THE STATE OF BIHAR & ORS. versus BIHAR RAJYA BHUMI VIKAS BANK SAMITI on 30 July 2018

[2018] 7 S.C.R. 1147

THE STATE OF BIHAR & ORS.

v.

BIHAR RAJYA BHUMI VIKAS BANK SAMITI

(Civil Appeal No. 7314 of 2018)

JULY 30, 2018

[R. F. NARIMAN AND INDU MALHOTRA, JJ.]

Arbitration and Conciliation Act, 1996:

s. 34(5) – Whether mandatory or directory – Held: When aprovision results in general inconvenience or injustice, withoutpromoting the real aim and object of the enactment, the provisionmust be declared to be directory – s. 34(5) is a procedural provision,infraction of which leads to no consequence – To construe such aprovision as mandatory would defeat the advancement of justice asit would provide the consequence of scuttling the process of justiceby burying the element of fairness – Interpretation of Statutes.

Judgments/Orders:

An earlier judgment cannot be overruled sub silentio withoutupsetting the reasons on which it is based.

Allowing the appeal, the Court

HELD: 1.1 Section 34(5) of Arbitration and ConciliationAct, 1996 is a procedural provision, the infraction of which leadsto no consequence. The object behind the provision is todispose of applications under Section 34 expeditiously. All rulesof procedure are the handmaids of justice and if, in advancing thecause of justice, it is made clear that such provision should beconstrued as directory, then so be it. To construe such aprovision as being mandatory would defeat the advancement ofjustice as it would provide the consequence of dismissing anapplication filed without adhering to the requirements of Section34(5), thereby scuttling the process of justice by burying theelement of fairness. [Paras 20 and 22] [1163-F-G; 1165-A-B]

1.2 Considerations of convenience and justice areuppermost, and if general inconvenience or injustice results,

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Awithout promoting the real aim and object of the enactment, theprovision must be declared to be directory. [Para 19] [1163-E]

1.3 The only requirement in Section 34(1) is that anapplication for setting aside an award be in accordance withsub-sections (2) and (3). This, again, is an important pointer toBthe fact that even legislatively, sub-section (5) of s. 34 is not acondition precedent, but a procedural provision which seeks toreduce the delay in deciding applications under Section 34.[Para 23] [1165-D-E]

1.4 It is evident from s. 29A that unlike Section 34(5) andC(6), if an Award is made beyond the stipulated or extendedperiod contained in the Section, the consequence of the mandateof the Arbitrator being terminated is expressly provided. Thisprovision is in stark contrast to Section 34(5) and (6) where, ifthe period for deciding the application under Section 34 haselapsed, no consequence is provided. This is one more indicatorDthat the same Amendment Act, when it provided time periods indifferent situations, did so intending different consequences.[Para 24] [1166-D-E]

1.5 Therefore, it is not correct that Section 34(5) isindependent of Section 34(6) and is a mandatory requirement ofElaw by itself. Sub-section (6) of s. 34 refers to the date on whichthe notice referred to in sub-section (5) is served upon the otherparty. This is for the reason that an anterior date to that of filingthe application is to be the starting point of the period of oneyear referred to in Section 34(6). Even if sub-section (5) beFconstrued to be a provision independent of sub-section (6), thesame consequence in law is the result – namely, that there is noconsequence provided if such prior notice is not issued.[Para 25] [1166-F-G]

1.6 It shall be the endeavour of every Court in which aGSection 34 application is filed, to stick to the time limit of oneyear from the date of service of notice to the opposite party bythe applicant, or by the Court, as the case may be. In case theCourt issues notice after the period mentioned in Section 34(3)has elapsed, every Court shall endeavour to dispose of theSection 34 application within a period of one year from the dateH

of filing of the said application, similar to what has been providedin Section 14 of the Commercial Courts, Commercial Divisionand Commercial Appellate Division of High Courts Act, 2015.This will give effect to the object sought to be achieved byadding Section 13(6) by the 2015 Amendment Act. [Para 27][1168-B-C]

1.7 In cases covered by Section 10 read with Section 14 ofthe Commercial Courts, Commercial Division and CommercialAppellate Division of High Courts Act, 2015, the CommercialAppellate Division shall endeavour to dispose of appeals filedbefore it within six months, as stipulated. Appeals which are notso covered will also be disposed of as expeditiously as possible,preferably within one year from the date on which the appeal isfiled. [Para 28] [1168-D, E]

Kailash v. Nanhku and Ors. (2005) 4 SCC 480:[2005] 3 SCR 289 ; Topline Shoes v. Corporation Bank(2002) 6 SCC 33 : [2002] 3 SCR 1167 ; Salem AdvocateBar Association v. Union of India (2005) 6 SCC344 : [2005] 1 Suppl. SCR 929 ; New India AssuranceCo. Ltd. v. Hilli Multipurpose Cold Storage Pvt. Ltd.(2015) 16 SCC 20 ; J. J. Merchant (Dr.) v. ShrinathChaturvedi (2002) 6 SCC 635 : [2002] 1 Suppl. SCR469 ; State v. N.S. Gnaneswaran (2013) 3 SCC 594 ;Bikhraj Jaipuria v.Union of India [1962] 2 SCR 880 –relied on.

