking note of large scale economic development since the enactment of the Principal Act which brought in enormous commercial activities including Foreign Direct Investment, Public Private Partnerships etc., the Centre proposed amendment to the Principal Act, to facilitate enforcement of contracts in a speedy manner by doing away with wider discretion of courts to grant specific performance and to make specific performance as the rule than an exception[1].  Accordingly, the Specific Relief (Amendment) Bill, 2017 was introduced in Parliament which after passage received the assent of the President and is published in official gazette on 1/8/2018.

The amendment

With effect from 1/8/2018 the Specific Relief (Amendment) Act, 2018 (Amendment Act) has come into force to amend Principal Act.

Sections 3, 4, 5, 7 and 10 of the Amendment Act substitute Sections 10, 11, 14, 16 and 20 of the Principal Act to facilitate enforcement of a contract by specific performance as a rule rather than an exception and do away with the discretion vested in courts to grant specific performance.

Absence of express provision to make amendment retrospective

There is no express provision in the Amendment Act stating if the Amended Act will apply retrospectively or will have only prospective application. Further, in the event of retrospective application, whether the Amendment Act will apply to all existing contracts or only to the contracts in relation to which legal proceedings for enforcement thereof are already pending, is not clear.​

Argument in favour of retrospective application

The position that legislature can enact laws retrospectively is well settled.  However, the legislative power to amend an enacted law with retrospective effect is subject to several judicially recognized limitations like (i) the words used must expressly provide or necessarily imply, retrospective operation; (ii) retrospectivity must be reasonable and not excessive or harsh otherwise it runs the risk of being struck down as unconstitutional. There is no fixed formula for expression of legislative intent to give retrospectivity to an enactment.  Substitution of an existing provision by a new provision can be construed as if substituted expressions were included from the date of introduction of the original law[2].

It is noticed that the Amendment Act while amending the provisions of Principal Act uses the expression “substituted”. The word “substitute” ordinarily would mean “to put one in place of another”; or “to replace”.

In a recent decision[3] the Supreme Court held that ordinarily wherever the word “substitute” is used by legislature, it has the effect of deleting the old provision and make new provision operative.  The process of substitution consists of two stages: in one, the old rule is made to cease to exist and in next, the new rule is brought into existence in its place.  Consequently, when a subsequent law amends an earlier one in such a way as to incorporate itself or a part of itself into the earlier, then the earlier law must thereafter be read and construed as if the altered words had been written into the earlier law with pen and ink and the old was scored out so that there is no need to refer to the amending law at all. The court further observed that in certain circumstances however having regard to the purport and object sought to be achieved by legislature, the court may construe the word “substitution” as an amendment having prospective effect.  In said case the court considered whether substitution of Section-6 of Recovery of Debts due to Banks and Financial Institutions Act, 1993, by Act No.44 of 2016 with effect from 1/9/2016 to provide that the Presiding Officer shall hold office for five years from the date he enters office provided he shall not continue beyond the age of 65 years, applied prospectively i.e., with effect from 1/9/2016.  Having regard to objective behind the amendment of said law viz. to reduce the burden of pendency by enhancing the age of Presiding Officers concerned as reflected from the report of Lok Sabha Joint Committee and the statement of objects and reasons to the said Amendment, the court held that the amendment applied to serving Presiding Officers on the day when the amendment became enforceable.

Conclusion

Having regard to the purport and object sought to be achieved by the legislature as per the statement of objects and reasons for the amendment viz. and to make grant of specific performance the rule than an exception, the word “substituted”  is likely to be construed to imply retrospective application of the Amendment Act.