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SUPREME COURT OF INDIA
R.F. NARIMAN, INDU MALHOTRA, JJ.
STATE OF BIHAR & OTHERS - APPELLANTS
Versus
BIHAR RAJYA BHUMI VIKAS BANK SAMITI – RESPONDENT
Civil Appeal No. 7314 of 2018 (Arising out of SLP (Civil) No. 4475 of 2017)
Decided On : 30-07-2018
(2005) 4 SCC 480; (2002) 6 SCC 33 – Relied upon
(2005) 6 SCC 344; (2015) 16 SCC 20; (2002) 6 SCC 635 – Referred
(b) Arbitration and Conciliation Act, 1996 – Section 34(5) and 34(6) – Section 34(5) requiring disposal of application u/s 34 within a period of one year from the date of service of notice – Section 34(6), however, not providing for any consequence of non-disposal of the application within one year – That would make the provision directory. (Para 10, 18)
(2013) 3 SCC 594 – Relied upon
(1962) 2 SCR 880 – Referred
© Administration of justice – Judicial propriety – An earlier judgment cannot be overruled sub silentio without upsetting the reasons on which it is based. (Para 17)
(d) Arbitration and Conciliation Act, 1996 – Section 34(5) – Requiring disposal of case within one year – Court not empowered to condone the delay in filing application u/s 34 – Provision aiming only at expeditious hearing – Such provisions should be held directory. (Para 20)
(2005) 4 SCC 480; (1984) 2 SCC 627 – Relied upon
(e) Arbitration and Conciliation Act, 1996 – Section 34 – Application for setting aside arbitral award – Section 34(1) requiring the application to be filed in accordance with section s 34(2) and (3) – There is no mention of section 34(5) = Held, section 34(5) not a condition precedent, but a procedural provision seeking to reduce delay in deciding applications under Section 34. (Para 23)
(f) Arbitration and Conciliation Act, 1996 – Section 34 and 29A – Section 29A mandating making of award within a time frame and consequences on failure – In contrast, section 34 does not contain any consequence for failure to adhering to the time frame – Held, section 34(5) cannot be held as mandatory. (Para 24, 25)
(g) Arbitration and Conciliation Act, 1996 – Section 34(5) – High Courts of Patna, Kerala, Himachal Pradesh, Delhi and Gauhati taking the view that Section 34(5) is mandatory in nature, based on the object sought to be achieved by the provision together with the mandatory nature of the language used in Section 34(5) – Analogies with Section 80, CPC have been drawn to reach the same result – Not proper – High Courts of Bombay and Calcutta holding the provision to be directory, largely because no consequence has been provided for breach of the time limit specified – A correct view. (Para 26)
Arbitration Petition No. 434 of 2017; Commercial Arbitration Petition No. 453 of 2017; A.P. No. 346 of 2018 – Cited with approval
L.P.A. No. 1841 of 2016; Arb. A. No. 49 of 2016; O.M.P. (M) No. 48 of 2016; O.M.P. (COMM.) 199- 200 of 2018; Arb. A. 1 of 2018 – Distinguished
(h) Arbitration and Conciliation Act, 1996 – Section 34(5) – Directions given – Every Court should stick to the time limit of one year from the date of service of notice to the opposite party – In case the Court issues notice after the period mentioned in Section 34(3) has elapsed, every Court shall endeavour to dispose of the Section 34 application within a period of one year from the date of filing of the said application. (Para 27)
Facts of the case:
The question raised in this appeal pertains to whether Section 34(5) of the Arbitration and Conciliation Act, 1996, inserted by Amending Act 3 of 2016 (w.e.f. 23rd October, 2015), is mandatory or directory.
The present appeal arises out of an arbitration proceeding which commenced on 24.05.2015. An arbitral award was made on 06.01.2016. A Section 34 petition challenging the said award was filed on 05.04.2016 before the High Court, in which notice was issued to the opposite party by the Court on 18.07.2016. Despite the coming into force of Section 34(5), the common ground between the parties is that no prior notice was issued to the other party in terms of the said Section, nor was the application under Section 34 accompanied by an affidavit that was required by the said sub-section.