Bihari Chowdhary and Anr. v. State of Bihar and Ors,(1984) 2 SCC 627 : [1984] 3 SCR 309 – referred to.

2. An earlier judgment cannot be overruled sub silentiowithout upsetting the reasons on which it is based. [Para 17][1161-H; 1162-A]

Maxwell on Interpretation of Statutes 10[th] Edn. p. 376– referred to.

Case Law Reference

[2005] 3 SCR 289 relied on[2002] 3 SCR 1167 relied on[2005] 1 Suppl. SCR 929 relied on Para 4Para 11Para 13

relied on

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[2018] 7 S.C.R.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 7314of 2018.

From the Judgment and Order dated 28.10.2016 of the High Courtof Judicature at Patna in Letters Patent Appeal No. 1841 of 2016.C

Nagendra Rai, Parag P. Tripathi, Sr. Advs., Gopal Singh, ManishKumar, Ms. Aprajita Sud, Jayant Kumar Mehta, Rajesh K. Singh, RajeshPrasad Chaudhary, Suveni Bhagat, Ms. Mishika Bajpai, Advs. for theappearing parties.DThe Judgment of the Court was delivered by

R. F. NARIMAN, J. 1. Leave granted.

2. The question raised in this appeal pertains to whether Section34(5) of the Arbitration and Conciliation Act, 1996, inserted by AmendingAct 3 of 2016 (w.e.f. 23[rd] October, 2015), is mandatory or directory.E

3. The present appeal arises out of an arbitration proceeding whichcommenced on 24.05.2015. An arbitral award was made on 06.01.2016.A Section 34 petition challenging the said award was filed on 05.04.2016before the Patna High Court, in which notice was issued to the oppositeparty by the Court on 18.07.2016. Despite the coming into force of SectionF34(5), the common ground between the parties is that no prior noticewas issued to the other party in terms of the said Section, nor was theapplication under Section 34 accompanied by an affidavit that wasrequired by the said sub-section.

4. A learned Single Judge of the Patna High Court, by a judgmentGdated 06.09.2016, held that the provision contained in Section 34(5) wasonly directory, following our judgment in Kailash v. Nanhku and Ors.,(2005) 4 SCC 480. A Letters Patent Appeal to a Division Bench yieldedthe impugned order dated 28.10.2016, by which it was held, adverting tothe Law Commission Report which led to the 2015 amendment, that the H

mandatory language of Section 34(5), together with its object, made itclear that the sub-section was a condition precedent to the filing of aproper application under Section 34, and, on the analogy of a noticeissued under Section 80 of the Code of Civil Procedure, 1908, being acondition precedent to the filing of a suit against the Government, theDivision Bench held that since this mandatory requirement had not beencomplied with, and as the period of 120 days had run out, the Section 34application itself would have to be dismissed. In the end, it allowed theappeal and set aside the judgment of the learned Single Judge.

5. Shri Nagendra Rai, learned Senior Advocate appearing on behalfof the Appellants, has argued that the Letters Patent Appeal itself wasnot maintainable. He further went on to argue that in any event, Section34(5) and (6) form part of a composite scheme, the object of which isthat an application under Section 34 be disposed of expeditiously withinone year. He points out that as no consequence is provided if suchapplication is not disposed of within the said period of one year, theaforesaid provisions are only directory, despite the mandatory nature ofthe language used therein. He also added that procedural provisionsought not to be construed in such a manner that justice itself gets trampledupon. For this purpose, he referred to and relied upon various judgmentsof this Court.

6. Shri Parag P. Tripathi, learned Senior Advocate appearing onbehalf of the Respondent, defended the High Court judgment, both onmaintainability as well as on Section 34(5) being a mandatory provision.According to the learned Senior Advocate, despite the fact that noconsequence has been provided if the time period of Section 34(6) goes,yet, an application that is filed under Section 34 without complying withthe condition precedent as set out in Section 34(5), is an application thatis non est in law. He further argued that the consequence that follows,therefore, follows not from sub-section (6) of Section 34 but from sub-section (3) thereof, under which, such application cannot be consideredif it is beyond the stipulated period and/or extended period mentioned inSection 34(3). He relied upon the Law Commission Report which led tothe 2015 amendment, as well as the mandatory nature of the languageof Section 34(5). Also, according to the learned Senior Advocate, thevast majority of High Courts have decided in favour of the provisionbeing construed as mandatory, the only discordant note being struck bythe Bombay High Court.

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7. Section 34(5) and (6) are set out hereunder 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 onlyafter issuing a prior notice to the other party and such applicationshall be accompanied by an affidavit by the applicant endorsingcompliance with the said requirement.

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

8. There is no doubt whatsoever that the language of Section 34does lend itself in support of the argument of Shri Tripathi, as theexpressions used are “shall”, “only after” and “prior notice” coupledDwith such application which again “shall” be accompanied by an affidavitendorsing compliance.

