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IN THE HIGH COURT OF JUDICATURE AT PATNA
I.A. ANSARI, RAVI RANJAN, JJ.
Bihar Rajya Bhumi Vikas Bank Samiti – Appellant
Versus
The State of Bihar – Respondent
Letters Patent Appeal No. 1841 of 2016 In Civil Writ Jurisdiction Case No. 746 of 2016
Decided On : 28-10-2016
The Court held that the provisions of Section 34(5) of the Arbitration and Conciliation Act, 1996 (the 1996 Act) are mandatory and not directory. The Court reasoned that the purpose of the amendment to Section 34(5) was to shorten the period of litigation post arbitral proceeding and to bring closure to the challenge to an arbitral award within a definite time-frame. The Court also held that the principal civil court, while exercising powers under Section 34 of the 1996 Act, is not a Court of civil judicature; rather, it is only a tribunal with the trappings of a Court. The Court further held that a writ of certiorari can be issued, under Article 226 of the Constitution of India, in grave cases, where the subordinate tribunals or bodies or officers act wholly without jurisdiction, or in excess of it, or in violation of the principles of natural justice, or refuse to exercise a jurisdiction vested in them, or there is an error apparent on the face of the record, and such act, omission, error, or excess has resulted in manifest injustice.
Fact of the Case:
The appellant bank challenged the order of the learned District Judge, Patna, dated 18.07.2016, passed under Section 34 of the Arbitration and Conciliation Act, 1996 (the 1996 Act), on the ground that the provisions of Section 34(5) of the 1996 Act, requiring a notice to be given, are mandatory and since no notice had been given, as required by Section 34(5) of the 1996 Act, to the appellant bank before making of the application under Section 34(5) of the 1996 Act, seeking to get the award set aside, the decision of the learned District Judge to proceed with the application, made under Section 34 of the 1996 Act, is untenable in law.
Finding of the Court:
The Court held that the provisions of Section 34(5) of the Arbitration and Conciliation Act, 1996 (the 1996 Act) are mandatory and not directory. The Court reasoned that the purpose of the amendment to Section 34(5) was to shorten the period of litigation post arbitral proceeding and to bring closure to the challenge to an arbitral award within a definite time-frame. The Court also held that the principal civil court, while exercising powers under Section 34 of the 1996 Act, is not a Court of civil judicature; rather, it is only a tribunal with the trappings of a Court. The Court further held that a writ of certiorari can be issued, under Article 226 of the Constitution of India, in grave cases, where the subordinate tribunals or bodies or officers act wholly without jurisdiction, or in excess of it, or in violation of the principles of natural justice, or refuse to exercise a jurisdiction vested in them, or there is an error apparent on the face of the record, and such act, omission, error, or excess has resulted in manifest injustice.
Issues: 1. Whether the provisions of Section 34(5) of the Arbitration and Conciliation Act, 1996 (the 1996 Act) are mandatory or directory? 2. Whether the principal civil court, while exercising powers under Section 34 of the 1996 Act, is a Court of civil judicature or a tribunal? 3. Whether a writ of certiorari can be issued, under Article 226 of the Constitution of India, to quash an order passed by a principal civil court under Section 34 of the 1996 Act?
Ratio Decidendi: The Court held that the provisions of Section 34(5) of the Arbitration and Conciliation Act, 1996 (the 1996 Act) are mandatory and not directory. The Court reasoned that the purpose of the amendment to Section 34(5) was to shorten the period of litigation post arbitral proceeding and to bring closure to the challenge to an arbitral award within a definite time-frame. The Court also held that the principal civil court, while exercising powers under Section 34 of the 1996 Act, is not a Court of civil judicature; rather, it is only a tribunal with the trappings of a Court. The Court further held that a writ of certiorari can be issued, under Article 226 of the Constitution of India, in grave cases, where the subordinate tribunals or bodies or officers act wholly without jurisdiction, or in excess of it, or in violation of the principles of natural justice, or refuse to exercise a jurisdiction vested in them, or there is an error apparent on the face of the record, and such act, omission, error, or excess has resulted in manifest injustice.
