'Granting of specific performance of a contract is discretionary remedy.' Discuss the rationale and defenses to such actions.

The Rationale: Why Discretion?

An Equitable Heritage

Specific performance did not originate in the common law courts of England. It was the creation of the Court of Chancery — a court of conscience — which intervened where the strict rule of common law, satisfied by an award of monetary damages, left the injured party without a truly adequate remedy. Because it was an equitable relief, it carried with it an equitable condition: the court would grant it only when it was just and equitable to do so. This heritage passed into Indian law through the Specific Relief Act, first of 1877 and then of 1963.

The unamended Section 20(1) gave statutory expression to this principle with great clarity: "The jurisdiction 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." The provision thus walked a careful line — it was neither mechanical enforcement, nor unchecked judicial whim.

The Supreme Court, in K. Prakash v. B.R. Sampath Kumar, (2015) 1 SCC 597, reminded us of the words spoken by the King's Bench as far back as 1598 in Rooke's Case, 77 ER 209 — that discretion "follows the law implicitly, in others allays the rigour of it, but in no case does it contradict it or overturn the grounds or principles thereof." Specific performance could be refused even where the contract was perfectly valid and binding at law, because the court refused to become an instrument of oppression.

The Underlying Policy Consideration

The deeper justification for discretion lay in the nature of the relief itself. Unlike damages, which allow a breaching party to pay the market value of his default and walk away, specific performance compels a person to do a specific act — to execute a sale deed, to hand over possession, to fulfil a promise. When the circumstances surrounding the making of the contract are tainted by inequality, surprise, or oppressive terms, forcing that act upon the defendant might cause an injustice greater than the original breach. The Supreme Court therefore held in Mademsetty Satyanarayana v. G. Yellogi Rao, AIR 1965 SC 1405, that in exercising discretion, the court must take into account the circumstances of the case, the conduct of the parties, and their respective interests under the contract — looking at the transaction in its entirety, not merely at the legal validity of the agreement.

The Grounds for Withholding Specific Performance

Unfair Advantage to the Plaintiff: Section 20(2)(a)

The first and most frequently invoked ground for withholding discretion was where the terms of the contract, or the conduct of the parties at the time of entering into the contract, or the surrounding circumstances were such that, though the contract was not voidable, they gave the plaintiff an unfair advantage over the defendant. This was a deliberately wide ground — it extended beyond fraud and misrepresentation to cover situations where the plaintiff had superior knowledge, or exploited the defendant's weak bargaining position, poverty, illiteracy, or distress, even without committing any legal wrong.

The term "unfair advantage" was explained with precision in Rangasami Gounder v. Periamuthu Gounder, 1977 1 Mad LJ 231, where the court observed that it refers to a situation where the court concludes that the affected party could have been tricked and that there was a designed approach by the plaintiff to victimise him. In AC Arulappan v. Ahalya Naik, (2001) 6 SCC 600, the Supreme Court refused specific performance where within a short period of the termination of the first agreement, the plaintiff pressed the defendant — who was under financial pressure — into executing a second agreement on terms heavily loaded in the plaintiff's favour. When a vendor agrees to sell property at far below the prevailing market price under financial distress and the plaintiff knew of this vulnerability, the court — as held in Shib Kumar Banerjee v. Rasal Bux, AIR 1959 Cal 302 — would refuse to become the handmaiden of that exploitation by decreeing specific performance.

However, the legislature and courts were careful to prevent this ground from becoming a general escape route from improvident bargains. Explanation 1 to Section 20 firmly stated that mere inadequacy of consideration, or the mere fact that the contract is onerous to the defendant or improvident in its nature, shall not by itself constitute unfair advantage. As the Supreme Court repeatedly confirmed — in Gobind Ram v. Gian Chand, (2000) 7 SCC 548 — a vendor who tries to wriggle out of his contract simply because of escalation in real estate prices cannot invoke the shield of unfair advantage; the court must decree specific performance.

Hardship on the Defendant: Section 20(2)(b)

The second ground was hardship — where the performance of the contract would impose upon the defendant a hardship that he did not foresee at the time of contracting, and the non-performance would involve no corresponding hardship on the plaintiff. Equity will not force a person to perform a contract when doing so would be oppressive in circumstances he never anticipated. As Fry's celebrated treatise on Specific Performance states, and was approved by Indian courts, the court will not enforce a contract where the result would be to impose great hardship even though the party seeking enforcement may be free from the least impropriety of conduct.

Explanation 2 to Section 20 provides an important clarification: the question of hardship must generally be determined with reference to the circumstances existing at the time of the contract — not by looking at subsequent events, unless those subsequent events were caused by the plaintiff's own conduct. This explains why a mere rise in the price of land during the pendency of litigation is, as a rule, not a hardship within Section 20(2)(b). The Supreme Court in PS Ranakrishna Reddy v. MK Bhagyalakshmi, (2007) 10 SCC 231, reaffirmed that rise in prices is a normal change of circumstances, and the purchaser cannot be penalised for delays not of his making. However, where litigation had been pending for 27 years and prices of urban property had steeply escalated, the court in Nanjappan v. Ramasamy, (2015) 4 SCC 341, refused specific performance on the ground that the grant would give the plaintiff an unfair advantage and cause unforeseeable hardship to the defendant.

