2018 (2) TMI 1757 - HC - Indian Laws

Arbitration Act: Notice Date Determines Applicability|

The court clarified that the Arbitration & Conciliation (Amendment) Act, 2015 applies based on the date of notice invoking arbitration, not the filing ... Applicability of amendment to arbitral proceedings commenced before commencement date - party autonomy to agree on applicability of statutory amendments - commencement of arbitral proceedings under section 21 - construction of saving clause in amendment statute - mandatory versus directory nature of procedural provisions - prior notice requirement under section 34(5) and expedition under section 34(6)Commencement of arbitral proceedings under section 21 - applicability of amendment to arbitral proceedings commenced before commencement date - party autonomy to agree on applicability of statutory amendments - Whether the provisions of the Arbitration & Conciliation (Amendment) Act, 2015 apply to arbitral proceedings where the notice invoking arbitration was received before 23rd October, 2015, and the effect of an express agreement between parties to be governed by statutory modifications. - HELD THAT: - The Court held that the date on which arbitral proceedings commence is the date the request/notice under section 21 is received by the respondent; that date determines whether the pre-amendment or post-amendment statutory regime governs the proceedings. Where the notice invoking arbitration was received prior to 23rd October, 2015 the unamended Arbitration & Conciliation Act, 1996 governs those arbitral proceedings for all purposes, even if the award is rendered or a section 34 petition is filed after that date, unless the parties have expressly agreed otherwise. Conversely, if the notice under section 21 is received after 23rd October, 2015 the amended Act applies. The Court relied on the principle in Thyssen Stahlunion and subsequent authorities that a saving clause operates to preserve the law in force at commencement of the arbitral proceedings and that parties may, by agreement, opt into the amended regime; section 26 of the Amendment Act therefore permits parties to agree that the Amendment Act will govern proceedings commenced earlier. [Paras 76, 77, 85, 96, 138]If the notice under section 21 was received before 23rd October, 2015 the pre-amendment Act governs unless parties agreed to apply the Amendment Act; if the notice was received after that date the Amendment Act applies.Prior notice requirement under section 34(5) and expedition under section 34(6) - mandatory versus directory nature of procedural provisions - construction of saving clause in amendment statute - Whether the requirement of issuing a prior notice under section 34(5) and the one year disposal mandate in section 34(6) (both inserted by the Amendment Act) are mandatory conditions rendering a section 34 petition non maintainable if non complied with, or are directory/procedural. - HELD THAT: - The Court examined the text of sections 34(5) and 34(6), the absence of any specified consequence for non-compliance, the Law Commission note, and relevant procedural rules (including High Court Original Side Rules). It observed that neither sub section prescribes mode of service, contents of notice, nor specific penal consequence on non compliance, and that local court rules already provide for service/notice practice. Considering authorities on procedural provisions and vested rights, the Court held that the prior notice requirement and the one year disposal objective are procedural safeguards intended to expedite disposal and not substantive conditions which extinguish the vested right to challenge an award. Consequently, these provisions are directory; the Court retains discretion to permit issuance or waiver of notice and to direct service of papers even after filing but before admission/hearing. [Paras 115, 116, 118, 121, 138]Sections 34(5) and 34(6) are procedural/directory; failure to issue the prior notice does not render a section 34 petition automatically non maintainable and the Court may direct service or accept waiver to secure expedition.Applicability of amendment to arbitral proceedings commenced before commencement date - date of filing of section 34 petition - commencement of arbitral proceedings under section 21 - Whether the date of filing a petition under section 34 (post award) is relevant to determine whether pre amendment or post amendment provisions apply. - HELD THAT: - The Court ruled that the relevant datum for choosing the applicable statutory regime is the commencement of the arbitral proceedings under section 21 (i.e., receipt of the arbitration notice), not the date on which a section 34 petition is filed or when the award is rendered. Thus filing the challenge after 23rd October, 2015 does not, by itself, bring the petition within the Amendment Act if the arbitral proceedings had commenced before that date and the parties had not agreed otherwise. [Paras 94, 99, 138]The filing date of a section 34 petition is irrelevant to determine applicability; commencement under section 21 controls.Final Conclusion: The Court directed that: (a) arbitral proceedings are governed by the law in force on the date the section 21 notice was received unless parties expressly agreed otherwise; (b) sections 34(5) and 34(6) are procedural and directory, so omission to issue prior notice does not automatically bar a section 34 petition and the Court may permit service or accept waiver to ensure expeditious disposal; and (c) the office should place the relevant petitions on board for admission on 28 February 2018. Issues Involved:1. Applicability of the Arbitration & Conciliation (Amendment) Act, 2015 to arbitral proceedings commenced prior to its enactment.2. Whether the requirement of prior notice under section 34(5) of the Amendment Act is mandatory or directory.3. Consequences of non-compliance with section 34(5) and 34(6) of the Amendment Act.Detailed Analysis:Issue 1: Applicability of the Amendment ActThe court examined whether the provisions of the Arbitration & Conciliation (Amendment) Act, 2015 apply to arbitral proceedings commenced before its enactment (23rd October 2015). The court concluded that:- If the notice invoking arbitration was issued before 23rd October 2015, the pre-amendment provisions of the Arbitration & Conciliation Act, 1996 would apply.- If the notice was issued after 23rd October 2015, the amended provisions would apply.- The date of filing the arbitration petition under section 34 is irrelevant for determining the applicability of the amended provisions.Issue 2: Mandatory or Directory Nature of Section 34(5)The court deliberated whether the requirement of issuing a prior notice under section 34(5) before filing an arbitration petition is mandatory. The court held that:- Section 34(5) is procedural and not substantive.- The provision is directory, not mandatory, as no specific consequences are provided for non-compliance.- The court can direct the petitioner to issue the notice after filing the petition but before the hearing.Issue 3: Consequences of Non-ComplianceThe court considered the consequences of not complying with sections 34(5) and 34(6). It was concluded that:- No specific consequences are outlined in the Amendment Act for non-compliance with these sections.- The procedural requirements aim to expedite the process and avoid delays but do not penalize non-compliance by invalidating the petition.- The court retains the discretion to ensure compliance with procedural requirements without dismissing the petition outright.Conclusion:- The court emphasized that the vested right to challenge an arbitral award under section 34 cannot be taken away by procedural amendments.- The court directed that all arbitration petitions where the issue of the mandatory or directory nature of section 34(5) and 34(6) arises should be placed on board for admission.The judgment provides clarity on the applicability of the Amendment Act and the procedural requirements under section 34, ensuring that substantive rights are not unduly affected by procedural technicalities.