SC expounds: It's not mandatory to serve prior notice to Opposite Party before filing Appl. under Sec 34 of Arbitration Act. Read Order here

01 Aug 2018

August 1,2018:

Supreme Court has expounded that,"It is not mandatory to serve prior notice to the opposite party before filing an application to set aside an Arbitral Award under Section 34 of Arbitration and Conciliation Act, 1996 (Act)".

Apex Court Bench comprising of Justice Rohinton Nariman and Justice Indu Malhotra was hearing an Appeal filed against a Division Bench Judgment of Patn

The contention was raised that no prior notice was served upon opposite party before filing the application to set aside the arbitral award in the Patna High Court.

Single Judge Bench of Patna HC stated that,"Such notice in terms of Section 34 (5) was only Directory".

In Appeal, Division Bench disagreed was of the view that Section 34 (5) was mandatory.

Thus the question before Apex Court was,"Whether prior notice under Section 34 (5) of the Act is mandatory before filing an application to set aside an arbitral award under Section 34?".

Supreme Court expounded that,"Prior Notice is only directory. Their will be no Penal Consequences for non-compliance of the Section 34 (5)".

SC Bench added that,"Even though Section 34 (5) and (6) are couched in mandatory language, the Court noted that the Act does not prescribe any penal consequences if they are not complied with".

Apex Court stated that,"Section 34 (5) is not a substantive provision. When a provision is only procedural in nature, it should be interpreted to advance the cause of justice rather than scuttle it, the Court noted. 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".

Bench concluded that,“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.”