The Supreme Court has clarified that an Arbitral Tribunal must retain the authority to determine whether a dispute concerning termination of a contract falls within an “excepted matter” and is therefore outside the scope of arbitration.
A bench of Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe dealt with the issue in M/s. GVV Constructions Private Limited v. The Union of India & Ors., arising from a dispute over termination of a railway construction contract.
The Court ultimately clarified that a direction issued by the Telangana High Court requiring the Arbitrator to decide the contractor’s claims strictly according to the contract should not be understood as limiting the Tribunal’s jurisdiction to adjudicate the termination dispute.
Background of the Case
South Central Railway invited tenders in February 2017 for doubling the railway track between the Guntur-Guntakal section, involving earthwork, bridges, road under bridges and other works. GVV Constructions’ bid was accepted and the parties executed the contract on November 30, 2017. The stipulated completion date was October 23, 2018.
The Railway terminated the contract on June 10, 2022 under Clause 62 of the Indian Railways Standard General Conditions of Contract (GCC). The contractor’s performance guarantee and security were also forfeited, and it was held disentitled to compensation for loss.
GVV Constructions challenged the termination before the Telangana High Court. The Single Judge declined to examine the dispute under Article 226 of the Constitution, noting that it involved serious and complicated questions of fact and that arbitration had already been invoked. However, the Single Judge also recorded a finding that there was no irregularity in the termination.
The Division Bench removed that finding and allowed the contractor to raise its claims before the Arbitral Tribunal. At the same time, it stated that the Arbitrator could decide those claims strictly in accordance with the contractual terms.
Supreme Court Examines Scope Of Arbitration
By the time the matter reached the Supreme Court, arbitration proceedings had already commenced before a former Supreme Court judge appointed as the Sole Arbitrator. The Tribunal had framed 12 issues, including whether the termination was valid and whether certain claims were “excepted matters” or otherwise not arbitrable.
The Supreme Court identified the central question as whether the High Court’s direction concerning the contractual terms went beyond its judicial-review jurisdiction and affected the Arbitral Tribunal’s authority under Section 16 of the Arbitration and Conciliation Act, 1996.
The Court examined Clauses 63 and 64 of the GCC. Clause 63 treats certain specified disputes as “excepted matters” and excludes them from arbitration. However, the Supreme Court noted that the clause does not exclude the jurisdiction of a court to examine the validity of a decision concerning such matters.
Court’s Observation On Section 16
The Court explained that Section 16 gives an Arbitral Tribunal the power to rule on its own jurisdiction. Referring to the development of arbitration law, the Court emphasised that questions concerning whether a particular claim falls within an “excepted matters” clause are matters for the Tribunal to consider under Section 16.
"Whether the dispute regarding termination is, in whole or in part, an ‘excepted matter’ outside the Arbitrator's jurisdiction, and, if so, what remedy survives to the appellant in that behalf, are questions that Section 16 of the Act commits to the Arbitrator in the first instance."
The Supreme Court further held that the Division Bench should not have prescribed in advance the manner in which the Arbitrator was required to decide the dispute or placed constraints on that adjudication. It also noted that the question of arbitrability of the termination dispute was not itself an issue before the High Court Division Bench.
The Court also distinguished its earlier decision in ABS Marine Services v. Andaman and Nicobar Administration, observing that the contractual clauses involved in that case were differently worded.
Decision
The Supreme Court clarified that the High Court’s direction requiring the Arbitrator to decide the contractor’s claims strictly according to the contract shall not be construed as impinging upon the Tribunal’s jurisdiction to adjudicate the dispute concerning termination of the contract.
The Court expressly stated that it had not expressed any opinion on the merits of the case.
The appeal was disposed of with no order as to costs, and pending applications, if any, were also disposed of.
Case Details
Case Title: M/s. GVV Constructions Private Limited v. The Union of India & Ors.
Case Number: Civil Appeal No. 12525 of 2026 (@ SLP (C) No. 7338 of 2026)
Judges: Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe
Decision Date: September 8, 2026
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