Supreme Court Holds “Excepted Matters” Clauses Cannot Oust Arbitration or Courts; State Cannot Be Judge in Its Own Cause

Case Name: M/s ABS Marine Services v. The Andaman and Nicobar Administration
Citation: 2026 INSC 274
Date of Judgment/Order: 23 March 2026
Bench: Hon’ble Mr. Justice J.B. Pardiwala; Hon’ble Mr. Justice K.V. Viswanathan

Held: The Supreme Court held that contractual clauses treating certain issues as “excepted matters” cannot be interpreted to oust arbitration or judicial remedies, particularly where liability is disputed, and further that a party to a contract, including the State, cannot act as judge in its own cause to determine breach or liability.

Summary: The case arose from a dispute under a manning agreement where the respondent administration imposed penalties and recovered substantial amounts alleging negligence by the appellant. The arbitrator upheld the appellant’s claim and awarded refund, but the High Court set aside the award holding that the dispute fell within “excepted matters” under Clause 3.20 and was beyond arbitral jurisdiction. Before the Supreme Court, the central issue was interpretation of Clauses 3.20 and 3.22. The Court analysed the scheme of the contract and held that Clause 3.22 was widely worded and covered all disputes, while Clause 3.20 could not be read to exclude adjudication where liability itself was disputed. The Court emphasised fundamental principles of rule of law, including that no party can be judge in its own cause, and that contractual interpretation cannot create a vacuum in legal remedies. It clarified that “excepted matters” may exclude only limited issues such as quantification in admitted cases, but cannot bar adjudication of disputed liability or deny access to arbitration or courts.

Decision: The Supreme Court allowed the appeals, set aside the High Court’s judgment, and restored the arbitral award dated 08.05.2017 in favour of the appellant; it held that the dispute was arbitrable and within jurisdiction, rejected the “excepted matters” objection, and disposed of the matter without costs.