Justice Surya Kant On Shift In India’s Contract Law: ‘Legal System Has Become More Responsive To The Needs Of Rapidly Growing Indian Economy

In a keynote address during the Legally Speaking dialogue, Justice Surya Kant, Hon’ble Judge of the Supreme Court of India, elaborated on the significant changes introduced by the 2018 Amendment to the Specific Relief Act, 1963. The speech touched on the legal and economic implications of these amendments, emphasizing how they align with India’s growing position as a global economic powerhouse. By focusing on the amendments, Justice Kant highlighted the importance of specific performance in modern contractual disputes, with an aim to foster a more efficient, predictable, and pro-business legal framework.

Historical Context: The Original Specific Relief Act of 1963

The Specific Relief Act of 1963 was designed to provide remedies to individuals whose civil rights had been infringed, particularly in cases of contract breaches. Justice Surya Kant reflected on the foundation of the Act, stating that the principle of “ubi jus ibi remedium” — where there is a right, there is a remedy — formed its core. Under the original Act, remedies such as specific performance, injunctions, and the recovery of possession of property were available to the aggrieved party.

However, the application of specific relief was governed by the inadequacy test, which required plaintiffs to prove that monetary compensation was insufficient. This led to specific performance being granted only in exceptional circumstances, limiting its effectiveness. According to Justice Kant, this framework inadvertently incentivized parties to breach contracts, as damages were often less burdensome than performing the contract itself, a phenomenon in line with the “efficient breach theory” in law and economics.

Justice Surya Kant on Expert Committee Recommendations

The limitations of the 1963 Act prompted a review by an expert committee in 2016. Justice Surya Kant discussed how the legal landscape had evolved since the Act’s inception, particularly with the rise of public-private partnerships and large infrastructure projects. These developments necessitated a more modernized approach to contract enforcement. The committee noted that the existing framework was inadequate for the demands of India’s expanding economy and proposed reforms aimed at facilitating faster, more efficient dispute resolution to enhance India’s ease of doing business.

The expert committee’s recommendations formed the foundation for the 2018 Amendment, which sought to make the legal system more responsive to the needs of a rapidly growing economy and its international business aspirations.

Justice Surya Kant on Key Changes in 2018 Amendment:

Justice Surya Kant highlighted several critical changes brought by the 2018 Amendment to the Specific Relief Act. One of the most significant changes was the shift from making specific performance an exception to making it a matter of right. Under the previous law, specific performance was granted only when damages were deemed inadequate. The amendment, however, made it available as a default remedy, reflecting a more robust approach to enforcing contractual obligations.

Furthermore, the amendment altered the burden of proof. Previously, plaintiffs had to explicitly state their willingness and readiness to perform the contract. Under the 2018 Amendment, while plaintiffs still bear the burden of proof, the requirement for specific averments in pleadings was removed, streamlining the legal process.

Another major provision in the 2018 Amendment is the allowance for compensation in addition to specific performance. This enables plaintiffs to receive both the fulfillment of their contractual obligations and financial compensation for any losses incurred due to the breach. This provision ensures that the injured party is not left without adequate remedy while simultaneously enforcing the contractual promise.

Enhancements to the Adjudication Process

Justice Kant also emphasized the provision in the 2018 Amendment that empowers courts to appoint experts to help resolve complex commercial contract disputes. This addition is designed to make adjudication more informed and efficient, allowing courts to rely on expert opinions in cases involving intricate legal or technical issues.

Furthermore, the amendment introduced the concept of substituted performance, which allows a party to procure the performance of a contract from a third party or its own agency in case of a breach. The cost of such substituted performance can be recovered from the defaulting party. This provision is particularly relevant in large-scale projects, where timely execution is essential.

Additionally, the 2018 Amendment provides for the designation of special courts to handle infrastructure-related disputes. These courts are tasked with expediting the resolution of issues related to public-private partnerships and other critical infrastructure projects. This focus on infrastructure is part of a broader push to streamline dispute resolution and ensure the timely completion of projects vital to India’s economic growth.

The Impact on Infrastructure and Judicial Efficiency

One of the central themes of Justice Kant’s address was the impact of the 2018 Amendment on infrastructure development. The amendment places a ban on granting injunctions that could delay infrastructure projects, which are often critical for national development. By providing a clear framework for resolving disputes related to infrastructure contracts, the amendment ensures that such projects can proceed without unnecessary delays.

To further accelerate the resolution of commercial disputes, the amendment stipulates that cases under the Specific Relief Act should be disposed of within 12 months of the service of summons. A maximum extension of six months is permitted, reflecting the growing importance of swift dispute resolution in India’s evolving economic landscape.

However, Justice Kant cautioned that while the law mandates expedited hearings, judicial impact assessments and improvements in judicial infrastructure will be necessary to meet these challenges. He stressed the importance of building a robust legal infrastructure to handle the increased caseload resulting from these ambitious reforms.

Justice Surya Kant on India’s Evolving Economic Landscape

Justice Kant also placed the 2018 Amendment in the context of India’s broader economic trajectory. He discussed how India’s economic model has transformed since the 1991 liberalization, which marked the beginning of the country’s integration into the global economy. From a closed economy focused on self-reliance, India transitioned to an open economy that welcomed foreign investment. The reforms of 1991 laid the foundation for India’s rise as a major destination for foreign direct investment (FDI), with sectors such as software, pharmaceuticals, and telecommunications attracting significant investment.

India’s ranking in the World Bank’s ease of doing business report also improved significantly, from 142nd in 2014 to 63rd in 2019. This improvement is attributed to legal and regulatory reforms, which have streamlined procedures and reduced barriers to entry for foreign investors.

Justice Kant pointed out that India’s legal reforms, including the 2018 Amendment, play a crucial role in this economic transformation. By strengthening the enforceability of contracts, the country is creating a more predictable and secure environment for businesses to thrive. He believes that these legal changes, along with judicial reforms, will enhance investor confidence and contribute to the country’s continued economic growth.

A Modernized Legal Framework for Economic Growth

In concluding his address, Justice Kant emphasized that the 2018 Amendment to the Specific Relief Act is a significant step towards modernizing India’s legal framework. By making specific performance the default remedy and enhancing the efficiency of the legal process, the amendment aligns India’s contract law with international best practices, creating a more business-friendly environment.

The amendment not only reflects India’s aspirations as a global economic leader but also serves as a catalyst for greater certainty in commercial transactions. As Justice Kant put it, the 2018 Amendment is an essential component of a broader strategy to strengthen India’s legal and economic landscape, paving the way for increased global trade, investment, and economic prosperity.

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