The hardship must be such that the defendant could not reasonably have foreseen it when he entered into the contract. A hardship that the defendant brought upon himself — such as a subsequent purchaser with notice of the earlier agreement who constructs a building on the property — cannot shield him from specific performance, as held in Damacharla v. Damacharla, AIR 1974 AP 193. In K. Narendra v. Riviera Apartments Pvt. Ltd., AIR 1999 SC 2309, the Supreme Court refused specific performance where the Urban Land Ceiling and Regulation Act, 1976 had come into force after the agreement was made, restricting the permissible construction area and imposing unforeseen conditions on the contracting party — a classic instance of unforeseeable supervening hardship.

Inequitable Circumstances: Section 20(2)(c)

Section 20(2)(c) was a residuary clause — it caught all those cases where, even if the contract was not voidable and even if no specific unfair advantage or hardship could be identified, enforcement would still be inequitable given the overall circumstances in which the defendant entered into the contract. Courts have applied this clause to cases of intoxication falling short of incapacity, intimidation falling short of duress, mental weakness not amounting to legal incapacity, senility, distress, and similar circumstances inconsistent with truly intelligent consent. In Jai Narain Parasrampuria v. Pushpa Devi Saraf, (2006) 7 SCC 756, both parties were found guilty of serious misconduct, suppression of material facts, and abuse of judicial process — in those circumstances, the court refused specific performance to either side and directed compensation instead.

Personal Defences: Section 16

Apart from the discretionary grounds, the Specific Relief Act also creates absolute, non-discretionary bars to the plaintiff's claim under Section 16. These are not grounds upon which the court may refuse — they are grounds on which the court must refuse. Section 16(b) disentitles a plaintiff who has himself become incapable of performing an essential term, or who has violated such a term, or who has acted in fraud of the contract. The most important bar is Section 16(c): the plaintiff must prove that he has performed or has always been ready and willing to perform his part of the contract. The failure to plead and prove readiness and willingness is an absolute statutory bar

Specific Defences Available to a Defendant

Beyond the grounds under Section 20, defendants in a suit for specific performance have available to them a range of equitable and statutory defences:

• Laches and delay: Though in India, unlike England, mere delay within the period of limitation does not ordinarily defeat a suit for specific performance, delay coupled with prejudice to the defendant, supervening circumstances that have altered the situation, or rights created in third parties, can be sufficient grounds to refuse the relief — as laid down in K.S. Vidyanadam v. Vairavan, (1997) 3 SCC 1.

• Fraud and misrepresentation: A contract obtained by fraud is not only voidable at the instance of the defendant, but offers him a complete defence to a suit for specific performance. Even an innocent misrepresentation of a less serious nature than that required to rescind the contract may suffice to resist specific performance under Section 20(2)(c).

• Material alteration of the agreement: Where the plaintiff has made a material alteration in the written agreement — such as mutilating a term making time of the essence, or inserting a clause for possession subsequent to execution — he comes before the court with unclean hands and cannot claim the equitable relief of specific performance. In Ram Khilona v. Sardar, (2002) 6 SCC 375, interference with an original agreement by substituting witnesses was held to justify denial.

• Clean hands doctrine: Since specific performance is an equitable remedy, the plaintiff must come to court with clean hands. Where the plaintiff has suppressed material facts, made false allegations, or adopted inconsistent positions in pleadings and evidence, the court will decline to exercise its equitable jurisdiction in his favour — as reaffirmed in Lourdu Mari David v. Lourdu Chinnaya Arogiaswamy, (1996) 5 SCC 589.

• Absence of a concluded or certain contract: Where the agreement suffers from uncertainty as to material terms, or where there is conflict between pleadings and evidence as to the very existence of the contract, the court cannot grant the relief.

Injury to third parties: Specific performance may be refused where enforcing the contract would cause injury to the rights of an innocent third party — such as an attaching decree-holder or a person holding a valid prohibitory order over the property.


The 2018 Transformation

The Specific Relief (Amendment) Act, 2018 radically departed from this entire framework. With effect from 1 October 2018, Section 20 was substituted entirely. The new Section 20 does not speak of discretion at all — it introduces the entirely new concept of substituted performance, which allows the injured party to have the contract performed through a third party or by his own agency and recover the costs from the breaching party. If substituted performance is availed of, the right to claim specific performance is extinguished.

As the Statement of Objects and Reasons of the 2018 Amendment Act candidly acknowledged, wide discretionary powers had led courts in the majority of cases to award damages as a general rule and grant specific performance as an exception — exactly the reverse of what equity had originally intended. The amendment was aimed at reversing this trend in the context of India's expanding infrastructure and commercial sectors. Today, under the amended Act, specific performance is a rule, not an exception, and if the requirements of Sections 11(2), 14 and 16 are satisfied, the court is bound to decree it. The defences of unfair advantage, hardship, and general inequity that had been embodied in the unamended Section 20(2) no longer operate as independent bars — though the absolute bars of Section 16 continue in full force.

The question of whether the 2018 Amendment applies to suits filed before its commencement remains unsettled. The Allahabad High Court in Mukesh Singh v. Saurabh Chaudhury, 2019, held the amendment to be prospective, whereas the Calcutta High Court in Church of North India v. Rt. Reverend Ashoke Biswas, 2019, applied the amended provisions to pending suits on the ground that the Act is triggered at the time of the decree, not filing. The Supreme Court in Sughar Singh v. Hari Singh, 2021 SCC OnLine SC 975, did not settle the question finally but noted that the amended provisions can serve as guidance in the exercise of even unamended discretionary jurisdiction.