Parliament passes Bill seeking damages for breach of contract

New Delhi: Parliament on Monday passed a bill proposing to grant a party the right to seek damages from the other side in case of a breach of a business contract and to reduce discretion of courts in such matters.

The Specific Relief (Amendment) Bill, 2018, which was passed in the Lok Sabha in March, was cleared in the Upper House by a voice vote on Monday afternoon.

The bill aims to tweak a 54-year-old law that deals with specific fulfilment of a contract, as part of the government's ease of doing business policy.

Responding to queries by some members, Law Minister Ravi Shankar Prasad said: "Today the world has changed, India has changed. When the bill was enacted, refusal of injuction was the norm. Even if a contractor runs away, you could not do anything. You could take only damage."

Now, such a stringent provision of law is creating problem for the Centre, the state governments and private parties, he said, adding "it was not in sync with modern needs."

The bill aims at the exact fulfilment of an obligation or specific performance of the contract rather than grant of a general relief or damages or compensation. The Specific Relief Act has not been amended since its inception.

Oberving that there was more FDI flowing in the infrastructure sector and public private partnership (PPP) model had become a norm, the Minister asked "should this 1963 law be a roadblock in the process?"

"This bill is an agent to recognise the changing needs of India in infrastructure, railway , education, healthcare, cold chains," he said and added that the amendments to the law have been proposed after consulting state governments.

"We had consulted the state governments and they have come on board. The notification, which we will issue, will also be applicable to the state governments," he added.

The law has been made tough, Prasad said, adding this was because "we are trying to make in India the execution of contracts more sobre and more responsible."

A provision for special courts has also been made as "infrastructure is important then faster adjudication of disputes becomes a pre-condition."

A key feature of the Bill is that no injunction shall be granted by a court in a suit under the Act involving a contract relating to an infrastructure project where granting an injunction would lead to a delay or impediment in the completion of the project.