The Nature of Section 34(5): Procedural Requirement or Mandatory condition?
Introduction
The Arbitration and Conciliation Act, 1996 was enacted with the objective of providing a speedy and cost-effective alternative to traditional court litigation. Section 34 of the act provides a statutory remedy through which a party can challenge an arbitral award before the court. The Arbitration and Conciliation (Amendment) Act, 2015 introduced Section 34(5) as an amendment to Section 34 with the objective of reducing delays in arbitration related litigation. This section requires an applicant to issue a prior notice to the opposite party and file an affidavit confirming such compliance before applying to set aside an arbitral award under section 34. The introduction of this provision gave rise to an important question, that is, whether compliance with Section 34(5) is mandatory and whether failure to issue a prior notice or filing an affidavit would render a Section 34 application invalid. This article focuses on Supreme Court’s stand on this issue and the reasoning for its decision through the leading authority on this issue:
State of Bihar v Bihar Rajya Bhumi Vikas Bank Samiti (2018) 9 SCC 472
Facts: The appeal by special leave arose out of an arbitration proceeding which commenced on May 24, 2015, and an award was made on January 06, 2016. Thereafter, a petition based on Section 34 challenging the said award was filed on April 05, 2016, before the Patna High Court, but notice to the opposite party was issued by Court on July 18, 2016. The common contention raised therein was that no prior notice was issued to the other party nor was an affidavit attached as required by Section 34(5), despite its apparent enforcement. Finally, the judgment to this effect was delivered on July 30, 2018, by a two-judge Bench of Justices Rohintan Fali Nariman and Indu Malhotra.
Held: The law with regard to the nature of Section 34(5) is directory not mandatory and therefore the vested right of a party to challenge an arbitral award under section 34 cannot be taken away for non-compliance of issuance of prior notice before filing of arbitration petitions.
Legislative Intent
The Provision under Section 34(5) of the Act reads:
Section 34(5): “An application under this section shall be filed by 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.”
Section 34(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 subsection (5) is served upon the other party.”
At first glance the use of the word “shall” appears to indicate that adherence with the requirement is mandatory, However, judicial interpretation has clarified that the provision must be understood in the context of its purpose and the overall scheme of the Act itself. The Court held that the use of the word “shall” does not automatically make a provision mandatory. It observed that Section 34(5) is a procedural requirement intended to enable speedy disposal of section 34 petitions. Importantly, the provision does not prescribe any consequences for non-compliance. The Court emphasized that procedural provisions should advance the cause of justice not defeat substantive rights.
Further, the Supreme Court made an in-depth analysis of the provisions and examined various precedents to determine the nature of Section 34(5) and (6) of the act, through which the actual legislative intent of this amendment can be understood.
This understanding begins with examining the 246th Law Commission Report, 2014, the core purpose of which was to better the Indian arbitration experience by limiting judicial intervention and fast-tracking the arbitration process. The Commission observed that challenges to arbitral awards frequently remain pending for several years and suggested procedural reforms to ensure expeditious disposal of such applications. The objective was to reduce delays and improve efficiency in arbitration and related cases rather than to create an additional hurdle for parties simply seeking to challenge an award. Therefore, Section 34(5) was part of the legislature’s attempt to promote expeditious disposal of applications challenging arbitral awards.
The reasoning adopted by the court is consistent with past judgements in procedural law. In Kailash v Nankhu (2005) 4 SCC 480, the Supreme Court held that procedural rules are meant to enable justice and should not be interpreted in a way that defeats judgements on merits. Similarly, in Salem Advocate Bar Association v Union of India (2005) 6 SCC 334 the court stated that using the word “shall” usually mandates the rule, however, interpretation depends on context as “the rules of procedure are the handmaid of justice not its mistress” and hence can be interpreted as directory.
Conclusion
Section 34(5) is a procedural mechanism introduced to ensure expeditious disposal of applications challenging arbitral awards. The SC in the leading authority clarified that the provision is directory not mandatory. Since the purpose of the provision is to promote efficiency rather than restrict access to judicial remedies, non-compliance with the requirement of prior notice and affidavit does not render a section 34 application invalid. The decision reinforces the principle that procedural law should serve as a tool for achieving justice rather than a technical obstacle to it.
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Author Name: Ritupriya Mukherjee | College: OP Jindal Global University, Jindal Global Law School | Course: BA LLB (2030) | Year: 1st Year (2025–2026) | Email ID: ritupriya2007a@gmail.com
