Supreme Court Holds an Arbitral Tribunal Under Section 16 Decides Whether a Dispute Falls Within an Excepted Matters Clause
Background and Facts
A contract that carves out excepted matters from arbitration raises an obvious question: who decides whether a given claim has been carved out. The Supreme Court has answered that the arbitral tribunal does, and that a writ court cannot settle the point in advance. The judgment in M/s GVV Constructions Private Limited v. Union of India and Others [Civil Appeal arising out of Special Leave Petition (Civil) No. 7338 of 2026] is reported as 2026 INSC 976.
South Central Railway invited tenders on February 21, 2017 for doubling work on the Guntur to Guntakal section. The appellant was the successful bidder and the contract was executed on November 30, 2017, with completion fixed for October 23, 2018. The work was not completed. On June 10, 2022 the Railways terminated the contract under Clause 62 of the Indian Railways Standard General Conditions of Contract and forfeited the performance guarantees.
The contract contains the familiar two-part structure. Clause 63 lists excepted matters, which are removed from arbitration and left to the decision of a railway officer. Clause 64 is the arbitration clause, and it operates on everything that is not an excepted matter. The contractor moved the High Court under Article 226 of the Constitution. A Division Bench disposed of the matter with a direction that the arbitrator decide the claims in accordance with the terms of the contract. The contractor appealed, concerned that the direction would be read as fencing off the termination dispute before the tribunal had looked at it.
Key Legal Issue
The question was one of allocation rather than merits. Where a contract excludes certain matters from arbitration, does a court exercising writ jurisdiction determine whether a particular dispute falls inside that exclusion, or is that determination reserved to the tribunal under Section 16 of the Arbitration and Conciliation Act, 1996?
The Supreme Court's Ruling
A Bench of Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe disposed of the appeal by clarifying the effect of the Division Bench's order. The Court recorded that
"the direction issued by the Division Bench to the Arbitrator to decide all claims shall not be construed to impinge upon the jurisdiction of the Arbitral Tribunal, to adjudicate the dispute with regard to termination of contract".
The distinction is worth stating precisely, because it is easy to overstate what was decided. The Court did not hold that the termination dispute is arbitrable. It expressed no opinion on that question at all. What it held is that the question belongs to the tribunal, and that a direction to decide claims according to the contract cannot be read as having resolved it.
Section 16 Puts the Question to the Tribunal
Section 16(1) empowers an arbitral tribunal to rule on its own jurisdiction, including on objections to the existence or validity of the arbitration agreement. An objection that a claim is an excepted matter is, in substance, a plea that the tribunal lacks jurisdiction over that claim. It therefore travels under Section 16(2), which requires the plea to be raised no later than the submission of the statement of defence.
The procedural consequences follow from Section 16(5) and Section 16(6). If the tribunal rejects the plea it continues and makes an award, and the objection is preserved for a challenge under Section 34. If it accepts the plea, an appeal lies under Section 37(2)(a). Either way the statute routes the excepted matters question through the tribunal first.
Why a Writ Court Cannot Settle the Point in Advance
Section 5 of the Act is in emphatic terms:
"Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part".
A writ court asked to police the boundary of an arbitration clause is intervening in a matter governed by Part I. The Act does not provide for that intervention, and Section 16 provides for a different decision maker. A finding by a High Court that a particular claim is or is not an excepted matter would, if binding, deprive the tribunal of a jurisdiction the statute gives it, and would do so on a record assembled for writ proceedings rather than on evidence.
Excepted Matters Are a Question of Construction
Whether a dispute is an excepted matter is not a self-evident category. It requires the clause to be construed and the claim to be characterised against it. A termination under a power such as Clause 62 may raise questions about whether the power was validly exercised, whether the contractual preconditions were met, and whether the consequences claimed follow. Those are ordinary contractual questions and they sit naturally with the tribunal.