9. The 246[th] Law Commission Report, which introduced theaforesaid provision, also makes interesting reading, which is set outhereinbelow:

“3. The Arbitration and Conciliation Act, 1996 (hereinafter“the Act”) is based on the UNCITRAL Model Law onInternational Commercial Arbitration, 1985 and theUNCITRAL Conciliation Rules, 1980. The Act has now beenin force for almost two decades, and in this period of time,although arbitration has fast emerged as a frequently chosenalternative to litigation, it has come to be afflicted with variousproblems including those of high costs and delays, making itno better than either the earlier regime which it was intendedto replace; or to litigation, to which it intends to provide analternative. Delays are inherent in the arbitration process,and costs of arbitration can be tremendous. Even thoughcourts play a pivotal role in giving finality to certain issueswhich arise before, after and even during an arbitration, thereexists a serious threat of arbitration related litigation gettingcaught up in the huge list of pending cases before the courts.

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After the award, a challenge under section 34 makes the awardinexecutable and such petitions remain pending for severalyears. The object of quick alternative disputes resolutionfrequently stands frustrated.

4. There is, therefore, an urgent need to revise certainprovisions of the Act to deal with these problems that frequentlyarise in the arbitral process. The purpose of this Chapter isto lay down the foundation for the changes suggested in thereport of the Commission. The suggested amendments addressa variety of issues that plague the present regime of arbitrationin India and, therefore, before setting out the amendments, itwould be useful to identify the problems that the suggestedamendments are intended to remedy and the context in whichthe said problems arise and hence the context in which theirsolutions must be seen.

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25. Similarly, the Commission has found that challenges toarbitration awards under sections 34 and 48 are similarlykept pending for many years. In this context, the Commissionproposes the addition of sections 34(5) and 48(4) which wouldrequire that an application under those sections shall bedisposed of expeditiously and in any event within a period ofone year from the date of service of notice. In the case ofapplications under section 48 of the Act, the Commission hasfurther provided a time limit under section 48(3), which mirrorsthe time limits set out in section 34(3), and is aimed at ensuringthat parties take their remedies under this section seriouslyand approach a judicial forum expeditiously, and not by wayof an afterthought …………”

10. There is no doubt that the object of Section 34(5) and (6) is, ashas been stated by the Law Commission, the requirement that anapplication under Section 34 be disposed of expeditiously within a periodof one year from the date of service of notice. We have to examine asto whether this, by itself, is sufficient to construe Section 34(5) asmandatory, keeping in view the fact that if the time limit of one year isnot adhered to under Section 34(6), no consequence thereof is provided.

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A11. Some of the judgments of this Court throw considerable lighton similar provisions being construed as being only directory in nature.Thus, in Topline Shoes v. Corporation Bank, (2002) 6 SCC 33, Section13(2)(a) of the Consumer Protection Act, 1986, spoke of a reply beingfiled by the opposite party “within a period of 30 days or such extendedperiod not exceeding 15 days, as may be granted by the District Forum”.BThis Court referred to the Statement of Objects and Reasons of theConsumer Protection Act, 1986, which is similar to the object sought tobe achieved by the amendment made in Section 34(5) and (6) of theArbitration and Conciliation Act, 1996, as follows:

“8. The Statement of Objects and Reasons of the ConsumerCProtection Act, 1986 indicates that it has been enacted to promoteand protect the rights and interests of consumers and to providethem speedy and simple redressal of their grievances. Hence,quasi-judicial machinery has been set up for the purpose, atdifferent levels. These quasi-judicial bodies have to observe theDprinciples of natural justice as per clause 4 of the Statement ofObjects and Reasons, which reads as under:

“4. To provide speedy and simple redressal to consumerdisputes, a quasi-judicial machinery is sought to be set up atthe District, State and Central levels. These quasi-judicial bodiesEwill observe the principles of natural justice and have beenempowered to give reliefs of a specific nature and to award,wherever appropriate, compensation to consumers. Penaltiesfor non-compliance of the orders given by the quasi-judicialbodies have also been provided.”

(emphasis in original)

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Thus the intention to provide a time-frame to file reply, is reallymeant to expedite the hearing of such matters and to avoidunnecessary adjournments to linger on the proceedings on thepretext of filing reply. The provision, however, as framed, doesnot indicate that it is mandatory in nature. In case the extendedtime exceeds 15 days, no penal consequences are prescribedtherefor. The period of extension of time “not exceeding 15 days”,does not prescribe any kind of period of limitation. The provisionappears to be directory in nature, which the consumer forums are G

ordinarily supposed to apply in the proceedings before them. Wedo not find force in the submission made by the appellant-in-person,that in no event, whatsoever, the reply of the respondent could betaken on record beyond the period of 45 days. The provision ismore by way of procedure to achieve the object of speedy disposalof such disputes. It is an expression of “desirability” in strongterms. But it falls short of creating any kind of substantive right infavour of the complainant by reason of which the respondent maybe debarred from placing his version in defence in anycircumstances whatsoever. It is for the Forum or the Commissionto consider all facts and circumstances along with the provisionsof the Act providing time-frame to file reply, as a guideline, andthen to exercise its discretion as best as it may serve the ends ofjustice and achieve the object of speedy disposal of such caseskeeping in mind the principles of natural justice as well. The Forummay refuse to extend time beyond 15 days, in view of Section13(2)(a) of the Act but exceeding the period of 15 days ofextension, would not cause any fatal illegality in the order.”

