Ghost Provisions: Who Will Exorcise Them Out?

There are some provisions in our statutes that have absolutely no reason for them to be there or for them to be drafted the way they are. This post terms such provisions as “ghost provisions”.

The term “ghost provisions” has been used somewhat extensively. For instance, it has previously been used by the US Congress as an alternative to the now scary term “sleeper” (as in “sleeper cells”) and for provisions which are not noticed (or believed to exist) but which will return to haunt if they are adopted without the full knowledge of their implications. Also see, this post, which talks about a “ghost” provision in Nigerian penal law. Note that the term “ghost provision” is also used to denote provisions that have been in existence for a long time without deletion but are mere “relics”. This post is not about such dead provisions which may not have any implications.

Despite several readings, ghost provisions do not “reveal” why they exist or why they have been drafted a certain way. Given the notorious lack of transparency in disclosure of the materials that lead to the drafting to a Bill, there could be no mechanism to examine why such provisions have been drafted. Imagination then runs riot and you see in the dark a snake for a rope.

This post is about two such provisions from the recent amendments discussed in the Monsoon session of the Parliament.  The first one is contained in the Arbitration and Conciliation (Amendment) Bill, 2018. Although it is less of a “ghost” than the second one in the Specific Relief (Amendment) Act, 2018, it is as scary as the Omen (link for the uninitiated).

The Arbitration and Conciliation (Amendment) Bill, 2018 proposes to introduce an Arbitration Council of India whose function would be to promote arbitration and ADR and to accredit arbitrators. Section 43G proposed to be introduced in the Act speaks of accreditation of arbitrators having the qualifications specified in Schedule 8 proposed to be added to the Act. Schedule 8 lays down the possible eligibility criteria to be appointed as arbitrator. This provision liberalizes the experience criteria (from 15 to 10 years), perhaps, to create a larger pool of arbitrators from which parties could choose to appoint arbitrators. This is a welcome move.

However, if one pays close attention to item (iii) of the Qualifications and Experience of Arbitrator, one may notice that it does not provide any experience requirement for an officer of the Indian Legal Service. There is no reason why an officer of the Indian Legal Service, despite his or her eminence, should be more qualified than, say, an advocate having ten years of practice experience to act as an arbitrator [See item (i) of the Eighth Schedule]. Without the availability of any materials considered by the drafters or the Government to come to such a conclusion, there can be no prudent reason why item (iii) of Schedule 8 has been drafted the way it is, that is. Hence, it is a “ghost provision”.

The second ghost provision is Section 14 the Specific Relief (Amendment) Act, 2018. The Amendment was introduced to give the power back to the victim of the breach, which has for more than half a century, been denied of its legitimate powers to terminate the contract and obtain damages. An expert committee was constituted, which gave detailed recommendations and the Bill was enacted pursuant to the Expert Committee’s recommendations. The expert committee recommended that specific performance be made a default remedy instead of being granted only in exceptional cases, including cases where it was possible for the victim to obtain substituted performance.

Shockingly, the Bill was introduced in the Lok Sabha by deleting the possibility requirement. The new Section 14(a) states “14. The following contracts cannot be specifically enforced, namely:— (a) where a party to the contract has obtained substituted performance of contract in accordance with the provisions of section 20;:” In other words, it is upon the discretion of the victim of the breach to get the contract executed through someone else at the breaching party’s risk and cost. The victim may choose to compel the breaching party to perform the contract. For instance, the contractor or the vendor may have no cash left with him to perform the contract and even then the court ought to grant specific performance if the victim wants to.

Let us look at a tear-jerker, posted elsewhere, and paraphrased here:

There is a village Sitapur where Ramu, a mango retailer, promises to deliver 100 kg of mangoes to Gowri for Rs. 1000 (Rs. 10/ kg) on a particular date. Ramu thinks he will invest Rs. 800 that he has with him for buying mangoes from the wholesale market, sell it to Gowri, and get Rs. 200 as profit (at Rs. 2/kg). On the date when he is supposed to go to the wholesale market, his child falls sick and is admitted in the hospital. Ramu expects that he will have to spend about Rs. 700 for the hospital. So he tells Gowri that he will not be able to perform the contract. Gowri is angry at Ramu and shouts at Ramu that he is no man as he cannot even keep his promise! So she threatens to teach Ramu a lesson. Gowri enquires with another retailer Shyamu who agrees to sell the mangoes at Rs. 1100 (at Rs. 11/ kg). Still angry at Ramu, she complains to the village Panchayat. The elders of the Panchayat summon both Ramu and Gowri and a sitting is held on a sunny Sunday. Ramu, whose daughter’s surgery is scheduled held the next day attends the sitting. After hearing both the parties, the Panchayat says that even the Parliament of India in its infinite wisdom has amended the Specific Relief Act, 1963 to give the option to the victim of breach to decide on whether the victim wants specific performance or damages. So the elders ask Gowri what she wants. Gowri says she wants specific performance. Ramu’s implores with Gowri to forgive him and his cries that unless he pays up Rs. 700 to the hospital, his daughter will not be operated on and might die fails to move Gowri. Suddenly Shyamu jumps up and says he’ll provide a solution. He says that if Gowri buys Shyamu’s mangoes at Rs. 11/ kg and if Ramu pays to Gowri that Rs. 1/ kg extra that Gowri has to shell out to Shyamu, Gowri will get the mangoes, Shyamu will make a profit (at Rs. 3/kg) and Ramu will have to shell out Rs. 1/ kg (Rs. 100), which he will be able to do even after paying up for his daughter’s surgery. Shyamu says if the solution he proposed is adopted, Shyamu, Gowri and Ramu will all get what they want. What should the Panchayat do? 

Notice how unjust it is for the victim of the breach to be asked to perform the contract. As opposed to the Committee’s recommendations, the Act goes a long way in providing absolute discretion to the victim to compel the breaching party to perform, irrespective of whether specific performance was possible for the victim. None of the international instruments on contract law contain such a provision. Readers may have a look at this post for a detailed discussion on the subject.

If the Expert Committee did not recommend such a draconian provision, who did and why? There are no materials available in the public domain as to why the drafters or the Government chose to draft the provision in this manner. Imagination, as this post stated before, runs riot if one takes into consideration that the report of the Expert Committee was not made public for a relatively long time. This provision has the potential to haunt us in the power play that is litigation in India. Specific performance is a powerful remedy. When exercised on parties with weaker bargaining power, it can have enormous unintended and adverse consequences.

A perusal of the discussions in both houses of the Parliament revealed no objections by the legislators to these “ghost provisions”. Who will exorcise them out?

Badrinath Srinivasan graduated from SDM Law College, Mangalore University and completed his masters from NUJS. He currently serves as Senior Executive (Law) at Bharat Heavy Electricals Limited.

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