The practical point for draftsmen is that the width of an excepted matters clause is decided later, by the tribunal, on the language used. A clause that leaves a matter to the decision of one party's own officer will be read carefully, and the party relying on it carries the burden of showing that the claim falls within it.
Precedent Relied Upon
The Court situated the holding in the line of authority narrowing judicial scrutiny at the referral stage. It referred to Vidya Drolia v. Durga Trading Corporation, (2021) 2 SCC 1, for the approach that where there is doubt the matter should be referred, and to SBI General Insurance Co. Ltd. v. Krish Spinning, (2024) 12 SCC 1, for the proposition that a referral court conducts a prima facie scrutiny rather than a full trial of jurisdictional objections. It also referred to Duro Felguera, S.A. v. Gangavaram Port Ltd., (2017) 9 SCC 729, and distinguished ABS Marine Services v. Andaman and Nicobar Administration, 2026 SCC OnLine SC 460, on the wording of the clause before it.
Practice Notes
In practice, the judgment changes where the excepted matters argument is made rather than whether it succeeds:
For contractors in government and public sector contracts: An excepted matters clause is not a reason to abandon a claim, and it is not a reason to go to the writ court first. Raise the claim before the tribunal and meet the exclusion there, on construction and on evidence.
For employers relying on an exclusion: Plead the objection under Section 16 and plead it in time. Section 16(2) fixes the outside limit at the submission of the statement of defence, and a late plea is admitted only if the tribunal considers the delay justified under Section 16(4).
On the use of Article 226: Writ proceedings against a termination under a commercial contract with an arbitration clause invite the answer that the forum has been chosen. Where a writ court does pass an order, resist any wording that could be read as deciding arbitrability, and seek the clarification this appellant obtained.
For those drafting standard conditions: The scope of an excepted matters clause will be tested by a tribunal, not fixed by the drafting party. Precision in listing the matters excluded is worth more than a broadly worded carve out that a tribunal will read down.
On reading the outcome: The appeal was disposed of with no opinion on whether the termination dispute is in fact arbitrable. A clarification about who decides is not a ruling on what will be decided.
Key Provisions Discussed
Section 5 of the Arbitration and Conciliation Act, 1996: No judicial authority may intervene in matters governed by Part I except where the Part so provides.
Section 16 of the Arbitration and Conciliation Act, 1996: Competence of an arbitral tribunal to rule on its own jurisdiction, the timing of pleas under sub-sections (2) and (3), the admission of a late plea under sub-section (4), and the continuation of proceedings under sub-section (5).
Section 34 of the Arbitration and Conciliation Act, 1996: Application for setting aside an arbitral award, which is where a rejected jurisdictional plea is revived.
Section 37(2)(a) of the Arbitration and Conciliation Act, 1996: Appeal from an order accepting a plea referred to in sub-section (2) or sub-section (3) of Section 16.
Article 226 of the Constitution of India: Writ jurisdiction of the High Courts, invoked here against the termination.
Clauses 62, 63 and 64 of the Indian Railways Standard General Conditions of Contract: Termination, excepted matters, and the arbitration clause respectively.
Case Details
Case: M/s GVV Constructions Private Limited v. Union of India and Others
Case No: Civil Appeal arising out of Special Leave Petition (Civil) No. 7338 of 2026
Citation: 2026 INSC 976
Court: Supreme Court of India
Date of Judgment: September 8, 2026
Bench: Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe
Outcome: Appeal disposed of. The High Court's direction does not restrict the arbitral tribunal's jurisdiction to adjudicate the termination dispute, and no opinion was expressed on whether that dispute is an excepted matter.
Sources and References
M/s GVV Constructions Pvt Ltd v. Union of India, Supreme Court of India, September 8, 2026
Section 5 of the Arbitration and Conciliation Act, 1996: Extent of judicial intervention
Arbitration and Conciliation Act, 1996, Sections 5, 16, 34 and 37(2)(a)
Constitution of India, Article 226
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Readers should consult a qualified legal professional for advice specific to their circumstances.
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