A Single Judge of the High Court held that the provision contained in Section 34(5) was only directory.
A Division Bench of the High Court held that the mandatory language of Section 34(5), together with its object, made it clear that the sub-section was a condition precedent to the filing of a proper application under Section 34. The Division Bench held that since this mandatory requirement had not been complied with, and as the period of 120 days had run out, the Section 34 application itself would have to be dismissed.
Finding of the Court:
Section 34(5) is neither mandatory nor condition precedent for an application u/s 34.
Result: Appeal allowed.
JUDGMENT
R.F. Nariman, J.
Leave granted.
2. The question raised in this appeal pertains to whether Section 34(5) of the Arbitration and Conciliation Act, 1996, inserted by Amending Act 3 of 2016 (w.e.f. 23rd October, 2015), is mandatory or directory.
3. The present appeal arises out of an arbitration proceeding which commenced on 24.05.2015. An arbitral award was made on 06.01.2016. A Section 34 petition challenging the said award was filed on 05.04.2016 before the Patna High Court, in which notice was issued to the opposite party by the Court on 18.07.2016. Despite the coming into force of Section 34(5), the common ground between the parties is that no prior notice was issued to the other party in terms of the said Section, nor was the application under Section 34 accompanied by an affidavit that was required by the said sub-section.
4. A learned Single Judge of the Patna High Court, by a judgment dated 06.09.2016, held that the provision contained in Section 34(5) was only directory, following our judgment in Kailash v. Nanhku and Ors., (2005) 4 SCC 480. A Letters Patent Appeal to a Division Bench yielded the impugned order dated 28.10.2016, by which it was held, adverting to the Law Commission Report which led to the 2015 amendment, that the mandatory language of Section 34(5), together with its object, made it clear that the sub-section was a condition precedent to the filing of a proper application under Section 34, and, on the analogy of a notice issued under Section 80 of the Code of Civil Procedure, 1908, being a condition precedent to the filing of a suit against the Government, the Division Bench held that since this mandatory requirement had not been complied with, and as the period of 120 days had run out, the Section 34 application itself would have to be dismissed. In the end, it allowed the appeal and set aside the judgment of the learned Single Judge.
5. Shri Nagendra Rai, learned Senior Advocate appearing on behalf of the Appellants, has argued that the Letters Patent Appeal itself was not maintainable. He further went on to argue that in any event, Section 34(5) and (6) form part of a composite scheme, the object of which is that an application under Section 34 be disposed of expeditiously within one year. He points out that as no consequence is provided if such application is not disposed of within the said period of one year, the aforesaid provisions are only directory, despite the mandatory nature of the language used therein. He also added that procedural provisions ought not to be construed in such a manner that justice itself gets trampled upon. For this purpose, he referred to and relied upon various judgments of this Court.
6. Shri Parag P. Tripathi, learned Senior Advocate appearing on behalf of the Respondent, defended the High Court judgment, both on maintainability as well as on Section 34(5) being a mandatory provision. According to the learned Senior Advocate, despite the fact that no consequence has been provided if the time period of Section 34(6) goes, yet, an application that is filed under Section 34 without complying with the condition precedent as set out in Section 34(5), is an application that is non est in law. He further argued that the consequence that follows, therefore, follows not from sub-section (6) of Section 34 but from subsection (3) thereof, under which, such application cannot be considered if it is beyond the stipulated period and/or extended period mentioned in Section 34(3). He relied upon the Law Commission Report which led to the 2015 amendment, as well as the mandatory nature of the language of Section 34(5). Also, according to the learned Senior Advocate, the vast majority of High Courts have decided in favour of the provision being construed as mandatory, the only discordant note being struck by the Bombay High Court.
7. Section 34(5) and (6) are set out hereunder as follows:
"34. Application for setting aside arbitral award.-
xxx xxx xxx
(5) An application under this section
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