Section 34(3) and Non-est Filings: Finding the Middle Ground

[This is a Guest Post by Mansi Sood, who is a Delhi-based lawyer.]

In the past year, a series of judgments by the Delhi High Court have chalked out the contours of S.34(3) of the 1996 Act in the context of non-est filings. While their pro-arbitration stance is exemplary, their inconsistency and over-enthusiastic intervention undermine any positive takeaways. In this post, I highlight the impact of these decisions and argue that a more balanced and less intrusive approach is both possible and necessary.

The interpretation of the term ‘non-est’ in an arbitration context is best outlined in the 2013 judgment of DDA v. Durga Construction Co., which dealt with a key question i.e. whether delay in re-filing a S.34 petition beyond the statutory limitation period of 3 months and 30 days under Section 34(3) can be condoned. Although it ultimately refused to condone the delay on facts, this decision lent clarity on two important points:

  • S.34(3) is applicable only to the initial filing of the petition and not to anything thereafter; filing and re-filing stand on different footings [subsequently affirmed by the Supreme Court in Northern Railway] and courts can condone re-filing delays, even beyond the statutory period. The rationale being that once a party demonstrates its intention to take recourse to its legal remedies, it cannot be assumed that it has given up its rights.
  • The only exception to this rule is in cases where the initial filing is hopelessly inadequate and insufficient or contains defects which are fundamental to the institution of the proceedings, such that the filing is non-est i.e. of no consequence. In such cases, the initial date of filing will be treated as the date on which a ‘proper’ petition is filed. Further, the determination of a non-est petition is based on the nature of the defects i.e. defects that are not formal or ancillary and would render the petition as an invalid pleading in law will make it non-est.

Thus, the court’s scrutiny of applications for condonation of delay under S.34(3) is effectively divided into two stages – a determination of whether the petition was non-est, followed by an examination of sufficient cause (for filing delays) and/or due diligence (for re-filing delays).

This formula was reiterated and applied in several subsequent cases. Three, in particular, are relevant. For brevity, their specific facts are not repeated here. However, it is pertinent that in all three cases, the initial filing was without signatures, vakalatnama, affidavits and the statement of truth.

In SKS Power Generation Ltd. v. ISC Projects Pvt. Ltd., the court placed reliance on Sravanthi Infratech and Durga Construction and held that the initial filing was deliberately mischievous and merely intended to stop the running of limitation. It observed that despite the individual defects being procedural (and presumably non-fatal), they could collectively be ‘fundamental’ enough to qualify a petition as non-est. In doing so, it took the Durga Construction line of reasoning further and illustrated the kind of defects that would qualify as ‘not formal or ancillary’. On the flip side, its narrow tailoring also created ambiguity by leaving their individual status open – if only one of these defects was present, would it still be a non-est petition?

The second important ruling, on nearly identical facts, came in Director-cum-Secretary, Department of Social Welfare v. Sarvesh Security Services. Here, the court attempted to positively outline the specific compliances required for a ‘proper’ petition i.e. “signatures of the parties, the affidavits accompanying the petition and the vakalatnama” and laid emphasis on due diligence. Its reasoning suggested that these defects are not individually fatal and the delay on this account could be condoned in light of a reasonable explanation – an interpretation that was explicitly negated in ONGC v. Joint Venture of M/s. SREE and M/s. MEIL.

After an extensive survey, the court in ONGC laid down the basic parameters necessary for an authentic and ‘proper’ petition, as follows:

(1) Signature of the party and advocate on each page and the last page of the petition

 (2) Vakalatnama signed by the party and advocate, with the party’s signature being identified by the advocate

(3) Statement of Truth/Affidavit signed by the party and attested by the Oath Commissioner

This cemented the elevation of procedural defects to something more substantive and clarified that the absence of even one would prove fatal; by implication, it gave short shrift to the role of due diligence, making compliance of the fundamental pre-requisites a binary question. In my view, while these cases discouraged half-baked and routine petitions under S.34, their hyper-technical view sent them down the slippery slope of creeping judicial intervention.

It is notable here that all three decisions have been rendered by coordinate benches. Until a higher bench positively settles this issue, the differences in the minutiae of the ‘basic pre-requisites’ across the three decisions will result in ambiguity and differing standards of application. For instance, ONGC states that signatures must be appended to each page, whereas previous decisions had limited this to signature on the last page of the petition. This successive addition of new pre-requisites erodes certainty in the law and leaves parties dependent on the court’s discretion.

Union of India v. Bharat Biotech is but one example of this. Here, even though the initial filing had a vakalatnama, statement of truth/affidavit and signatures (albeit with some deficiencies), the non-filing of the impugned arbitral award proved fatal. Strictly speaking, annexing the arbitral award was not one of the ONGC pre-requisites; and yet, the court chose to base its decision primarily on its absence, holding it to be ‘a defect of such gravity that it would render the original filing as a mere dummy filing’. It appears from this decision that complying with the pre-requisites for a proper filing laid down in ONGC is not sufficient. As such, there is no way to assess whether the petition being filed is proper or non-est.

Therefore, when put together, these cases raise three important questions.

First, what is the extent of a court’s power to elevate procedural defects into substantive faults that can deprive a party of the right to agitate the merits of its case? Surely, the oft quoted adage “procedure is the handmaiden of justice” has not become so old that it can be completely overridden. There is no doubt that ensuring the authenticity of filings and discouraging parties from making dummy petitions are laudable goals. And perhaps the peculiar facts of these decisions were gross enough to warrant dismissal. But even so, it seems logical that the purpose of authentic filings would be better served by an unambiguous rule preventing changes to the body and substance of the petition, rather than microscopic requirements for accompanying documents. In fact, by removing the scope for altering the very petition that is being authenticated, this could perhaps ensure that the attendant procedural compliances are also completed in the first go.

Second, what happens in cases that do not fall in the black or white but in the grey? If the purpose of these pre-requisites is to establish authenticity, errors which do not render a petition ‘hopelessly inadequate’ should not deprive a party of the chance to contest on merits. This could include instances involving substantial but not full compliance as also intricacies of individual v. cumulative defects. And yet, the ONGC approach does not even follow its own logic. Not only is its adoption of a binary approach in this singular category of cases arbitrary and inconsistent, it also crosses the boundary between making and interpreting rules. Further, by losing sight of its self-professed goal of ensuring authenticity and instead, micro-managing filing specifications through judicial pronouncement, the court risks wasting future judicial time. In turn, this has the potential to clog up an already over-burdened legal system and deprive commercial parties of the quick and painless adjudication of disputes promised to them. While procedural requirements are certainly not dispensable, they cannot be used as funnels either; doing so renders the procedure-substance separation obsolete. Instead, courts could strike a more commercially-minded balance by imposing heavier costs on irresponsible litigants, without depriving them of a substantive hearing altogether.

Third, what are the precise standards of scrutiny applicable to filing and re-filing delays? While the answer to this issue should be obvious in light of Durga Construction, in practice, courts continue to examine the ‘overall conduct’ of the parties, particularly within the 3-month-and-30-day period. This blurring of the lines gives the impression that parties must clear all defects before the 3-month-and-30-day deadline, which is incorrect and has no basis in the 1996 Act or the Delhi High Court Original Side Rules, 2018. This kind of interpretation only enhances uncertainty and the consequent need for judicial interference. As the Delhi High Court now hears appeals from SKS Power Generation and ONGC, one hopes that it will lend some clarity and strike a balance between strictly upholding statutory intent and affording a reasonable margin of error.

Published by Sharad Bansal

Advocate, Bombay High Court

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