Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2018 Supreme(Bom) 229

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
R.D. DHANUKA, J.
Global Aviation Services Private Limited & Others - Petitioners
Versus
Airport Authority of India & Others - Respondents
Commercial Jurisdiction Commercial Arbitration Petition No. 434 of 2017 with Notice of Motion No. 165 of 2017 488 of 2017, 690 of 2017 with Commercial Arbitration Petition Nos. 236 of 2017, 173 of 2017 with Arbitration Petition Nos. 159 of 2017, 230 of 2017, 232 of 2017, 413 of 2017, 448 of 2017, 976 of 2016, 399 of 2017, 484 of 2017, 614 of 2017, 624 of 2017, 655 of 2017
Decided On : 21-02-2018

Advocates Appeared:
For the Petitioners:Shyam Mehta, Senior Counsel with Hitesh Mutha, Sumit Raghani, Dimple Majithia, Dipika Bhateja i/b Agrud Partners, Sagar Kasar, Amol Wagh, Sheha Sanap, Sapna Rachure i/b T.N. Tripathi & Co., A.S. Daver, Anuj Jaiswal, Nirav Shah, i/b Little & Co., Pawan Pandey i/b Clayderman & Co., Sanjay Jain with Aniketh Nair, Apoorva Gupta i/b Mustafa Motiwala, C.N. Chavan, Prakash Shah, Santosh Mungekar, Rohin Shah, Simil Purohit i/b M/s. Purohit & Co., Iqbal Hussain Bhati, Shriram Kulkarni, Sachin Chavan, Megna Pujari, Madhu Deshmukh, Paras Vira i/b Anand Kate, Advocates.
For the Respondents:Lopa Munim, Sanish Mathew i/b Rajesh Kothari & Co., T.J. Pandian, R1, Bhupesh Samant, Sumi Soman i/b Priyanka Pawar, Anand Poojary, S.I. Joshi, Nikita Pawar, Jalpa i/b S.I. Joshi & Co., Girish Agarwal, Anil Balani, Ashish Kamat, S. Banerjee i/b Rajesh Gaikwad, Pankaj Savant, Senior Advocate, a/w. Sandeep Aole, Saket More, Subit Chakrabarti, Vishesh Kalra, Neha Joshi, i/b. Vidhi Partners, Advocates.

The provisions of section 34(5) and 34(6) of the Arbitration & Conciliation (Amendment) Act, 2015 are directory and not mandatory.

Headnote:
Whether the provisions of section 34(5) and 34(6) of the Arbitration & Conciliation (Amendment) Act, 2015 are mandatory or directory.
Fact of the Case:

The respondents in all these petitions have raised a preliminary issue of maintainability of these petitions on the ground that no notice under section 34(5) of the Arbitration & Conciliation Act, 1996 has been issued by the petitioners to the respondents before filing these arbitration petitions and thus the petitions are liable to be dismissed on that ground alone.
Finding of the Court:

The Court held that the provisions of section 34(5) and 34(6) of the Arbitration & Conciliation (Amendment) Act, 2015 are directory and not mandatory.
Issues: Whether the provisions of section 34(5) and 34(6) of the Arbitration & Conciliation (Amendment) Act, 2015 are mandatory or directory.
Ratio Decidendi: The Court observed that section 34(5) does not prescribe the nature of the notice or the contents of the notice and the said provision is vague. It also observed that section 34(5) refers to issuance of prior notice and does not provide the mode and manner of service of notice. Whether a copy of the arbitration petition is also required to be served upon the respondent or not is also not provided in the said provision. The Court further observed that section 34(6) also does not provide for any consequences of non compliance and leaves the consequences of non compliance to the discretion of the Court. The Court also observed that the right to challenge an award is a vested right. It vests on the date of commencement of arbitral proceedings in accordance with section 21 of the Act. Such right did not have any such preconditions. An impediment now created by section 34(5) cannot affect the vested right. Though processual in nature, an impediment which affects a vested right, has to be treated as prospective and cannot be given a retrospective effect. The Court also observed that section 34(5) only refers to issuance of prior notice and does not contemplate filing of the arbitration application impugning an arbitral award after service of the notice to the other party whereas section 34(6) contemplates period of disposal of arbitration application within one year from the date of service of notice upon other party. The Court held that in view of such conflicting provision, the Court can compute disposal of the arbitration application from the date of filing petition or from the date of issuance of the Court notice. The Court further observed that section 26 of the Amendment Act does not apply to the pending arbitral proceedings as on 23rd October, 2015. The Court also observed that even if a notice under section 34(5) is not issued prior to the date of filing of the arbitration petition, substantive remedy of the aggrieved party cannot be taken away under section 34(1). The Court also observed that section 34(5) is procedural in nature and thus the petitioner can always amend the grounds before the petition is filed. The Court also observed that section 34(5) cannot be equated with section 80 of the Code of Civil Procedure, 1908. The Court also observed that the requirement under section 34(5) has to be construed as directory and nor mandatory.
Final Decision: The Court held that the provisions of section 34(5) and 34(6) of the Arbitration & Conciliation (Amendment) Act, 2015 are directory and not mandatory.