The Court further held:

The Court further held:

“11. We have already noticed that the provision as contained underclause (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 theenactment, that there may be speedy disposal of such cases, thatit has been provided that reply is to be filed within 30 days and theextension of time may not exceed 15 days. This provisionenvisages that proceedings may not be prolonged for a very longtime without the opposite party having filed his reply. No penalconsequences have however been provided in case extension oftime exceeds 15 days. Therefore, it could not be said that anysubstantive right accrued in favour of the appellant or there wasany kind of bar of limitation in filing of the reply within extendedtime though beyond 45 days in all. The reply is not necessarily tobe rejected. All facts and circumstances of the case must be takeninto account. The Statement of Objects and Reasons of the Actalso provides that the principles of natural justice have also to bekept in mind.”

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A12. In Kailash (supra), this Court was faced with the questionwhether, after the amendment of Order VIII Rule 1 of the CPC by theAmendment Act of 2002, the said provision must be construed as beingmandatory. The provision is set out in paragraph 26 of the judgment asfollows:

B“26. The text of Order 8 Rule 1, as it stands now, reads as under:

“1. Written statement.—The defendant shall, within thirty daysfrom the date of service of summons on him, present a writtenstatement of his defence:

Provided that where the defendant fails to file the written statementCwithin the said period of thirty days, he shall be allowed to file thesame on such other day, as may be specified by the court, forreasons to be recorded in writing, but which shall not be later thanninety days from the date of service of summons.”

In an instructive judgment, this Court held:D

“27. Three things are clear. Firstly, a careful reading of the languagein which Order 8 Rule 1 has been drafted, shows that it casts anobligation on the defendant to file the written statement within 30days from the date of service of summons on him and within theextended time falling within 90 days. The provision does not dealEwith the power of the court and also does not specifically takeaway the power of the court to take the written statement onrecord though filed beyond the time as provided for. Secondly, thenature of the provision contained in Order 8 Rule 1 is procedural.It is not a part of the substantive law. Thirdly, the object behindsubstituting Order 8 Rule 1 in the present shape is to curb theFmischief of unscrupulous defendants adopting dilatory tactics,delaying the disposal of cases much to the chagrin of the plaintiffsand petitioners approaching the court for quick relief and also tothe serious inconvenience of the court faced with frequent prayersfor adjournments. The object is to expedite the hearing and not toGscuttle the same. The process of justice may be speeded up andhurried but the fairness which is a basic element of justice cannotbe permitted to be buried.

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30. It is also to be noted that though the power of the court underthe proviso appended to Rule 1 Order 8 is circumscribed by thewords “shall not be later than ninety days” but the consequencesflowing from non-extension of time are not specifically providedfor though they may be read in by necessary implication. Merelybecause a provision of law is couched in a negative languageimplying 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 provisioncame to be enacted, hold the same to be directory though wordedin the negative form.

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35. Two decisions, having a direct bearing on the issue arising fordecision before us, have been brought to our notice, one each bythe learned counsel for either party. The learned Senior Counselfor the appellant submitted that in Topline Shoes Ltd. v. Corpn.Bank [(2002) 6 SCC 33] a pari materia provision contained inSection 13 of the Consumer Protection Act, 1986 came up for theconsideration of the Court. The provision requires the oppositeparty to a complaint to give his version of the case within a periodof 30 days or such extended period not exceeding 15 days as maybe granted by the District Forum. The Court took into considerationthe Statement of Objects and Reasons and the legislative intentbehind providing a time-frame to file reply and held: (i) that theprovision as framed was not mandatory in nature as no penalconsequences are prescribed if the extended time exceeds 15days, and; (ii) that the provision was directory in nature and couldnot be interpreted to mean that in no event whatsoever the replyof the respondent could be taken on record beyond the period of45 days.

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46. We sum up and briefly state our conclusions as under:

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(iv) The purpose of providing the time schedule for filing the writtenstatement under Order 8 Rule 1 CPC is to expedite and not toscuttle the hearing. The provision spells out a disability on the AB

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Adefendant. It does not impose an embargo on the power of thecourt to extend the time. Though the language of the proviso toRule 1 Order 8 CPC is couched in negative form, it does notspecify any penal consequences flowing from the non-compliance.The provision being in the domain of the procedural law, it has tobe held directory and not mandatory. The power of the court toBextend time for filing the written statement beyond the timeschedule provided by Order 8 Rule 1 CPC is not completely takenaway.

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C13. To similar effect are the observations of this Court in SalemAdvocate Bar Association v. Union of India, (2005) 6 SCC 344 atparagraph 20, which is reproduced hereinbelow:

“20. The use of the word “shall” in Order 8 Rule 1 by itself is notconclusive to determine whether the provision is mandatory orDdirectory. We have to ascertain the object which is required to beserved by this provision and its design and context in which it isenacted. The use of the word “shall” is ordinarily indicative ofmandatory nature of the provision but having regard to the contextin which it is used or having regard to the intention of the legislation,the same can be construed as directory. The rule in question hasEto advance the cause of justice and not to defeat it. The rules ofprocedure are made to advance the cause of justice and not todefeat it. Construction of the rule or procedure which promotesjustice and prevents miscarriage has to be preferred. The rules ofprocedure are the handmaid of justice and not its mistress. In theFpresent context, the strict interpretation would defeat justice.”

