Compensation With or Instead of Specific Performance

In one line

Four sections about money in a specific performance suit: when the court may add compensation, what else may be asked for in the same suit, why a penalty clause is no answer, and the trap that closes the door on a second suit.

In the words a student can write in an exam: section 21 of the Specific Relief Act 1963 allows a plaintiff in a suit for specific performance to claim compensation in addition to performance, and empowers the court to award compensation where it decides that performance ought not to be granted, or where performance is granted but is not sufficient to satisfy the justice of the case, guided by section 73 of the Indian Contract Act 1872, and only if the compensation has been claimed in the plaint. Section 22 allows possession, partition and separate possession, and other reliefs including refund of earnest money, to be asked for in the same suit, again only if specifically claimed. Section 23 provides that a sum named for breach is no bar to specific performance where it was named only to secure performance. Section 24 provides that the dismissal of a suit for specific performance bars a later suit for compensation for the breach.

Section 21: compensation in addition to performance

The 2018 change, first

Section 11 of the Specific Relief (Amendment) Act 2018 substituted, in sub-section (1), the words "in addition to" for the words ", either in addition to, or in substitution of,", with effect from 1 October 2018.

The effect is real. A plaintiff can no longer frame a suit for specific performance and ask, in the alternative, for compensation in substitution of it. He may ask for compensation in addition to performance. That fits the rest of the 2018 scheme: performance is the remedy, and money is an add on rather than an alternative the plaintiff may elect.

Sub-sections (2) and (3) are untouched, so the court may still award compensation where it decides performance ought not to be granted. The change is to what the plaintiff may ask for, not to what the court may do.

The provision

"(1) In a suit for specific performance of a contract, the plaintiff may also claim compensation for its breach in addition to such performance.

(2) 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.

(3) If, in any such suit, the court decides that specific performance ought to be granted, but that it is not sufficient to satisfy the justice of the case, and that some compensation for breach of the contract should also be made to the plaintiff, it shall award him such compensation accordingly.

(4) In determining the amount of any compensation awarded under this section, the court shall be guided by the principles specified in section 73 of the Indian Contract Act, 1872.

(5) No compensation shall be awarded under this section unless the plaintiff has claimed such compensation in his plaint:

Provided that where the plaintiff has not claimed any such compensation in the plaint, the court shall, at any stage of the proceeding, allow him to amend the plaint on such terms as may be just, for including a claim for such compensation.

Explanation. The circumstance that the contract has become incapable of specific performance does not preclude the court from exercising the jurisdiction conferred by this section."