SUPREME COURT RULES THAT SECTIONS 34(5) AND 34(6) OF THE ARBITRATION AND CONCILIATION ACT, 1996 AS AMENDED IN 2016 ARE DIRECTORY IN NATURE

Clearing the confusion that came with the insertion of the amended provisions, namely, Sections 34(5) and (6) of the Arbitration and Conciliation Act, 1996, inserted by Amending Act 3 of 2016, the Supreme Court dealt with the nature of these amended provisions in the case of ‘The State of Bihar & Ors. Vs. Bihar Rajya Bhumi Vikas Bank Samiti’ (Civil Appeal No. 7314 of 2018).

The question before the Court was whether Section34 (5) is mandatory in nature or whether it is directory, i.e. whether non-issue of notice to the other party can lead to dismissal of the suit on this very ground.

Section 34, sub-sections (5) and (6) of the Arbitration and Conciliation Act, 1996 read as follows:

“34. Application for setting aside arbitral award.—

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(5)    An application under this section shall be filed by a party only after issuing a prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement.

(6)    An application under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice referred to in sub-section (5) is served upon the other party.”

The Court said that Section 34(5) is a procedural provision whose object is to dispose of applications under Section 34 expeditiously within one year, and not to scuttle the same. All rules of procedure are the handmaids of justice and if, in advancing the cause of justice, it is made clear that such provision should be construed as directory, then so be it, irrespective of the fact that the language used therein is mandatory in nature.

The Court referred to an instructive passage in Maxwell on Interpretation of Statutes, 10^th Edition, which says that considerations of convenience and justice are uppermost, and if general inconvenience or injustice results, without promoting the real aim and object of the enactment, the provision must be declared to be directory.

The Court drew analogy to Section 80 of the Civil Procedure Code, 1908,to say that,“Section 80, though a procedural provision, has been held to be mandatory as it is conceived in public interest, the public purpose underlying it being the advancement of justice by giving the Government the opportunity to scrutinize and take immediate action to settle a just claim without driving the person who has issued the notice having to institute a suit involving considerable expenditure and delay. This is to be contrasted with Section 34(5), also a procedural provision, the infraction of which leads to no consequence. To construe such a provision as being mandatory would defeat the advancement of justice as it would provide the consequence of dismissing an application filed without adhering to the requirements of Section 34(5), thereby scuttling the process of justice by burying the element of fairness.”

The Court thus, held that the amended provisions are directory in nature despite the mandatory language used therein, largely because no consequence has been provided for the breach of the time limit specified.

Surabhi Aggarwal

Senior Associate

The Indian Lawyer