14. However, a discordant note was struck by a Judgment dated04.12.2015, reported in New India Assurance Co. Ltd. v. HilliMultipurpose Cold Storage Pvt. Ltd., (2015) 16 SCC 20. A Benchof three learned Judges resurrected the judgment of J.J. MerchantG(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 Courtin J.J. Merchant (Dr.) v. Shrinath Chaturvedi [(2002) 6 SCC635] wherein we find a reference made to Order 8 Rule 1 CPCH

vide paras 14 and 15 thereof and the Court having said that themandate of the law is required to be strictly adhered to. A carefulreading of the judgment shows that the provisions of Order 8Rule 1 CPC did not directly arise for consideration before theCourt and to that extent the observations made by the Court areobiter. Also, the attention of the Court was not invited to theearlier decision of this Court in Topline Shoes Ltd. case [(2002)6 SCC 33].”

Despite this observation, New India Assurance Co. Ltd. (supra)went on to follow the judgment in J.J. Merchant (supra), and stated:

“25. We are, therefore, of the view that the judgment delivered inJ.J. Merchant [J.J. Merchant v. Shrinath Chaturvedi, (2002)6 SCC 635] holds the field and therefore, we reiterate the viewthat the District Forum can grant a further period of 15 days tothe opposite party for filing his version or reply and not beyondthat.

26. There is one more reason to follow the law laid down in J.J.Merchant (supra). J.J. Merchant (supra) was decided in 2002,whereas Kailash [Kailash v. Nanhku, (2005) 4 SCC 480] wasdecided in 2005. As per law laid down by this Court, while decidingKailash (supra), this Court ought to have respected the viewexpressed in J.J. Merchant (supra) as the judgment delivered inJ.J. Merchant (supra) was earlier in point of time. The aforestatedlegal position cannot be ignored by us and therefore, we are ofthe opinion that the view expressed in J.J. Merchant (supra) shouldbe followed.”

15. J.J. Merchant (supra) arose out of a miscellaneous petitionwhich was filed before the National Consumer Disputes RedressalCommission, praying that the complaint filed for alleged medical negligencebe decided by the Civil Court, as complicated questions of law arise. Acriminal prosecution against the said doctors was also pending. Inparagraph 4 of the judgment, the Court stated that some guidelines needto be laid down with regard to the type of cases which the ConsumerForum will not entertain. After noticing that there was an inordinatedelay of almost nine years in disposal of the complaint, this Court feltthat such delay would not be a ground for rejecting the complaint and fordirecting the complainant to approach the Civil Court. In answering the AB

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Acontention that complicated questions of fact cannot be decided insummary proceedings, this Court held that speedy trial does not meanthat justice cannot be done when questions of fact are to be dealt withand decided. It was in this context of speedy trial that the Court made anobservation about the legislative mandate of not granting more than 45days in submitting the written statement. In fact, the Court was alive toBthe fact that there was no time frame under the unamended ConsumerProtection Act, 1986 for disposing of complaints, appeals and revisions.This Court, therefore, stated:

“23. For reducing the arrears and for seeing that complaints,appeals and revisions are decided speedily and within the stipulatedCtime, we hope that the President of the National Commission woulddraw the attention of the Government for taking appropriate actionswithin the stipulated time and see that the object and purpose ofthe Act is not frustrated.

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25. It can be hoped that the National Commission would ensureits best to see that District Forums, State Commissions and theNational Commission can discharge its functions as efficientlyand speedily as contemplated by the provisions of the Act. TheNational Commission has administrative control over all the StateECommissions inter alia for issuing of instructions regardingadoption of uniform procedure in hearing of the matters etc. Itwould have also administrative control in overseeing that thefunctions of the State Commissions or District Forums aredischarged in furtherance of the objects and purposes of the Actin the best manner.”F

The Court then referred to the Consumer Protection (Amendment)Bill, 2002, which envisaged insertion of sub-section (3-A) in Section 13of the Act, which reads as under:

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“13. (3-A) Every complaint shall be heard as expeditiously aspossible and endeavour shall be made to decide the complaintwithin a period of three months from the date of receipt of noticeby opposite party where the complaint does not require analysisor testing of commodities and within five months if it requiresHanalysis or testing of commodities:

Provided that no adjournment shall be ordinarily granted bythe District Forum unless sufficient cause is shown and thereasons for grant of adjournment have been recorded in writingby the Forum:

Provided further that the District Forum shall make such ordersas to the costs occasioned by the adjournment as may beprovided in the regulations made under this Act.”

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31. From the wording of the aforesaid section, it is apparent thatthere is legislative mandate to the District Forum or theCommissions to dispose of the complaints as far as possible withinthe prescribed time of three months by adhering strictly to theprocedure prescribed under the Act. The opposite party has tosubmit its version within 30 days from the date of the receipt ofthe complaint by him and the Commission can give at the mostfurther 15 days for some unavoidable reasons to file its version.”

