Amendment in Specific Relief Act

Amendment in Specific Relief Act – A positive change for Infrastructure Companies

Dealing with present laws is a challenge for infrastructure companies. The recent amendment in the Specific Relief Act will change the entire system. Our country passed through major development phases since last two decades, without changing the legal system. The reason is not the Government but the presentation to the Government by the Industry. Major articles and books on Infrastructure laws deal with the immovable property and its ancillary laws. It is difficult to relate and read all of them and that is also evident from the current situation. I always considered why we are not emphasizing Specific Relief Act and its importance.

Stalled Infrastructure projects is a stress for the Infra companies and harm the reputation of the country globally. The rating of the country badly affected and foreign investors heavily bargain. We faced such situations also where the foreign investors left the country in the middle of the projects. The only reason is the cost overrun and high operating cost. Courts such as the Central Electricity Regulatory Commission (CERC) is the only dedicated infrastructure court at India.  Major issues faced by the Infra companies and investor are as follows:-

1. No dedicated Courts and costly disputes
2. Non-performance of Contracts
3. Inadequate compensation for damages
4. Interference of Courts
5. Lack of experts

In this article, we will try to explain how the amendments 2018 in Specific Relief Actis going to change the situation in the current development phase of our country.

1. No dedicated courts and costly disputes

The amendment provides the provision of dedicated courts for the infra companies enumerated in the list of the new amendment act. The disputes will be settled within 12 months. The same will be the ray of hope for the infrastructure companies.

2. Non-performance of Contracts

Earlier the non-performance of Contract was covered by the Infrastructure Companies in their Contract. The same was used to be covered under the ‘risk purchase clause’ and it means that in case of default, the owner of the contract has the right to give the contract to the third party on the cost of the party in breach. Often the defaulting party reaches the court for the relief and in many cases filed a criminal complaint also. The same resulted in the multiplicity of litigation, project delay and raised the cost of the projects due to huge expenditure in litigation. Obviously, court will take its own time to look into the matter and in few cases court also passed the order which stalled the infrastructure projects.

Now it becomes the statue that in case of the non-performance of the contractual work, the Owner will have the right by law to assign the work to the third party on the cost of the defaulting party. The Owner is required to serve at least 30 days notice on the defaulting party to fulfil the contractual obligations. In case if the defaulting party failed to fulfil the terms and conditions of the contract within stipulated time, the other party has the right to assign the work to third party on the cost of defaulting party. However, it is also added in the amendment that the right to claim damages from the defaulting party will be closed thereafter. The amendments creates the statuary right in favour of the Owner of the Project and therefore reduced the scope of litigation between the parties to the maximum extent.

3. Inadequate compensation for damages

Before passing the amendment, specific performance was an exception rather than rule and, in most cases, the legal right available was damages. The court enforced its discretion only when (i) actual damage caused due to non-performance of the action could not be ascertained or (ii) when monetary compensation would not be adequate relief for the non-performance of the contract (Section 10). As a result, Indian Courts often award damages for breach of contract as a general rule and grant specific performance as an exception. The other parameters for the qualification of relief under the old Act were given in Section 16 (Personal bars to relief).

The amendment has wiped off the above mentioned discretionary power of court and pass the specific performance of contract as a general rule subject to limited grounds.

4. Interference of the courts

The amendment limits the court interference in order to progress the infrastructure project. The section is restricted only to the list of infrastructure enumerated in the Specific performance (amendment) Act 2018.

5. Appointment of Experts

The amendment empowered court to appoint the experts for the opinion on any pending issue.

The amendment is passed by both the Houses and the President has given the approval on 1st August 2018. Notification of the coming into force of the different provisions introduced by the Amendment Act is presently awaited.