TaxTMI 
TaxTMI 
2018 (8) TMI 34
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....tna High Court, in which notice was issued to the opposite party by the Court on 18.07.2016. Despite the coming into force of Section 34(5), the common ground between the parties is that no prior notice was issued to the other party in terms of the said Section, nor was the application under Section 34 accompanied by an affidavit that was required by the said sub-section. 4. A learned Single Judge of the Patna High Court, by a judgment dated 06.09.2016, held that the provision contained in Section 34(5) was only directory, following our judgment in Kailash v. Nanhku and Ors., (2005) 4 SCC 480. A Letters Patent Appeal to a Division Bench yielded the impugned order dated 28.10.2016, by which it was held, adverting to the Law Commission Report which led to the 2015 amendment, that the mandatory language of Section 34(5), together with its object, made it clear that the sub-section was a condition precedent to the filing of a proper application under Section 34, and, on the analogy of a notice issued under Section 80 of the Code of Civil Procedure, 1908, being a condition precedent to the filing of a suit against the Government, the Division Bench held that since this mandatory requ....
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....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." 8. There is no doubt whatsoever that the language of Section 34 does lend itself in support of the argument of Shri Tripathi, as the expressions used are "shall", "only after" and "prior notice" coupled with such application which again "shall" be accompanied by an affidavit endorsing compliance. 9. The 246th Law Commission Report, which introduced the aforesaid provision, also makes interesting reading, which is set out hereinbelow: "3. The Arbitration and Conciliation Act, 1996 (hereinafter "the Act") is based on the UNCITRAL Model Law on International Commercial Arbitration, 1985 and the UNCITRAL Conciliation Rules, 1980. The Act has now been in force for almost two decades, and in this period of time, although arbitration has fast emerged as a frequently chose....
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....e requirement that an application under Section 34 be disposed of expeditiously within a period of one year from the date of service of notice. We have to examine as to whether this, by itself, is sufficient to construe Section 34(5) as mandatory, keeping in view the fact that if the time limit of one year is not adhered to under Section 34(6), no consequence thereof is provided. 11. Some of the judgments of this Court throw considerable light on similar provisions being construed as being only directory in nature. Thus, in Topline Shoes v. Corporation Bank, (2002) 6 SCC 33, Section 13(2)(a) of the Consumer Protection Act, 1986, spoke of a reply being filed by the opposite party "within a period of 30 days or such extended period not exceeding 15 days, as may be granted by the District Forum". This Court referred to the Statement of Objects and Reasons of the Consumer Protection Act, 1986, which is similar to the object sought to be achieved by the amendment made in Section 34(5) and (6) of the Arbitration and Conciliation Act, 1996, as follows: "8. The Statement of Objects and Reasons of the Consumer Protection Act, 1986 indicates that it has been enacted to promote....
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....tural justice as well. The Forum may refuse to extend time beyond 15 days, in view of Section 13(2)(a) of the Act but exceeding the period of 15 days of extension, would not cause any fatal illegality in the order." The Court further held: "11. We have already noticed that the provision as contained under clause (a) of sub-section (2) of Section 13 is procedural in nature. It is also clear that with a view to achieve the object of the enactment, that there may be speedy disposal of such cases, that it has been provided that reply is to be filed within 30 days and the extension of time may not exceed 15 days. This provision envisages that proceedings may not be prolonged for a very long time without the opposite party having filed his reply. No penal consequences have however been provided in case extension of time exceeds 15 days. Therefore, it could not be said that any substantive right accrued in favour of the appellant or there was any kind of bar of limitation in filing of the reply within extended time though beyond 45 days in all. The reply is not necessarily to be rejected. All facts and circumstances of the case must be taken into account. The Statement of Objects an....
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....l not be later than ninety days" but the consequences flowing from non-extension of time are not specifically provided for though they may be read in by necessary implication. Merely because a provision of law is couched in a negative language implying mandatory character, the same is not without exceptions. The courts, when called upon to interpret the nature of the provision, may, keeping in view the entire context in which the provision came to be enacted, hold the same to be directory though worded in the negative form. xxx xxx xxx 35. Two decisions, having a direct bearing on the issue arising for decision before us, have been brought to our notice, one each by the learned counsel for either party. The learned Senior Counsel for the appellant submitted that in Topline Shoes Ltd. v. Corpn. Bank [(2002) 6 SCC 33] a pari materia provision contained in Section 13 of the Consumer Protection Act, 1986 came up for the consideration of the Court. The provision requires the opposite party to a complaint to give his version of the case within a period of 30 days or such extended period not exceeding 15 days as may be granted by the District Forum. The Court to....
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....ext, the strict interpretation would defeat justice." 14. However, a discordant note was struck by a Judgment dated 04.12.2015, reported in New India Assurance Co. Ltd. v. Hilli Multipurpose Cold Storage Pvt. Ltd., (2015) 16 SCC 20. A Bench of three learned Judges resurrected the judgment of J.J. Merchant (Dr.) v. Shrinath Chaturvedi, (2002) 6 SCC 635. J.J. Merchant (supra) was distinguished in Kailash (supra) as follows: "38. The learned counsel for the respondent, on the other hand, invited our attention to a three-Judge Bench decision of this Court in J.J. Merchant (Dr.) v. Shrinath Chaturvedi [(2002) 6 SCC 635] wherein we find a reference made to Order 8 Rule 1 CPC vide paras 14 and 15 thereof and the Court having said that the mandate of the law is required to be strictly adhered to. A careful reading of the judgment shows that the provisions of Order 8 Rule 1 CPC did not directly arise for consideration before the Court and to that extent the observations made by the Court are obiter. Also, the attention of the Court was not invited to the earlier decision of this Court in Topline Shoes Ltd. case [(2002) 6 SCC 33]." Despite this observation, New India Assurance....
