Compensation in Substitution of Specific Performance

After the Specific Relief (Amendment) Act 2018 comes into force on 1 October 2018, a plaintiff will not be able to seek compensation in substitution of specific performance.

If the Act has been amended to enable plaintiffs to seek confidently the relief of specific performance, this particular amendment will deter plaintiffs from seeking it. It is hoped that this particular amendment in Section 21(1) of the Act that takes away the right to seek compensation in substitution, and indeed many other amendments to the Act, do not become one more instance of ‘legislate in haste, amend at leisure’.

This change to section 21(1) was NOT recommended by the Expert Committee set up to suggest amendments to the Specific Relief Act. The Report of the Expert Committee has not been published.

Amendment to section 21(1) of the Act

Section 21 of the Specific Relief Act 1963 is amended. The unamended and amended text of section 21(1) is as follows:

Before Amendment of 2018:
12(1). In a suit for a specific performance of a contract, the plaintiff may also claim compensation for its breach, either in addition to, or in substitution of, such performance.[1]

After Amendment of 2018:
12(1). In a suit for a specific performance of a contract, the plaintiff may also claim compensation for its breach, either in addition to, or in substitution of, such performance.

Compensation in substitution when sought

The relief of specific performance has been exceptional and discretionary under the unamended Act. Whether the relief will be granted was uncertain in this regime, and also for other reasons. It becomes necessary for any plaintiff to seek, and for his lawyer to advise him, that he must claim compensation for breach of that contract because specific performance might not be granted.

The reliefs of specific performance and compensation are incompatible in nature.[2] A plaintiff seeking specific performance claims on the basis that the contract subsists. He seeks compensation on the basis that the contract is broken. His claim for compensation might be held against him on the ground that loss arising from breach is compensable, i.e. capable or ascertainment, and is adequate. However, it has been held that the cause of action for the two suits is the same: the breach of contract.[3] Order 2 rule 2 of the Civil Procedure Code would compel him to seek both reliefs in the same suit, so that if specific performance is refused, his claim for compensation can be considered.

A plaintiff is compelled to seek specific performance and compensation as alternative reliefs in the same suit, also because Section 24 of the Specific Relief Act prevents him from filing another suit for compensation if his suit for specific performance is dismissed.

The discussion whether the relief of compensation claimed in the alternative in a suit is the same as relief ‘in substitution’ described in unamended section 21(1) of the Specific Relief Act, is inconclusive.[4]

A plaintiff seeking specific performance hence will be advised to seek alternative relief of compensation in a suit for specific performance. The fact that the plaintiff has asked for the compensation which is permissible under Section 19[5] does not prejudice his right to get a decree for specific performance.[6]

Compensation in substitution when granted

Section 12(2) of the Act provides that “if, in any such suit, the court decides that specific performance ought not to be granted, but that there is a contract between the parties which has been broken by the defendant, and that the plaintiff is entitled to compensation for that breach, it shall award him such compensation accordingly.” This provision relates to the claim for compensation ‘in substitution’.[7]

Compensation ‘in substitution’ of specific performance has been granted in various situations:

  1. Where the plaintiff has sought compensation in the alternative, and wishes to give up his claim for specific performance and seek compensation in the suit. He can ask to convert his suit from specific performance to one of compensation.[8] He must make his decision before trial begins.[9]
  2. Where the court decides that specific performance ought not to be granted. In all these cases, compensation must be pleaded, and amendment can be sought at any stage under section 12(5). Compensation in substitution has been granted in following circumstances:

a) The property (land) was acquired pending suit for specific performance.[10]

b) Permission for transfer was refused, viz. under the Urban Land Ceiling Act 1976.[11]

c) Where the land could not be sold because of abolition of zamindaris.[12]

d) Where specific performance was refused because property was transferred to a bonafide transferee for value without notice [section 19(1)(b)].[13] Relief of compensation can also be granted against the subsequent purchaser.[14]

e) Property in suit is sold away.[15]

f) Where the court refuses specific performance on the grounds stated in section 14, viz. contract involves constant supervision, or depends on personal volition, or is determinable.[16]

g) Granting specific performance serves no purpose or use.[17]

h) The terms of the contract are not certain enough for a grant of specific performance.[18]

i) Where the court in the exercise of discretion refuses specific performance [Section 20].[19]

Effect of amendment

After the amendment of 2018, neither can a plaintiff ask for compensation in the alternative, nor will a court grant it. Nor can arbitrators grant compensation instead of specific performance. This is bound to dissuade parties from asking specific performance, which works against the objective of the amendment to make specific performance easily available.

—-

[1] Section 19 under the Specific Relief Act 1877.

[2] Ardeshir H Mama v Flora Sassoon AIR 1928 PC 208.

[3] Rajendra Nath Saha v Saraswati Press Ltd  AIR 1952 Cal 78 ; John v Mammootty AIR 1985 Ker 120.

[4] Jagdish Singh v Natthu Singh AIR 1992 SC 1604.

[5] under Specific Relief Act of 1877, equivalent to section 21(1) of the Act of 1963.

[6] Motilal Jain v Ramdasi Devi AIR 2000 SC 2408; Devendra Basappa Doddannavar  v Sonubai Tuljansa Kosandal AIR 1971 Mys 217.

[7] Flora Sassoon v Ardeshir H Mama AIR 1926 Bom 189.

[8] Ardeshir H Mama v Flora Sassoon AIR 1928 PC 208.

[9] Karsandas v Chhota Lal AIR 1924 Bom 119; Gopi Nath Sen v Bahadurmul Dulichand AIR 1979 Cal 203.

[10] Urmila Devi v Deity, Mandir Shree Chamunda Devi AIR 2018 SC 640; Pillamma v P Rangaraju AIR 1996 Kant 330.

[11] K Narendra v Riviera Apartments (P) Ltd AIR 1999 SC 2309; Matadin Agarwal v Syed Abdul Razack AIR 1997 AP 103.

[12] Salim Beg v Krishna Ballabh AIR 1954 MB 76.

[13] Jhandoo v Ramesh Chandra AIR 1971 All 189.

[14] Rajendra Kantilal Dalal v Bombay Builders Co (P) Ltd AIR 2002 Bom 408; but see Jhandoo v Ramesh Chandra AIR 1971 All 189.

[15] Khatun Bibi v Lilabati Dassi AIR 1949 Cal 128; Gopal Debjibhai Patel v Rishal Singh AIR 1982 Ori 242; John v Mammootty AIR 1985 Ker 120.

[16] Her Highness Maharani Shantidevi P Gaikwad v Savjibhai Haribhai Patel AIR 2001 SC 1462 (determinable, and involving constant supervision) (Compensation not granted because it was not claimed); SDU Travels Pvt Ltd v Vipin Sharma AIR 2017 Del 92 (determinable).

[17] Kalyanpur Lime Works v State of Bihar AIR 1954 SC 165.

[18] P Panneerselvan v A Baylis AIR 2006 Mad 242 (Compensation not granted because it was not claimed).

[19] Kanshi Ram v Om Prakash Jawal AIR 1996 SC 2150.


Follow these links for downloading Acts.

The Specific Relief Act, 1963, before the amendment of 2018.

The Specific Relief (Amendment) Act, 2018

The Specific Relief Act, 1963, as amended in 2018

The Specific Relief Act, 1963 as amended in 2018, with changes in BW.

The Specific Relief Act, 1963 as amended in 2018, with changes in colour.

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