It is prevalent in the industry when an employee joins an organization to sign employment contract. Such employment contract generally contains all terms of employment including work hours, duration; whether permanent, temporary, or contractual; the perquisites and benefits, leaves and holidays, condition of service, duties and responsibilities, etc. Can such an employment contract be specifically enforced is what is discussed below.
The word “specifically enforced” means whether an aggrieved party can approach the court of law seeking an injunction order against the other asking the other party to perform the terms of the contract.
The law relating to such specific reliefs (relief in the form of injunction both mandatory and preventive) is contained in the Specific Relief Act of 1963. The relevant section of this enactment addressing or answering to the above question is Section 14. The same is reproduced below.
Contracts not specifically enforceable.
14. Contracts not specifically enforceable.-(1) The following contracts cannot be specifically enforced, namely:–
(a) a contract for the non-performance of which compensation in money is an adequate relief;
(b) a contract which runs into such minute or numerous details or which is so dependent on the personal qualifications or volition of the parties, or otherwise from its nature is such, that the court cannot enforce specific performance of its material terms;
(c) a contract which is in its nature determinable;
(d) a contract the performance of which involves the performance of a continuous duty which the court cannot supervise.
(2) Save as provided by the Arbitration Act, 1940 (10 of 1940), no contract to refer present or future differences to arbitration shall be specifically enforced; but if any person who has made such a contract (other than an arbitration agreement to which the provisions of the said Act apply) and has refused to perform it, sues in respect of any subject which he has contracted to refer, the existence of such contract shall bar the suit.
(3) Notwithstanding anything contained in clause (a) or clause (c) or clause (d) of sub-section (1), the court may enforce specific performance in the following cases:-
(a) where the suit is for the enforcement of a contract,-
(i) to execute a mortgage or furnish any other security for security for securing the repayment of any loan which the borrower is not willing to repay at once:
Provided that where only a part of the loan has been advanced the lender is willing to advance the remaining part of the loan in terms of the contract; or
(ii) to take up and pay for any debentures of a company;
(b) where the suit is for,-
(i) the execution of a formal deed of partnership, the parties having commenced to carry on the business of the partnership; or
(ii) the purchase of a share of a partner in a firm,
(c) where the suit is for the enforcement of a contract for the construction of any building or the execution of any other work on land:
Provided that the following conditions are fulfilled, namely:-
(i) the building or other work is described in the contract in terms sufficiently precise to enable the court to determine the exact nature of the building or work;
(ii) the plaintiff has a substantial interest in the performance of the contract and the interest is of such a nature that compensation in money for non-performance of the contract is not an adequate relief; and
(iii) the defendant has, in pursuance of the contract, obtained possession of the whole or any part of the land on which the building is to be constructed or other work is to be executed.
The Supreme Court of India in “Nandganj Sihori Sugar Company Limited, Rae Bareli & Another Versus Badri Nath Dixit & Others, 1991 AIR(SC) 1525” has explained this legal provision succinctly. In the said case, the question that was addressed was “whether a suit for mandatory injunction can be allowed in relation to a contract of employment against the company asking the company to retain him as an employee.” Justice Thommen T.K. delivering the judgment beautifully summarized the legal provision. The court held that
“A contract of employment cannot ordinarily be enforced by or against an employer. The remedy is to sue for damages. The grant of specific performance is purely discretionary and must be refused when not warranted by the ends of justice. In the absence of any statutory requirement, courts do not ordinarily force an employer to recruit or retain service of employment required by an employer. There are of course certain exceptions to this rule such as i) In the case of a public servant dismissed for service in contravention of Article 311. ii) reinstatement of a dismissed worker under the Industrial Law; and (iii) a statutory body acting in breach of statutory obligations.”
The above judgment is in tune to the internationally accepted concept. Halsbury’s Laws of England, Fourth Edn., Volume 44, paragraphs 405 to 420, was quoted in the judgment. The relevant portions of the quoted reference is as below.
“Courts do not ordinarily enforce performance of contracts of a personal character, such as a contract of employment. Subject to certain well defined categories of exceptions, law does not permit, and the Specific Relief Act does not contemplate, the enforcement of a contract of a personal nature by a decree for specific performance.”
The above judgment clarifies the legal recourse in cases of dispute between an employer and employee for the alleged or threatened breach of contract between employer and employee. Nobody can be forced to work. Nobody can be asked to retain a person as employee. If one of the parties wanted to get out of the contractual relationship, the only remedy available to the aggrieved party is to sue for damages. The rule narrated above is equally applicable in relation to all contracts of personal nature.
Forgetting this fundamental legal concept, there are thousands of pending litigations in various Indian courts seeking specific relief of mandatory injunction based on employment contracts. Can our justice administration collectively address to the cases and dispose of the same expeditiously in the interest of justice?
By: Rajesh Vellakkat & Indran MB