The Court was, therefore, alive to the fact that no consequence isprescribed for non-adherence to the time limit of three months. In theresult, the case was disposed of with certain directions for avoiding delayin disposal of proceedings under the Consumer Protection Act, 1986.

16. It will thus be seen that there was no focused argument inJ.J. Merchant (supra) on whether the provisions of Section 13(2)(a)of the Consumer Protection Act, 1986 could be held to be directory in asmuch as no consequence was provided for a written statement beingfiled beyond 45 days. In point of fact, this Court’s judgment in ToplineShoes (supra) was not even cited before the Bench hearing J.J.Merchant (supra).

17. In this view of the matter, it is a little difficult to appreciatehow the three-Judge Bench in Kailash (supra) ought to have respectedan obiter dictum view of Order VIII Rule 1, CPC in J.J. Merchant(supra). Unfortunately, what was missed in New India Assurance Co.Ltd. (supra) is paragraph 38 of Kailash (supra) which has beenextracted hereinabove. The fact that Topline Shoes (supra) was notcited before the three-Judge Bench in J.J. Merchant (supra), as hasbeen held in paragraph 38 of Kailash (supra), would render the aforesaidjudgment vulnerable on Section 13(2)(a) of the Consumer ProtectionAct, 1986 being held to be mandatory. An earlier judgment cannot be A

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Aoverruled 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 extendedtime of 15 days was exceeded; that therefore, no substantive right accruedin favour of the claimant; and that the Statement of Objects and Reasonsof the Act also provided that the principles of natural justice be kept inBmind. The judgment in New India Assurance Co. Ltd. (supra) did notrefer to paragraph 38 of Kailash (supra) or appreciate that J.J.Merchant (supra) was distinguished correctly on the ground that OrderVIII Rule 1, CPC did not directly arise for consideration in J.J. Merchant(supra). The observations on Order VIII Rule 1, CPC in paragraphs 14Cand 15 of J.J. Merchant (supra) were correctly held to be in the natureof obiter dicta, and therefore, not binding on the three-Judge Bench ofKailash (supra). Insofar as Kailash (supra) is concerned, it is a bindingjudgment on the effect of Order VIII Rule 1, CPC, whose reasoning hasbeen confirmed by a three-Judge Bench in Salem Bar Association(supra).D

18. In State v. N.S. Gnaneswaran, (2013) 3 SCC 594, this Courtwas concerned with whether Section 154(2) of the Code of CriminalProcedure, 1973 was mandatory or directory. The said Section reads asfollows:“E154. Information in cognizable cases.—

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(2) A copy of the information as recorded under sub-section (1)shall be given forthwith, free of cost, to the informant.”

Despite the mandatory nature of the language used in the provision,Fno consequence was provided if the Section was breached. This Courtreferred to a number of judgments which laid down tests for determiningwhether a provision is mandatory or directory, and then held that Section154(2) was directory.

19. However, Shri Tripathi has relied strongly upon the judgmentGof Bikhraj Jaipuria v. Union of India, (1962) 2 SCR 880. In thatcase, this Court held that the provision contained in Section 175(3) of theGovernment of India Act, 1935, which requires that contracts on behalfof the Government of India shall be executed in the form prescribed,was mandatory in nature, despite the fact that the Section did not set outHany consequence for non-compliance. This Court referred to an instructive

passage in Maxwell on Interpretation of Statutes, 10[th] Edn, p. 376, asfollows:

“It has been said that no rule can be laid down for determiningwhether the command is to be considered as a mere direction orinstruction involving no invalidating consequence in its disregard,or as imperative, with an implied nullification for disobedience,beyond the fundamental one that it depends on the scope andobject of the enactment. It may perhaps be found generally correctto say that nullification is the natural and usual consequence ofdisobedience, but the question is in the main governed byconsiderations of convenience and justice, and when that resultwould involve general inconvenience or injustice to innocentpersons, or advantage to those guilty of the neglect, withoutpromoting the real aim and object of the enactment, such anintention is not to be attributed to the legislature. The whole scopeand purpose of the statute under consideration must be regarded.”[1]

It then went on to hold that the provision was in the interest of thegeneral public because the question whether a binding contract has beenmade between the State and the private individual should not be leftopen to dispute and litigation. We must not forget that, as has been laiddown in Maxwell (supra), considerations of convenience and justice areuppermost, and if general inconvenience or injustice results, withoutpromoting the real aim and object of the enactment, the provision mustbe declared to be directory.

20. It will thus be seen that Section 34(5) does not deal with thepower of the Court to condone the non-compliance thereof. It isimperative to note that the provision is procedural, the object behindwhich is to dispose of applications under Section 34 expeditiously. Onemust remember the wise observation contained in Kailash (supra), wherethe object of such a provision is only to expedite the hearing and not toscuttle the same. All rules of procedure are the handmaids of justice andif, in advancing the cause of justice, it is made clear that such provisionshould be construed as directory, then so be it.

