Arbitral Tribunal Under Section 16 Of A&C Act Has Exclusive Jurisdiction To Determine Arbitrability Of Claims Including Excepted Matters: Supreme Court

"Whether the dispute regarding termination is, in whole or in part, an “excepted matter” outside the Arbitrator's jurisdiction... are questions that Section 16 of the Act commits to the Arbitrator in the first instance." Supreme Court, in a significant ruling dated September 8, 2026, held that a court exercising jurisdiction under Article 226 of the Constitution of India cannot pre-determine the scope of an Arbitrator's jurisdiction or place constraints upon the adjudication of claims.

A bench comprising Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe emphasized that the competence to decide whether a claim falls within an "excepted matters" clause rests exclusively with the Arbitral Tribunal under Section 16 of the Arbitration and Conciliation Act, 1996.

The dispute arose from a construction contract between M/s. GVV Constructions Private Limited and the South Central Railway. Following the termination of the contract under Clause 62 of the General Conditions of Contract (GCC) and the forfeiture of its performance guarantee, the appellant approached the High Court. While the High Court set aside a Single Judge's observation that the termination was valid, it simultaneously directed the Arbitrator to decide the claims strictly in accordance with the terms of the contract.

The primary question before the Supreme Court was whether the High Court’s direction to the Arbitrator to decide claims "strictly in accordance with the terms of the contract" traveled beyond the scope of judicial review under Article 226. The Court was also called upon to clarify whether a writ appellate court could effectively circumscribe the Arbitral Tribunal’s authority to rule on its own jurisdiction under Section 16 of the Act.

Court Reaffirms Principle Of Kompetenz-Kompetenz

The Supreme Court held that the Arbitration and Conciliation Act, 1996, incorporates the principle of kompetenz-kompetenz, which serves as a foundational pillar of the modern arbitration regime. By directing the Arbitrator to follow specific contractual terms, the High Court inadvertently impinged upon the Tribunal's statutory power to rule on its own jurisdiction. The Bench noted that this approach contradicts the legislative intent of minimizing judicial intervention in arbitral proceedings, as mandated by Section 5 of the Act.

Court Limits Judicial Scrutiny In Arbitration Matters

The Court observed that even at the stage of appointment of an Arbitrator under Section 11, the scope of judicial inquiry is restricted to the existence of an arbitration agreement. Therefore, a court exercising writ jurisdiction under Article 226 has no greater authority to dictate the contours of the Arbitral Tribunal's inquiry. The judgment clarifies that the "excepted matters" clause in a works contract does not oust the Arbitrator's primary competence to determine whether a dispute is arbitrable.

"It was not open to the Division Bench, in the exercise of its writ appellate jurisdiction, to prescribe in advance the manner of, or to place constraints upon, that adjudication."

Distinction Between Excepted Matters And Ouster Clauses

Addressing the reliance placed on precedents, the Court distinguished the present matter from cases involving absolute ouster clauses. It noted that Clause 63 of the GCC does not bar the jurisdiction of courts of law entirely; rather, it categorizes certain disputes as "excepted matters" beyond the purview of arbitration. Crucially, the Court clarified that an Arbitral Tribunal remains the appropriate forum to determine, in the first instance, whether a specific termination dispute constitutes an "excepted matter" or remains within its jurisdictional ambit.

Clarification On Earlier Judgments

The Bench clarified that its judgment in ABS Marine Services v. Andaman and Nicobar Administration was inapplicable to the present facts due to the distinct wording of the clauses involved. The Court underscored that previous regimes under the Arbitration Act, 1940, are fundamentally different from the current legislative framework, which mandates a "decisive departure" toward fostering arbitral autonomy.

Final Directions Of The Supreme Court

The Supreme Court concluded that the High Court’s observations regarding the manner of adjudication could not be construed as binding or as a constraint on the Arbitral Tribunal. The Tribunal remains free to adjudicate all claims and the validity of the termination in accordance with law and the contract, without being influenced by any prior judicial observations on the merits. The appeal was disposed of with no order as to costs, ensuring that the Arbitrator retains full discretion to exercise its authority under Section 16 of the Act.

Date of Decision: 08 September 2026