2018 (5) TMI 1750 - HC - Indian Laws

Arbitration award - Section 34(5) of the Arbitration and Conciliation Act, 1996 - issuance of prior notice to the party - Held that - Section 34(5) was inserted by way of amendment under the Arbitration and Conciliation (Amendment) Act, 2015, made effective from 23.10.2015. Section 34(5) was inserted by way of amendment under the Arbitration and Conciliation (Amendment) Act, 2015, made effective from 23.10.2015 - A perusal of the aforesaid provision under Section 26 of the Amendment Act, it is seen that arbitral proceedings which have commenced in accordance with the provisions of Section 21 of the principal Act would remain unaffected by the Amendment Act unless the parties otherwise agree. The terms and conditions of the Contract in question are governed under the General Conditions of Contract, 1998. The application filed by the appellants under Section 34 of the Act was not maintainable in the absence of compliance of the mandate of Section 34(5) of the Act - appeal dismissed.

Summary

Issues:
1. Applicability of Section 34(5) of the Arbitration and Conciliation Act, 1996 to the case.
2. Interpretation of Section 26 of the Arbitration and Conciliation (Amendment) Act, 2015.
3. Compliance with mandatory requirements before filing an application under Section 34 of the Act.

Analysis:

Issue 1: Applicability of Section 34(5) of the Arbitration and Conciliation Act, 1996

The case involved an arbitration appeal against the dismissal of a case under Section 34 of the Arbitration and Conciliation Act, 1996. The dispute arose from a contract related to the construction of a railway line. The appellants filed an application under Section 34 challenging the Arbitral Award on specific claim numbers. The sole respondent raised a preliminary objection that the application was not maintainable as the appellants did not comply with the mandatory requirement of issuing a prior notice under Section 34(5) of the Act. The court below accepted this objection, leading to the dismissal of the application. The appellant contended that Section 34(5) should not apply retroactively as the arbitration proceedings had commenced before the amendment that introduced this requirement. However, the court held that the application was not maintainable due to non-compliance with Section 34(5).

Issue 2: Interpretation of Section 26 of the Arbitration and Conciliation (Amendment) Act, 2015

Section 34(5) was inserted through an amendment in the Arbitration and Conciliation (Amendment) Act, 2015, effective from 23.10.2015. Section 26 of the Amendment Act clarified that the new provisions would not apply to ongoing arbitral proceedings unless the parties agreed otherwise. In this case, the contract terms specified arbitration under the General Conditions of Contract, 1998, which incorporated the Arbitration and Conciliation Act. The court emphasized that the word "only" in Section 34(5) had a mandatory character, as interpreted by the Supreme Court in a previous case. Considering the terms of the contract and the exception in Section 26 of the Amendment Act, the court concluded that Section 34(5) was applicable to the case.

Issue 3: Compliance with mandatory requirements before filing an application under Section 34 of the Act

The court, after analyzing Section 26 of the Amendment Act and the interpretation of the word "only," found that the appellants' application under Section 34 was not maintainable due to non-compliance with the requirements of Section 34(5). The court upheld the lower court's decision to dismiss the application. Consequently, the appeal was deemed meritless and dismissed without costs, with the interim order vacated.

This detailed analysis of the judgment highlights the key issues surrounding the applicability of Section 34(5) of the Arbitration and Conciliation Act, 1996, and the interpretation of relevant provisions in the Amendment Act, providing a comprehensive understanding of the legal reasoning behind the decision.