21. Take the case of Section 80 of the CPC. Under the saidprovision, the Privy Council and then our Court have consistently takenthe view that a suit against the Government cannot be validly instituted 1 Bikhraj Jaipuria v. Union of India, (1962) 2 SCR 880, para 16.

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Auntil after the expiration of two months after the notice in writing hasbeen delivered to the parties concerned in the manner prescribed by thesaid Section. If such suit is filed either without such notice or before thesaid two months’ period is over, such suit has to be dismissed as notmaintainable. The reason for this is felicitously set out in BihariChowdhary and Anr. v. State of Bihar and Ors., (1984) 2 SCC 627,Bas follows:

“3. …… When we examine the scheme of the section it becomesobvious that the section has been enacted as a measure of publicpolicy with the object of ensuring that before a suit is institutedagainst the Government or a public officer, the Government orCthe officer concerned is afforded an opportunity to scrutinise theclaim in respect of which the suit is proposed to be filed and if itbe found to be a just claim, to take immediate action and therebyavoid unnecessary litigation and save public time and money bysettling the claim without driving the person, who has issued theDnotice, to institute the suit involving considerable expenditure anddelay. The Government, unlike private parties, is expected toconsider the matter covered by the notice in a most objectivemanner, after obtaining such legal advice as they may think fit,and take a decision in public interest within the period of twomonths allowed by the section as to whether the claim is just andEreasonable and the contemplated suit should, therefore, be avoidedby speedy negotiations and settlement or whether the claim shouldbe resisted by fighting out the suit if and when it is instituted.There is clearly a public purpose underlying the mandatory provisioncontained in the section insisting on the issuance of a notice settingFout the particulars of the proposed suit and giving two months’time to Government or a public officer before a suit can be institutedagainst them. The object of the section is the advancement ofjustice and the securing of public good by avoidance ofunnecessary litigation.”

G22. Section 80, though a procedural provision, has been held to bemandatory as it is conceived in public interest, the public purposeunderlying it being the advancement of justice by giving the Governmentthe opportunity to scrutinize and take immediate action to settle a justclaim without driving the person who has issued a notice having to institutea suit involving considerable expenditure and delay. This is to beH

contrasted with Section 34(5), also a procedural provision, the infractionof which leads to no consequence. To construe such a provision as beingmandatory would defeat the advancement of justice as it would providethe consequence of dismissing an application filed without adhering tothe requirements of Section 34(5), thereby scuttling the process of justiceby burying the element of fairness.

23. However, according to Shri Tripathi, an application filed underSection 34 is a condition precedent, and if no prior notice is issued to theother party, without being accompanied by an affidavit by the applicantendorsing compliance with the said requirement, such application, beinga non-starter, would have to be dismissed at the end of the 120 days’period mentioned in Section 34(3). Apart from what has been stated byus hereinabove, even otherwise, on a plain reading of Section 34, thisdoes not follow. Section 34(1) reads as under:

“34. Application for setting aside arbitral award.—(1)Recourse to a Court against an arbitral award may be made onlyby an application for setting aside such award in accordance withsub-section (2) and sub-section (3).”

What is conspicuous by its absence is any reference to sub-section(5). The only requirement in Section 34(1) is that an application for settingaside an award be in accordance with sub-sections (2) and (3). This,again, is an important pointer to the fact that even legislatively, sub-section (5) is not a condition precedent, but a procedural provision whichseeks to reduce the delay in deciding applications under Section 34. Oneother interesting thing needs to the noted – the same Amendment Actbrought in a new Section 29A. This provision states as follows:

“29A. Time limit for arbitral award.— (1) The award shall bemade within a period of twelve months from the date the arbitraltribunal enters upon the reference.

Explanation.— For the purpose of this sub-section, an arbitraltribunal shall be deemed to have entered upon the reference onthe date on which the arbitrator or all the arbitrators, as the casemay be, have received notice, in writing, of their appointment.

(2) If the award is made within a period of six months from thedate the arbitral tribunal enters upon the reference, the arbitraltribunal shall be entitled to receive such amount of additional feesas the parties may agree.

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A(3) The parties may, by consent, extend the period specified insub-section (1) for making award for a further period not exceedingsix months.

(4) If the award is not made within the period specified in sub-section (1) or the extended period specified under sub-sectionB(3), the mandate of the arbitrator(s) shall terminate unless theCourt has, either prior to or after the expiry of the period sospecified, extended the period:

Provided that while extending the period under this sub-section, ifthe court finds that the proceedings have been delayed for theCreasons attributable to the arbitral tribunal, then, it may orderreduction of fees of arbitrator(s) by not exceeding five per centfor each month of such delay.”

24. It will be seen from this provision that, unlike Section 34(5)Dand (6), if an Award is made beyond the stipulated or extended periodcontained in the Section, the consequence of the mandate of the Arbitratorbeing terminated is expressly provided. This provision is in stark contrastto Section 34(5) and (6) where, as has been stated hereinabove, if theperiod for deciding the application under Section 34 has elapsed, noconsequence is provided. This is one more indicator that the sameEAmendment 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 ofSection 34(6) and is a mandatory requirement of law by itself. There aretwo answers to this. The first is that sub-section (6) refers to the date onFwhich the notice referred to in sub-section (5) is served upon the otherparty. This is for the reason that an anterior date to that of filing theapplication is to be the starting point of the period of one year referred toin Section 34(6). The express language of Section 34(6), therefore,militates against this submission of Shri Tripathi. Secondly, even if sub-Gsection (5) be construed to be a provision independent of sub-section(6), the same consequence in law is the result – namely, that there is noconsequence provided if such prior notice is not issued. This submissionmust therefore fail.

