Courts Cannot Clip the Arbitrator’s Jurisdiction: Supreme Court Holds That “Excepted Matters” and Arbitrability Must First Be Decided Under Section 16
Case Name: M/s GVV Constructions Private Limited v. Union of India and Others
Date of Judgment: 8 September 2026
Citation: 2026 INSC 976
Bench: Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe
Held: The Supreme Court held that the question whether a dispute concerning termination of a contract falls within an “excepted matters” clause and is consequently outside the scope of arbitration must, in the first instance, be decided by the Arbitral Tribunal under Section 16 of the Arbitration and Conciliation Act, 1996. A High Court exercising writ or appellate jurisdiction under Article 226 of the Constitution cannot predetermine that issue or impose directions that restrict the Tribunal’s authority to rule upon its own jurisdiction. The principle of kompetenz-kompetenz empowers the Arbitral Tribunal to determine the scope and validity of its jurisdiction, including objections founded upon contractual exclusions.
Summary: South Central Railway awarded a contract to M/s GVV Constructions Private Limited for infrastructure work relating to the doubling of the Guntur-Guntakal railway section. The agreement was executed on 30 November 2017, with 23 October 2018 fixed as the date for completion. On 10 June 2022, the Railway terminated the contract under Clause 62 of the Indian Railways Standard General Conditions of Contract, forfeited the performance guarantee and security, and denied compensation to the contractor.
The contractor challenged the termination through a writ petition, alleging non-compliance with the contractual procedure. The Single Judge dismissed the petition on the ground that serious and disputed questions of fact could not appropriately be adjudicated under Article 226 and observed that the contractor could pursue its remedies before the Arbitral Tribunal. However, the Single Judge also recorded that there was no irregularity in the termination of the contract.
In appeal, the Division Bench set aside the Single Judge’s finding regarding the validity of the termination because it was unsupported by reasons and could prejudice the arbitration proceedings. It permitted the contractor to raise its claims before the Arbitral Tribunal but stated that the Tribunal should decide them “strictly in accordance with the terms of the contract agreed upon between the parties.” The contractor approached the Supreme Court, contending that this direction could restrict the Tribunal from independently deciding whether the termination dispute was arbitrable.
The Supreme Court examined Clauses 63 and 64 of the General Conditions of Contract. Clause 63 excluded specified “excepted matters” from arbitration, while Clause 64 governed the demand and reference of disputes to arbitration. The Court clarified that although an excepted-matters clause may exclude certain disputes from the eventual scope of arbitration, the preliminary question whether a particular dispute actually falls within that exclusion is itself for the Arbitral Tribunal to decide under Section 16.
Tracing the development of the law from Konkan Railway, SBP & Co., Boghara Polyfab, Duro Felguera, Mayavati Trading, Vidya Drolia and SBI General Insurance v. Krish Spinning, the Court reiterated that judicial scrutiny at the referral stage has progressively narrowed. Unless non-arbitrability is manifest and ex facie certain, the governing principle is “when in doubt, do refer.” The Court emphasised that even a court acting under Section 11 cannot undertake a contested inquiry into whether a claim is excluded as an excepted matter. A writ court exercising discretionary jurisdiction under Article 226 has still less authority to pre-empt or circumscribe the Tribunal’s inquiry, particularly after declining to examine the contractual dispute on its merits.
The Court further observed that the arbitrability of the termination dispute had not even been an issue before the Division Bench. Therefore, it was impermissible for the High Court to prescribe in advance how the Tribunal should approach that question. Whether the termination dispute was wholly or partly an excepted matter, and what remedy would remain available if it was found non-arbitrable, were questions entrusted to the Arbitrator in the first instance.
Decision: The Supreme Court disposed of the appeal by clarifying that the Division Bench’s direction requiring the Arbitrator to decide the claims strictly in accordance with the contractual terms would not restrict the Arbitral Tribunal’s jurisdiction to adjudicate upon the dispute concerning termination of the contract. The Tribunal remained free to determine under Section 16 whether the termination dispute was arbitrable or constituted an excepted matter.