In the realm of Alternative Dispute Resolution, Section 18 of the Arbitration and Conciliation Act, 1996, serves as the "Magna Carta" of arbitral proceedings. It states that the parties shall be treated with equality and each party shall be given a full opportunity to present their case.
This provision incorporates the core tenets of Natural Justice into the private dispute resolution process, ensuring that the flexibility of arbitration does not descend into arbitrariness.
1. The Twin Pillars of Natural Justice
The conduct of arbitral proceedings is guided by two fundamental principles of natural justice:
Audi Alteram Partem (Hear the Other Side): No man should be condemned unheard. In arbitration, this means the tribunal must ensure that every piece of evidence or submission made by one party is shared with the other, allowing them a chance to respond.
Nemo Judex in Causa Sua (No one should be a judge in their own cause): This ensures the impartiality and independence of the arbitrator. If an arbitrator has a conflict of interest, they are disqualified under Section 12 and the Fifth/Seventh Schedules of the Act.
2. Equal Treatment under Section 18
Equal treatment does not just mean giving both parties the same amount of time; it means providing a "level playing field."
Access to Evidence: If the tribunal appoints an expert under Section 26, both parties must have the opportunity to put questions to that expert and present their own expert witnesses on the same point.
Notice of Hearings: Under Section 24, parties must be given sufficient advance notice of any hearing or any meeting of the tribunal for the inspection of documents, goods, or property.
Communication: Any statement, document, or application supplied to the tribunal by one party must be communicated to the other party. Similarly, any expert report or evidentiary document on which the tribunal relies must be shared with both sides.
3. Flexibility vs. Natural Justice (Section 19)
While Section 19 explicitly states that the Arbitral Tribunal is not bound by the technical rules of the Code of Civil Procedure, 1908 or the Indian Evidence Act, 1872, this does not mean the tribunal can ignore the principles of natural justice.
The flexibility of the procedure is intended to provide speed, but it is always subject to the mandatory requirement of fairness. A tribunal that decides a case based on a document not shown to one party, or conducts a hearing behind the back of a party, is said to have committed "misconduct," and its award can be set aside under Section 34.
4. Consequences of Violation
If a tribunal fails to treat parties equally or violates natural justice:
Setting Aside the Award: Under Section 34(2)(a)(iii), the court can set aside an award if the party making the application was "otherwise unable to present his case."
Public Policy: A violation of natural justice is considered a contravention of the Fundamental Policy of Indian Law, which is a ground for setting aside an award under the "Public Policy" head.
5. Judicial Interpretation
In the landmark case of Sohan Lal Gupta v. Asha Devi Gupta, the Supreme Court emphasized that:
"The state of the law is that an arbitrator is a judge of the parties’ choice. He must, therefore, act judicially. A reasonable opportunity of being heard must be afforded to the parties."
Similarly, in ONGC v. Saw Pipes, the court reinforced that a "patently illegal" award—which includes an award passed in violation of the principles of natural justice—cannot be allowed to stand.
Summary
The basis of arbitral proceedings is a delicate balance between Party Autonomy and Procedural Fairness. While parties can choose the rules, the law (through Section 18) ensures that those rules never override the basic human right to a fair and equal hearing.
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