26. We come now to some of the High Court judgments. TheHigh Courts of Patna,[2] Kerala,[3] Himachal Pradesh,[4] Delhi,[5] and Gauhati[6]have all taken the view that Section 34(5) is mandatory in nature. Whatis strongly relied upon is the object sought to be achieved by the provisiontogether with the mandatory nature of the language used in Section 34(5).Equally, analogies with Section 80, CPC have been drawn to reach thesame result. On the other hand, in Global Aviation Services PrivateLimited v. Airport Authorities of India,[7] the Bombay High Court, inanswering question 4 posed by it, held, following some of our judgments,that the provision is directory, largely because no consequence has beenprovided for breach of the time limit specified. When faced with theargument that the object of the provision would be rendered otiose if itwere to be construed as directory, the learned Single Judge of the BombayHigh Court held as under:

“133. Insofar as the submission of the learned counsel for therespondent that if section 34(5) is considered as directory, theentire purpose of the amendments would be rendered otiose isconcerned, in my view, there is no merit in this submission madeby the learned counsel for the respondent. Since there is noconsequence provided in the said provision in case of non-compliance thereof, the said provision cannot be considered asmandatory. The purpose of avoiding any delay in proceeding withthe matter expeditiously is already served by insertion ofappropriate rule in Bombay High Court (Original Side) Rules. TheCourt can always direct the petitioner to issue notice along withpapers and proceedings upon other party before the matter isheard by the Court for admission as well as for final hearing. Thevested rights of a party to challenge an award under section 34cannot be taken away for non-compliance of issuance of priornotice before filing of the arbitration petition.”

2 Bihar Rajya Bhumi Vikas Bank Samiti v. State of Bihar and Ors., L.P.A. No. 1841 of2016 in C.W.J.C. No. 746 of 2016 [decided on 28.10.2016].

3 Shamsudeen v. Shreeram Transport Finance Co. Ltd., Arb. A. No. 49 of 2016 [decidedon 16.02.2017].

4 Madhava Hytech Engineers Pvt. Ltd. v. The Executive Engineers and Ors., O.M.P.(M) No. 48 of 2016 [decided on 24.08.2017].

5 Machine Tool (India) Ltd. v. Splendor Buildwell Pvt. Ltd. and Ors., O.M.P. (COMM.)199-200 of 2018 [decided on 29.05.2018].

6 Union of India and Ors. v. Durga Krishna Store Pvt. Ltd., Arb. A. 1 of 2018 [decidedon 31.05.2018].

7 Commercial Arbitration Petition No. 434 of 2017 [decided on 21.02.2018].

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AThe aforesaid judgment has been followed by recent judgmentsof the High Courts of Bombay[8] and Calcutta.[9]

27. We are of the opinion that the view propounded by the HighCourts of Bombay and Calcutta represents the correct state of the law.However, we may add that it shall be the endeavour of every Court inBwhich a Section 34 application is filed, to stick to the time limit of oneyear from the date of service of notice to the opposite party by theapplicant, or by the Court, as the case may be. In case the Court issuesnotice after the period mentioned in Section 34(3) has elapsed, everyCourt shall endeavour to dispose of the Section 34 application within aperiod of one year from the date of filing of the said application, similarCto what has been provided in Section 14 of the Commercial Courts,Commercial Division and Commercial Appellate Division of High CourtsAct, 2015. This will give effect to the object sought to be achieved byadding Section 13(6) by the 2015 Amendment Act.

28. We may also add that in cases covered by Section 10 readDwith Section 14 of the Commercial Courts, Commercial Division andCommercial Appellate Division of High Courts Act, 2015, the CommercialAppellate Division shall endeavour to dispose of appeals filed before itwithin six months, as stipulated. Appeals which are not so covered willalso be disposed of as expeditiously as possible, preferably within oneEyear from the date on which the appeal is filed. As the present appealhas succeeded on Section 34(5) being held to be directory, we have notfound it necessary to decide Shri Rai’s alternative plea of maintainabilityof the Letters Patent Appeal before the Division Bench.

29. As a result, the appeal is allowed and the judgment of theFPatna High Court is set aside. The Section 34 petition that has been filedin the present case will now be disposed of on its merits.

Kalpana K. Tripathy

Appeal allowed.

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8 Maharashtra State Road Development Corporation Ltd. v. Simplex Gayatri Consortiumand Ors., Commercial Arbitration Petition No. 453 of 2017 [decided on 19.04.2018].9 Srei Infrastructure Finance Limited v. Candor Gurgaon Two Developers and ProjectsPvt. Ltd., A.P. No. 346 of 2018 [decided on 12.07.2018].

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