2018 (2) TMI 1757 - HC - Indian Laws

Arbitration Act: Notice Date Determines Applicability|

Global Aviation Services Private Limited, Ganesh Benzoplast Limited, Mumbai Metropolitan Region Development Authority, Vijay Shree Pal Sharma, Union Of India Through Controller Of Stores, SMC Global Securities Ltd., Haresh N. Awatramani & Anr., MIRC Electronic Limited, JM Financial Services Ltd., Bharat Sanchar Nigam Limited, Reshma Rejendra Desai & Anr. Versus Airport Authority of India, Bharat Petroleum Corporation Limited, M/s Patel Engineering Ltd., M/s. L & T Finance Ltd., Union Roadways Corporation, Iqbal Hussain Bhati, The Saraswat Co-operative Bank Limited & Ors., M/s. Power Plaza, Gouri Arvind Kapoor, Trimax IT Infrastructure & Services Limited, L And T Finance Limited

The court clarified that the Arbitration & Conciliation (Amendment) Act, 2015 applies based on the date of notice invoking arbitration, not the filing ... Maintainability of petition - section 34 (5) of the Arbitration & Conciliation Act, 1996 - 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 carbp434-17 provisions inserted by the Arbitration & Conciliation (Amendment) Act, 2015 would apply to such proceedings filed after 23rd October, 2015 or not? Held that:- A perusal of section 26 of the Amendment Act of 2015 clearly indicates that unless the parties otherwise agree, no provisions of the Amendment Act would apply to arbitral proceedings commenced in accordance with the provisions of section 21 of the Arbitration and Conciliation Act, 1996 prior to 23rd October, 2015. It also makes it clear that the provisions of Amendment Act shall apply in relation to the arbitral proceedings commenced on or after the date of commencement of the Amendment Act. It is thus clear that if in an arbitration agreement is entered into prior to 23rd October, 2015, and the parties had agreed that the parties would be governed not only by carbp434-17 the provisions of the Arbitration and Conciliation Act, 1996 but also by statutory amendment thereto or repeal thereto and if the notice invoking arbitration agreement under section 21 is received by the other party prior to 23rd October, 2015 when the arbitral proceedings contemplated under section 21 is commenced, the party will be governed by not only the provisions of Arbitration and Conciliation Act, 1996 but also by the statutory amendments thereto or repeal thereto and not otherwise. Since the arbitral proceedings commences on receipt of the notice invoking arbitration agreement by the other party as contemplated under section 21 read with section 43 of the Arbitration and Conciliation Act, 1996, if such notice is received by the other side after 23rd October, 2015, the provisions of the Amendment Act would apply to such matters. The parties cannot agree that they will not be bound by the provisions of the Amendment Act. The parties would be governed by the right and remedy available to the parties existing on the date of invoking the arbitration agreement and not on the date of the award or on the date of filing of the arbitration petition unless the legislature so specifically provided for a different remedy or the conditions introduced by invoking such remedy in law with retrospective effect - section 34(5) and 34(6) thus cannot be pressed in the service by the respondent to deprive the petitioner of filing a petition challenging an award in such matters without issuing any prior notice to the respondent. The date of filing of the arbitration petition under section 34 of the Arbitration & Conciliation Act, 1996 before 23 rd October, 2015 or after such date is not relevant for the purpose of deciding whether the parties will be governed by the provisions of the Arbitration & Conciliation Act, 1996 before insertion of the amendments by the Amendment Act or not. The petitioner had already served a copy along with a copy of the arbitration petition upon the respondent on 18 th April, 2017 i.e. after filing of the arbitration petition. Learned counsel is right in his submission that the principles under section 4 of the Arbitration & Conciliation Act, 1996 are applicable to the present situation and issuance of such notice can also be waived by the respondent under section 4 of the Arbitration & Conciliation Act, 1996. The respondent in that matter has also filed a arbitration petition without issuing the notice under section 34(5) to the petitioner. Whether the compliance of the requirement of prior notice contemplated under section 34(5) before filing an arbitration application under section 34(1) is mandatory or directory? - Held that:- Section 34(5) cannot be equated with section 80 of the Code of Civil Procedure, 1908. In view of the fact that now by virtue of the amendment to section 36, merely upon filing of the arbitration application for challenging an award under section 34, there is no automatic stay, the petitioner who challenges the arbitral carbp434-17 award by filing an application under section 34 would not wait and would not cause any delay by not issuing notice upon the other party to obviate any situation of execution of award under the provisions of the Code of Civil Procedure, 1908 - the requirement under section 34(5) has to be construed as directory and nor mandatory. Petition disposed off. 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.