The main legal point established in the judgment is that the principles of natural justice must be adhered to in arbitration proceedings, and the Arbitrator cannot act unilaterally without notice to the opposite side and without hearing them, as mandated by Section 33 of the Arbitration and Conciliation Act, 1996.

Dev Darshan Sud, J.- Both these cases under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the `Act’) have been preferred by the H.P. Housing and Urban Development Authority against the award made by the Arbitrator on 7th November, 2007. The claim petition was instituted by the respondent herein.

2. The basic grievance of the petitioner herein is that the Arbitrator proceeded to decide an application under Section 33 of the Act filed by the claimants-respondents. It is undisputed before me that despite notice having been given to the petitioners herein on the application, they were not heard by the Arbitrator who proceeded to decide the application behind their back. Learned Senior Counsel appearing for the petitioners submits that the award requires to be set aside on the ground that the Arbitrator has acted contrary to the provisions of the Act. Learned Senior Counsel appearing for the respondents submits that all that is required under Section 33 of the Act is that only notice is required and no hearing is contemplated.

3. I cannot agree with the submissions made by the learned Senior Counsel appearing for the respondents. The principles of natural justice have not been excluded by the provisions of Section 33 of the Act. Issuing notice to the opposite party also carries with it a duty to hear the parties on the maintainability and the merits of any application/ petition filed before the Arbitrator. The Act does not contemplate the Arbitrator acting ex-parte on his own.

4. In State of Kerala and another vs. Joseph Vilangadan, AIR 1990 Kerala 276, a Division Bench of the Kerala High Court dealing with the provisions of Section 13(d) of the Arbitration Act, 1940, held:-

“12. Coming to the 3rd question: Assuming the arbitrator has the power to correct the mistake under Sec.13(d) even then he cannot pass an order under that provision without notice to the affected parties, the learned Government Pleader submits. The learned Counsel for the contractor however, argues that the Arbitration Act does not contain any provision saying that the correction could be made only after notice to parties. It is fundamental that no order in a proceeding affecting the parties thereto shall be passed without notice to them. Apart from this principle, it could be seen from the scheme of the relevant provisions in the Arbitration Act that the arbitrator could possibly exercise this power only on the request of one or possibly both of the parties or as per directions of the Court. It is said so, because the arbitrator after filing the award along with all the records in the Court would not get a chance to go through the award and the connected papers again and rectify clerical or accidental mistakes unless it be that the said mistakes in the award are brought to his notice either by the parties or by the Court by an order under Section 16 read with S.15(c) directing the arbitrator to correct such mistake. To put it differently: The arbitrator, having once issued his award can undoubtedly rectify a clerical mistake or an error arising from an accidental slip or omission with the consent of both parties. If such an error is to be rectified otherwise, the same can be had only after notice to the parties and with the strict observance of all rules of judicial procedure. A reference in this connection to the following observation of Scrutton,J. in Inland Revenue Commissioner v. Hunter, (1914) 3 KB 423, is profitable:-

“…..It is clear, ……… that a referee, having once issued his award, cannot issue another without the consent of both parties. If an error is to be corrected, unless the parties assent, it can only be done by the Court on proper evidence, and with proper procedure; ….. it is of great importance that the referees should exercise their important duties in the future, …… with strict observance of all rules of judicial procedure.”

In the same strain is the comment made by Mustill and Boyd in their