SC: Prior Notice u/S 34(5) of Arbitration Act is not Mandatory


July 31, 2018

Case name: The State of Bihar & Ors. v. Bihar Rajya Bhumi Vikas Bank Samiti


The seminal issue that fell for consideration before the Two-Judge Bench of the Supreme Court was whether Section 34(5) of the Arbitration and Conciliation Act, 1996, inserted by Amending Act 3 of 2016 is mandatory or directory?

The newly inserted Section 34(5) of the Arbitration Act stipulates that an application for setting aside an arbitral award under Section 34 shall be filed only after issuing a prior notice to the other party.

The High Court of Patna in the case held that the impugned provision was only directory. The Appellant in the case has thus assailed the High Court’s judgment.

The Supreme Court in the case, in view of the prevailing law has held that the statutory provision under Section 34(5) of the Arbitration Act is directory in nature and not mandatory.

While pronouncing its verdict, the Apex Court inter alia made the following observations in the case:

“That the provision under Section 34(5) is procedural, the object behind which is to dispose of applications under Section 34 expeditiously.

That the only requirement in Section 34(1) is that an application for setting aside 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 which seeks to reduce the delay in deciding applications under Section 34.

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 Court, as the case may be.”

The entire case can be accessed here.

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