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.... "23. For reducing the arrears and for seeing that complaints, appeals and revisions are decided speedily and within the stipulated time, we hope that the President of the National Commission would draw the attention of the Government for taking appropriate actions within the stipulated time and see that the object and purpose of the Act is not frustrated. xxx xxx xxx 25. It can be hoped that the National Commission would ensure its best to see that District Forums, State Commissions and the National Commission can discharge its functions as efficiently and speedily as contemplated by the provisions of the Act. The National Commission has administrative control over all the State Commissions inter alia for issuing of instructions regarding adoption of uniform procedure in hearing of the matters etc. It would have also administrative control in overseeing that the functions of the State Commissions or District Forums are discharged in furtherance of the objects and purposes of the Act in the best manner." The Court then referred to the Consumer Protection (Amendment) Bill, 2002, which envisaged insertion of sub-section (3-A) in Section 13 of the Act, wh....
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....s been extracted hereinabove. The fact that Topline Shoes (supra) was not cited before the three-Judge Bench in J.J. Merchant (supra), as has been held in paragraph 38 of Kailash (supra), would render the aforesaid judgment vulnerable on Section 13(2)(a) of the Consumer Protection Act, 1986 being held to be mandatory. An earlier judgment cannot be overruled sub silentio without upsetting the reasons on which it is based. J.J. Merchant (supra) does not deal with Topline Shoes' (supra) ratio - namely, that no penal consequence was provided in case the extended time of 15 days was exceeded; that therefore, no substantive right accrued in favour of the claimant; and that the Statement of Objects and Reasons of the Act also provided that the principles of natural justice be kept in mind. The judgment in New India Assurance Co. Ltd. (supra) did not refer to paragraph 38 of Kailash (supra) or appreciate that J.J. Merchant (supra) was distinguished correctly on the ground that Order VIII Rule 1, CPC did not directly arise for consideration in J.J. Merchant (supra). The observations on Order VIII Rule 1, CPC in paragraphs 14 and 15 of J.J. Merchant (supra) were correctly held to be in the n....
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.... legislature. The whole scope and purpose of the statute under consideration must be regarded." (Bikhraj Jaipuria v. Union of India, (1962) 2 SCR 880, para 16.) It then went on to hold that the provision was in the interest of the general public because the question whether a binding contract has been made between the State and the private individual should not be left open to dispute and litigation. We must not forget that, as has been laid down in Maxwell (supra), 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. 20. It will thus be seen that Section 34(5) does not deal with the power of the Court to condone the non-compliance thereof. It is imperative to note that the provision is procedural, the object behind which is to dispose of applications under Section 34 expeditiously. One must remember the wise observation contained in Kailash (supra), where the object of such a provision is only to expedite the hearing and not to scuttle the same. All rules of procedure are the handmaids of justice and if, in advanci....
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....al 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 a 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. 23. However, according to Shri Tripathi, an application filed under Section 34 is a condition precedent, and if no prior notice is issued to the other party, without being accompanied by an affidavit by the applicant endorsing compliance with the said requirement, such application, being a non-starter, would have to be dismissed at the end of the 120 days' period mentioned in Section 34(3). Apart from w....
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....m this provision that, unlike Section 34(5) and (6), if an Award is made beyond the stipulated or extended period contained in the Section, the consequence of the mandate of the Arbitrator being terminated is expressly provided. This provision is in stark contrast to Section 34(5) and (6) where, as has been stated hereinabove, if the period for deciding the application under Section 34 has elapsed, no consequence is provided. This is one more indicator that the same Amendment Act, when it provided time periods in different situations, did so intending different consequences. 25. Shri Tripathi then argued that Section 34(5) is independent of Section 34(6) and is a mandatory requirement of law by itself. There are two answers to this. The first is that sub-section (6) refers to the date on which the notice referred to in sub-section (5) is served upon the other party. This is for the reason that an anterior date to that of filing the application is to be the starting point of the period of one year referred to in Section 34(6). The express language of Section 34(6), therefore, militates against this submission of Shri Tripathi. Secondly, even if sub-section (5) be construed to be ....
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....ombay High Court (Original Side) Rules. The Court can always direct the petitioner to issue notice along with papers and proceedings upon other party before the matter is heard by the Court for admission as well as for final hearing. The vested rights of a party to challenge an award under section 34 cannot be taken away for non-compliance of issuance of prior notice before filing of the arbitration petition." The aforesaid judgment has been followed by recent judgments of the High Courts of Bombay Maharashtra State Road Development Corporation Ltd. v. Simplex Gayatri Consortium and Ors., Commercial Arbitration Petition No. 453 of 2017 [decided on 19.04.2018]. and Calcutta. Srei Infrastructure Finance Limited v. Candor Gurgaon Two Developers and Projects Pvt. Ltd., A.P. No. 346 of 2018 [decided on 12.07.2018]. 27. We are of the opinion that the view propounded by the High Courts of Bombay and Calcutta represents the correct state of the law. However, we may add that it shall be the endeavour of every Court in which a Section 34 application is filed, to stick to the time limit of one year from the date of service of notice to the opposite party by the applicant, or by the C....