Alternative Dispute Resolution

Union of India v. G.S. Atwal & Co. (Asansole)

(1996) 3 SCC 568

Facts

G.S. Atwal entered into a contract with the Union of India for excavation work connected with the Farakka Barrage project.
Over time, several different disputes were referred to arbitration.
In a later reference, the specified dispute principally concerned refund of excess hire charges for departmental equipment.
After entering upon the reference, the contractor added further claims concerning:
repair expenses;
security and watch-and-ward costs;
final bills;
and interest.
The Union objected that these additional claims had not been referred.
The arbitrator nevertheless entertained them and made an award.
The contractor argued that the Union had participated and had therefore acquiesced in the expanded jurisdiction.

An arbitrator’s jurisdiction is founded upon:
the arbitration agreement; and
the specific disputes referred.
Participation may waive an objection concerning:
appointment;
procedure;
or another curable irregularity, where the party knowingly submits without protest.
However, an arbitrator cannot acquire authority over an unreferenced dispute merely through their own decision.
Whether a claim falls within the reference is a jurisdictional question.
The tribunal must remain within:
the contract;
the invocation;
and the appointing order.

The original reference identified the dispute concerning excess equipment-hire charges.
The later financial claims were separate and substantial.
They were not simply components necessary to calculate the referred hire-charge claim.
They introduced new controversies.
The Union had objected to their inclusion.
Therefore, its participation could not be treated as unconditional consent to enlarge the reference.
The Supreme Court distinguished two situations:
A party knows of an irregular appointment, participates and later attacks the arbitrator personally.
The arbitrator decides claims the parties never authorised.
In the first case, acquiescence may operate.
In the second, the tribunal cannot manufacture jurisdiction.
The arbitrator’s sole function is to decide disputes entrusted under the contract and reference.
The tribunal cannot act:
arbitrarily;
independently of the agreement;
or beyond the boundaries fixed by the parties.
The award was therefore vulnerable to the extent it determined unreferenced matters.
The case predates Section 16 of the 1996 Act, but its central idea remains relevant:
competence-competence allows the tribunal to rule on jurisdiction;
it does not create substantive authority beyond the arbitration agreement.
Modern parties must raise scope objections promptly under Section 16, but a tribunal still cannot decide a matter wholly outside the submission.

The Supreme Court held that the arbitrator could not unilaterally enlarge the reference to include separate claims.
Participation did not amount to consent where the Union had objected to the expanded jurisdiction.
Use this case for: the distinction between waivable appointment irregularities and non-consensual expansion of the arbitral reference.