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Section 23: Liquidation of damages not a bar to specific performance

Specific Relief Act • Official Statutory Text & Practice Guide

Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 1963
Section 22 All 44 Sections of Specific Relief Act Section 24

Legal Commentary & Landmark Judgments: Section 23

Section 23 of the Specific Relief Act, 1963 clarifies that the naming of a specified sum as liquidated damages or penalty in the contract in case of breach is not a bar to a decree for specific performance.

  • Liquidated Damages Clause No Bar: A contract, otherwise proper to be specifically enforced, may be so enforced, though a sum be named in it as the amount to be paid in case of its breach, and the party in default is willing to pay the same.
  • Ascertaining True Intention: If the Court, having regard to the terms of the contract and other attending circumstances, is satisfied that the sum was named only for the purpose of securing performance of the contract and not for giving the party an option of paying money in lieu of performance.
  • No Double Recovery: When decreeing specific performance, the Court shall not also decree payment of the sum so named to the plaintiff, except as compensation under Section 21.
Key Landmark Precedents:
  • P. D'Souza v. Shondrilo Kakkab, (2004) 6 SCC 649: The Supreme Court authoritatively settled that the incorporation of a liquidated damages clause or forfeiture clause does not take away the right to specific performance under Section 23, unless the contract unambiguously provides that paying money terminates the contract.
  • Man Kaur v. Hartar Singh Sangha, (2010) 10 SCC 512: Reaffirmed that naming a penal sum is presumed to secure performance rather than confer an option to walk away by paying damages.
Courtroom Practice & Strategic Litigation Guidance:

When defending against a defaulting seller who argues 'I will pay double the earnest money as liquidated damages under clause 10, so specific performance cannot be claimed', cite Section 23 and P. D'Souza to demonstrate that liquidated clauses do not extinguish specific performance.

Section 22 All 44 Sections of Specific Relief Act Section 24