JUDGMENT :

1. The respondents in all these petitions have raised a preliminary issue of maintainability of these petitions on the ground that no notice under section 34 (5) of the Arbitration & Conciliation Act, 1996 has been issued by the petitioners to the respondents before filing these arbitration petitions and thus the petitions are liable to be dismissed on that ground itself. In view of this preliminary objection raised by the respondents, learned counsel appearing for the parties have addressed this Court on this issue at this stage at great length, which is being considered by this Court by passing a common order in the aforesaid matters.

2. The questions that arise for consideration of this Court are:-

(i). If the notice invoking arbitration agreement is issued prior to 23rd October, 2015, whereas the impugned award is rendered after 23rd October, 2015 and if the arbitration agreement contemplate that the parties would be governed not only by the provisions of the Arbitration & Conciliation Act, 1996, but also any statutory modification thereof or repeal thereto, the provisions inserted by the Arbitration & Conciliation (Amendment) Act, 2015 would apply to such proceedings filed after 23rd October, 2015 or not?

(ii). If there was no agreement between the parties that that the parties would be governed by not only the provisions of the Arbitration & Conciliation Act, 1996 but also any statutory amendment thereto or repeal thereto and the notice was issued prior to 23rd October, 2015 but the arbitral award is rendered after 23rd October, 2015, whether provisions of the Arbitration & Conciliation (Amendment) Act, 2015 would apply to such arbitral proceedings commenced prior to 23rd October, 2015?

(iii). If the arbitral notice was issued prior to 23rd October, 2015 and the arbital award was rendered prior to 23rd October, 2015 however the arbitration petition is filed after 23rd October, 2015 whether the provisions of the Arbitration & Conciliation (Amendment) Act, 2015 would apply to such pending petitions?

(iv) Even if the parties would be governed by the provisions of the Arbitration & Conciliation (Amendment) Act, 2015 depending upon the facts and circumstances of each case, whether issuance of prior notice under section 34(5) by the petitioner upon the respondent before filing the arbitration petition under section 34 is mandatory or directory and the consequence, if any, for non-compliance of such prior notice?

3. The petitioner in Commercial Arbitration Petition No.434 of 2017 began the arguments on these issue first and thus the facts in the said arbitration petition which are relevant for the purpose of deciding these preliminary issues raised by the respondents are summarized in this order.

4. The respondents had invited the bids for setting up flying schools at 11 airports all over India including two at Surat Airport. The final bid of the petitioner was accepted by the respondents. The petitioner accepted all the terms and conditions of the allotment letter sent by the respondents. The respondents issued a modification by a letter of allotment to the petitioner on 28th March, 2008. The petitioner accepted the terms and conditions of the letter of allotment as well as modification thereto on 4th April, 2008. The dispute arose between the parties.

5. On 28th February, 2011, the petitioner issued a notice invoking arbitration agreement to the respondents to settle the claims between the parties. The petitioner sent a reminder to the respondents on 7th April, 2011 and once again called upon to appoint a sole arbitrator. On 5th January, 2012, the respondents issued a notice of termination of agreement. The petitioner filed an application under section 11 of the Arbitration & Conciliation Act, 1996 for seeking an appointment of a sole arbitrator. On 4th December, 2012, the learned designate of the Hon'ble Chief Justice of this Court disposed of the said Arbitration Application No.67 of 2012 and referred the disputes between

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2018 Supreme(Bom) 229

The provisions of section 34(5) and 34(6) of the Arbitration & Conciliation (Amendment) Act, 2015 are directory and not mandatory.

Cases Referred (24)