Agreement to Advance Loan: Validity & Enforceability After the 2018 Specific Relief Amendment

 The core questions

• Is an agreement to advance a loan a valid contract under Indian law?

• After the 2018 amendment to the Specific Relief Act, are courts bound to specifically enforce such an agreement?

Validity: When does a “promise to lend” become a contract?

Under the Indian Contract Act, 1872, an agreement becomes a contract only if it is enforceable by law and satisfies essentials such as lawful offer and acceptance, lawful consideration, free consent, competent parties, and a lawful object, among others. Practically, a loan agreement that meets these elements (e.g., consideration in the form of money to be advanced against a borrower’s promise to repay with agreed terms) is a valid contract; mere intent to negotiate or an incomplete understanding will not suffice.

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How specific relief amendment Act 2018 has eliminated inadequacy test?

The Specific Relief Act, 1963, required the aggrieved party to satisfy the inadequacy test before granting specific relief. The test was applied to suits for specific performance of contracts and to injunctions for enforcing obligations arising from contracts. The inadequacy test made specific performance an exceptional remedy, as it was granted only when compensation under common law was either not ascertainable or inadequate, and when it was possible for the court to make its decree enforceable.

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Supreme Court: Civil court should refuse to grant an injunction if it would delay completion of infrastructure project

Further, Section 41(f) of the 1963 Act clearly mandates that

an injunction cannot be granted to prevent, on the ground of

nuisance, an act of which it is not reasonably clear that it will be

a nuisance. Similarly, the respondent No. 20 (State of

Maharashtra) is right in contending that the plaintiffs would have

equally efficacious relief by resorting to other mode of

proceedings. To wit, when the proposal regarding setting up of

the Project is being finalised and permissions are granted by the

competent authority under the concerned statutory dispensation,

at that time, the affected parties would be free to make

representation which can be considered by the competent

authority appropriately. Hence, the civil Court ought not to have

granted injunction simpliciter also because of the stipulation in

Section 41(h) of the 1963 Act, wherein it is made amply clear that

when equally efficacious relief can certainly be obtained by any

other usual mode of proceeding except in case of breach of trust,

an injunction cannot be granted. The scheme of Section 41 of

the 1963 Act predicates that the civil Court must refuse to grant

injunction in the situations referred to therein vide clauses (a) to

(j). The recent amendment to that provision by Act 18 of 2018

has inserted clause (ha), for making it explicitly clear that the

civil Court must refuse to grant injunction if it would impede or

delay the progress of completion of any infrastructure project,

such as the present one. Indeed, this amended provision does

not apply to the present case. However, the Court could not have

answered the matter in issue on the basis of assumptions and

conjectures, much less unsubstantiated claim of the plaintiffs.

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 2412/2020

Ratnagiri Nagar Parishad  Vs Gangaram Narayan Ambekar

A.M. Khanwilkar, J.

Dated:May 6, 2020.

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Whether S 14 of specific relief Act as amended in the year 2018 applies to pending suit?

 Taking up for consideration the third question involved in the present case, the 2018 Amendment to the Specific Relief Act, 1963 came into force from October 1, 2018. The suit was undoubtedly filed prior to the commencement of operation of the Amendment Act. However, a question arises as to the relevant date for ascertaining the applicability of the amendment - the date of filing of the suit or the date of passing of the decree. In the event the date of filing of the suit was the relevant date, the 2018 Amendment would not be applicable to the present case.

99. However, the language of Section 14 of the 1963 Act indicates that the relevant date would be the date of passing of the decree, since Section 14(1) commences with the phrase, "The following contracts cannot be specifically enforced ....."

100. The question of enforcement comes only on the date of passing of the decree and not the institution of the suit. If the date of filing of the suit was the relevant date, the language of Section 14(1) would be something akin to: "no suit can be filed for specific performance of the following contracts ...."

101. Hence, the relevant date is the date of passing of the decree. As such, the 2018 Amendment becomes applicable to the present lis, since the amendment came into force during pendency of the suit.

102. Hence, the 2018 Amendment to the 1963 Act is applicable to the present case and the third issue is decided in the affirmative.

IN THE HIGH COURT OF CALCUTTA

C.O. No. 863 of 2019

Decided On: 17.04.2019

 Church of North India  Vs.  Ashoke Biswas

Hon'ble Judges/Coram:

Sabyasachi Bhattacharyya, J.