Final Decision: The Court allowed the appeal and held that the order of the learned District Judge, Patna, dated 18.07.2016, passed under Section 34 of the Arbitration and Conciliation Act, 1996 (the 1996 Act), was illegal and void.
I.A. Ansari, J.
1. The core issue, which this appeal has raised, is: whether issuance of a notice, under sub-Section (5) of Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the 1996 Act’), is mandatory or directory? Connected with this core issue is the issue : whether an order, entertaining an application, which is made contrary to the provisions of Section 34 (5) of the 1996 Act, by omitting to serve advance notice on the opposite party by the application, would be amenable to Article 227 or 226 of the Constitution of India? Yet another issue, raised in this appeal, is: whether a District Judge, while exercising power under Section 34 of the 1996 Act functions as a Civil Court or a Court other than a Civil Court?
BACKGROUND FACTS
2. The brief facts, giving rise to present appeal, may be summed up as follows:
(i) The appellant bank alleges that the State owes to it a sum of Rs. 570.79 crore under different heads. The bank approached this Court for appointment of an Arbitrator by filing Request Case No. 4 of 2013, which was allowed, on 07.03.2014 and Mr. Justice S.C. Jha (Retired) was appointed as the Arbitrator.
(ii) The order, appointing the Arbitrator, was challenged by way of Special Leave Petition before the Supreme Court in S.L.P. (C) No. 15552 of 2014. By its order, dated 14.07.2014, the Supreme Court dismissed the Special Leave Petition aforementioned.
(iii) After dismissal of the Special Leave Petition, the arbitration proceeding commenced. Though the State raised the issue of maintainability of the arbitration proceeding, the same was rejected by the Arbitrator by order, dated 24.05.2015, and this order, dated 24.05.2015, was not challenged. The proceeding, thus, continued and the award was passed on 06.01.2016.
(iv) The State challenged the award, invoking the jurisdiction of the District Judge, by way of an application made under section 34 of the 1996 Act. However, no prior notice was issued to the appellant bank under Section 34 (5) of the 1996 Act. The Shirestedar of the learned Court below pointed out the defect with regard to non-compliance with the provisions of Section 34 (5) of the 1996 Act, which found reference in the margin of the order sheet; yet the learned Court below ignored the same and proceeded to take up the application, made under Section 34 (5) of the 1996 Act, for disposal.
(v) The grievance of the appellant bank is that the provisions of Section 34 (5) of the 1996 Act, requiring a notice to be given is mandatory and since no notice had been given, as required by Section 34 (5) of the 1996 Act, to the appellant bank before making of the application under Section 34 (5) of the 1996 Act, seeking to get the award set aside, the decision of the learned District Judge to proceed with the application, made under Section 34 of the 1996 Act, is untenable in law. It is contended that by the order under appeal, the very purpose of the amendment, brought in to the 1996 Act by the Arbitration and Conciliation (Amendment) Act, 2015, by way of Section 18, with effect from 23.10.2015, has been made redundant.
3. Aggrieved by the order, dated 18.07.2016, aforementioned, the appellant bank impugned the said order in a petition filed under Article 227 of the Constitution of India. A learned single Judge of this Court has, disagreeing with the contention of the appellant bank that the decision of the learned District Judge, Patna, of issuing notice through his order, dated 18.07.2016, was bad since there was non-adherence to the requirement of issuance of a prior notice as per the provisions embodied in Section 34 (5) of the 1996 Act, which, according to learned counsel for the appellant, is mandatory in nature, and held that Section 34 (5) of the 1996 Act is merely directory and not being mandatory, the order, dated 18.07.2016, passed by the District Judge does not call for any interference and accordingly dismissed the petition.
4. The observations made, conclusio
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