Recently, the Union Cabinet approved amendments to the Specific Relief Act, 1963, and a Bill viz. The Specific Relief [amendment] Bill, 2017 was introduced in the parliament on December 22, 2017. It deals with specific fulfillment of a contract as part of the Government’s ease of doing business policy.
The amendments proposes that after two parties enter into an agreement and one of them breaks the contract, the affected party will have the freedom to get the contract executed by a third party. Also, the affected party can get costs and other expenses recovered from the party which broke the agreement [under the existing law, the courts grant monetary compensation in exceptional circumstances].
In case, the contract relates to infrastructure projects, the court would grant injunction after satisfying itself that it would not cause any impediment or delay in the progress or completion of the project. The bar on injunction could apply even at the stage of tendering process. The courts would be barred from issuing interim stays.
The sectors covered under the amendments are: roads, bridges, airports, urban development and railways, tunnel, viaducts, terminal infrastructure including stations and adjoining commercial infrastructure, oil pipelines, gas pipelines, water supply, electricity, sewerage treatment, storm water drainage system, construction of public buildings, highways, ports, telecommunication towers, education institutions, hospitals, cold chain, affordable housing [including a house project using at least 50 percent of the floor area ratio for dwelling units], tourism infrastructure including three star hotels, ropeways, cable cars and schools.
It goes to the credit of prime minister, Modi that from the day he assumed office, he has been relentlessly making efforts to remove all bottlenecks in the implementation of projects. These were driven by an overarching logic that if development has to be put on to a high growth trajectory and this has to happen within shortest possible time frame [given the high level of aspiration especially among the millions of unemployed youth], the project approval and their execution must be accelerated.
This government has done a great job in removing executive bottlenecks by bringing about ‘stability’ and ‘certainty’ of policy environment, ‘transparency’ and ‘promptness’ in decision making, streamlining procedures, empowering bureaucracy, delegating powers to states, and use of information technology in all matters pertaining to grant of approval and delivery of public services. It is also doing a yeoman’s job in removing legislative bottlenecks by dismantling archaic laws and passing new ones [or amending existing laws].
Yet, it faces a major constraint from the judiciary. The contractors, competitors [especially those who fail to get contract], non-government organizations [NGOs], self-appointed protectors of the environment, investors etc are prone to challenging projects in courts. The first thing the courts do is to grant an injunction pushing the project in to a state of uncertainty. By the time the case is decided, there is a manifold cost escalation.
In majority of the cases, implementation of projects gets delayed by several years – in some even decades. For instance, the work on Western Peripheral Expressway was started in 2007 and is expected to be commissioned by March 31, 2018. The resultant steep increase in the cost has huge ramifications for all stakeholders.
During the interregnum, the consumers/users suffer due to non-availability of services a project provides and when it is available, they are made to pay high tariff. For instance, in case of an expressway, they have to pay high toll tax as the high investment cost due to delay in completion has to be amortized [repayment of loan amount plus interest and depreciation]. Likewise, delay in commissioning of a power project or gas pipeline will have a cascading effect on the electricity tariff/transportation charges.
Many of our industries and service establishments face a competitive disadvantage – both in export and domestic markets – overwhelmingly because the cost of power, transport, fuel, port charges, toll tax, rail freight and a host of other services are high. The resulting decline in export and increase in import bill leads to high current account deficit and fiscal deficit [read: high borrowings] which pushes the entire economy into a vicious cycle of inflation.
The infrastructure projects are particularly crucial in view of the externalities. For instance, a rural road provides a vital link between farmers and the market place where he sells his produce. If, construction of the road gets delayed, they will be denied access constraining their ability to fetch a remunerative price. Likewise, rural industries and workers will be hamstrung for want of connectivity with cities and urban areas where they can get to sell or find jobs.
The success of Modi’s grandiose plan for inclusive development with employment generation not just in urban agglomerations but also in semi-urban and rural areas depends on establishing connectivity and creating a seamless India. This requires building roads, bridges, airports, ports, rails, pipelines etc on a gargantuan scale. Any obstruction [including due to litigation] that comes in the way could be suicidal especially in the backdrop of massive requirements of current aspirational India.
The amendment to the Specific Relief Act 1963 could not have been timed better. The focus on precise fulfillment of an obligation or specific performance of the contract [rather than grant of a general relief or damages or compensation as per the extant provisions] is of tremendous significance as it will make things really work on the ground. Further, for infrastructure projects, it will ensure that vested interests do not use judiciary as a tool to obstruct work.
However, the exact wording “the court would grant injunction after satisfying itself that it would not cause any impediment or delay ………. project” leaves lot of discretion with the court. To grant injunction or not depends entirely on the satisfaction of the court. With present wording, it may end up giving injunction even when it results in delaying completion. Accordingly, the wording needs to be modified to reflect the spirit of the intended amendment.
The government should aim at getting the bill passed in the current session itself.