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Whether the court can decide the pending appeal as per S 20 of specific relief Act amended in the year 2018?

Turning to the facts of the present case, I find that the Principal Act 1963 has been extensively amended by the Specific Relief (Amendment) Act 2018, without any saving clause Sections 10, 14, and 20 of the Principal Act have been repealed and substituted by new Sections 14, 14A, 20, 20A, 20B and 20C as under:

AMENDED SPECIFIC RELIEF ACT 

https://www.lawweb.in/2018/05/short-notes-on-specific-relief-act-part.html

36. Apart from the aforesaid substitution, the Amending Act also amended and inserted/substituted some portion in Sections 6, 15, 16, 19, 21, 25 and 41 of the Principal Act and inserted new Schedule under Section 20-A and Section 41(ha).

37. The scheme of the Act as amended by the Amendment Act 2018 (No. 18 of 2018) that the wider discretion of Courts to grant specific performance and to make specific performance of contract a General Rule than exception subject to certain limited ground has been done away. The discretionary jurisdiction to decree specific performance as provided in the old Section 20 of the Act has been omitted. After the amendment there is no provision under the present Act like the repealed provision of Section 20(1) that the "jurisdiction of Court to decree specific performance" is discretionary, and the Court is not bound to grant such relief merely because it is lawful to do so; but the discretion of the Court is not arbitrary but sound and reasonable guided by judicial principles and capable of correction by a Court of appeal. Similarly, after the amendment there is no provision similar to the repealed provision of sub-section 2 of Section 20 providing for cases in which Court may exercise discretion not to decree specific performance. Thus, the amending Act clearly expressed a different intention than the repealed provisions of Section 20. Therefore, the provisions of Section 6 of the General Clauses Act would not be attracted. After amendment, the jurisdiction of the Court is not discretionary to decree specific performance. Consequently, the repealed provisions of Section 20 of the Act would not be available for decision in the present appeal. Question Nos. 3 and 4 are answered accordingly. The benefit of repealed Section 20 of the Act is not available to the defendant-appellant.

IN THE HIGH COURT OF ALLAHABAD

First Appeal No. 594 of 2018

Decided On: 03.05.2019

 Mukesh Singh  Vs. Saurabh Chaudhary and Ors.

Hon'ble Judges/Coram:

Surya Prakash Kesarwani, J.

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Whether the plaintiff must plead readiness and willingness to perform contract even after specific relief amendment Act 2018?

 Section 16 of the Specific Relief Act, 1963 as amended with effect from 2018 provides that specific performance of a contract cannot be enforced in favour of a person who fails to prove that he has performed or has always been ready and willing to perform the essential term of the contract which was to be performed by him. Even though the words "who fails to aver." have been deleted from Section 16 vide the amendment of the year 2018 but I have in judgment dated 20th December, 2019 in CS(COMM.) No. 634/2019 titled Jasbir Singh Vs. Phoenix Arc Pvt. Ltd., held that since evidence can be led only on what is pleaded (as held in Transformative Learning Solutions Pvt. Ltd. Vs. Pawajot Kaur Baweja MANU/DE/2272/2019 and India Yamaha Motor Pvt. ltd. Vs. Seema Bhatia MANU/DE/2625/2019) and cannot be led on what is not pleaded, a plaintiff in a suit for specific performance, must plead facts to show performance by him of his part of the agreement and his readiness and willingness to perform the essential terms of the agreement, even if not expressly so, as was the law prior to the amendment.

IN THE HIGH COURT OF DELHI

CS (OS) 623/2019 and IA No. 16791/2019 (u/O XXXIX R-1&2 CPC)

Decided On: 17.01.2020

 Rajinder Prasad Aggarwal  Vs.  Anil Kumar Narang

Hon'ble Judges/Coram:

Rajiv Sahai Endlaw, J.

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THE SPECIFIC RELIEF (AMENDMENT) ACT, 2018 brought into effect

http://www.egazette.nic.in/WriteReadData/2018/187919.pdf

http://www.mondaq.com/india/x/728614/Contract+Law/Specific+Relief+Amendment+Act+2018

The Central Government as on 19-09-2018, vide S.O. 4888(E), in exercise of powers conferred  by Section 1(2) of the Specific Relief (Amendment) Act, 2018 (18 of 2018), has appointed 01-10-2018 as the date on which the provisions of the said Act shall come into force.

Ministry of Law and Justice

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