In M/s GVV Constructions Private Limited v. Union of India & Ors., 2026 INSC 976, the Supreme Court examined the limits of judicial intervention where a works contract excluded certain disputes from arbitration as “excepted matters”. The Court held that the question whether a particular claim is covered by such an exclusion is itself a jurisdictional question that the Arbitral Tribunal is competent to determine under Section 16 of the Arbitration and Conciliation Act, 1996.
The judgment, delivered by Justice Alok Aradhe for the Bench comprising Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe on September 8, 2026, underscores that even a court exercising jurisdiction under Section 11 has a narrowly circumscribed role at the referral stage. A court exercising discretionary judicial review under Article 226 cannot assume a wider authority and prescribe how an arbitrator should determine the scope of his own jurisdiction.
Background of the Dispute
The dispute arose from a railway infrastructure contract. On February 21, 2017, South Central Railway invited tenders for doubling of the track between the Guntur-Guntakal section, involving earthwork, blanketing, construction of bridges, road under-bridges for level crossings and miscellaneous works.
M/s GVV Constructions Private Limited submitted its bid, which was accepted. A formal contract agreement was executed on November 30, 2017, with October 23, 2018 stipulated as the due date for completion of the work.
On June 10, 2022, the contract was terminated under Clause 62 of the Indian Railways Standard General Conditions of Contract (GCC). The performance guarantee and security furnished by the contractor were forfeited, and it was held disentitled to compensation for any loss.
The contractor challenged the termination through a writ petition, alleging violation of the procedure prescribed under the GCC and seeking a consequential direction to the authorities to follow Clause 17.
The Single Judge dismissed the writ petition on October 18, 2022, observing that serious and complicated questions of fact could not appropriately be adjudicated under Article 226. The Single Judge also noted that since the contractor had invoked arbitration, it could raise its defences before the Arbitral Tribunal. However, the judgment simultaneously recorded a finding that there was no irregularity in the termination of the contract.
Division Bench Removes Finding on Validity of Termination
On appeal, the Division Bench of the Telangana High Court found that the Single Judge’s conclusion regarding the validity of termination had been recorded without assigning reasons.
More importantly, the Division Bench recognised that affirming the termination in writ proceedings could effectively foreclose the question before the Arbitral Tribunal or any other competent forum.
It therefore set aside the finding that there was no irregularity in the termination and granted the contractor liberty to raise all its claims before the Arbitral Tribunal. The Tribunal was permitted to decide the claims in accordance with law and without being influenced by the observations of either the Single Judge or the Division Bench.
However, the Division Bench also stated that the arbitrator was at liberty to decide the contractor’s claims “strictly in accordance with the terms of the contract agreed upon between the parties.”
It was this observation that ultimately became the focus of the proceedings before the Supreme Court.
Arbitration Proceedings Commence
Following the Division Bench’s judgment, a former Judge of the Supreme Court was appointed as the Sole Arbitrator, and arbitration proceedings commenced on January 20, 2026.
The Arbitral Tribunal framed twelve issues. These included the validity of the termination order dated June 10, 2022, limitation, and whether any claims fell within “excepted matters” or were otherwise non-arbitrable.
The contractor argued before the Supreme Court that the legality of termination was intrinsically connected with the other disputes pending before the Tribunal and should therefore be left for determination by the arbitrator.
The Union of India, on the other hand, relied upon Clause 63 of the GCC and argued that the validity of termination constituted an “excepted matter” beyond the Tribunal’s jurisdiction.
The Issue Before the Supreme Court
The Supreme Court identified a solitary issue:
- Whether the Division Bench’s observation that the arbitrator could decide the contractor’s claims “strictly in accordance with the terms of the contract” travelled beyond the scope of judicial review under Article 226 and impinged upon the jurisdiction conferred on the Arbitral Tribunal by Section 16 of the Arbitration and Conciliation Act, 1996.
This brought into focus the relationship between contractual clauses excluding particular disputes from arbitration and the statutory authority of an arbitral tribunal to rule upon its own jurisdiction.
What Were the ‘Excepted Matters’ Under the Contract?
Clause 63 of the GCC provided for certain matters to be treated as “excepted matters”. These were matters in respect of which the Railway authority’s decision was to be final and binding and which were specifically excluded from the arbitration clause.
The relevant portion of Clause 63 stated:
“…‘excepted matters’ shall stand specifically excluded from the purview of the Arbitration Clause.”
Clause 64, dealing with demand for arbitration, similarly excluded from arbitration the “excepted matters” referred to in Clause 63.
Importantly, the Supreme Court observed that a conjoint reading of Clauses 63 and 64 showed that Clause 63 excluded excepted matters from arbitration but did not exclude the jurisdiction of a court of law to examine the validity of decisions taken in respect of such matters.
Section 16 and the Principle of Kompetenz-Kompetenz
The heart of the Supreme Court’s reasoning lies in Section 16 of the Arbitration and Conciliation Act, 1996. Section 16(1) empowers an Arbitral Tribunal to rule on its own jurisdiction, including objections concerning the existence or validity of the arbitration agreement.
The Court described Section 16 as incorporating the principle of kompetenz-kompetenz, which lies at the foundation of the 1996 Act and marks a decisive departure from the earlier Arbitration Act, 1940.
The principle essentially recognises that the arbitrator has the competence to determine whether the Tribunal possesses jurisdiction over a particular dispute. Courts are therefore not expected to decide every contested question of arbitrability before the Tribunal has had an opportunity to rule upon it.
This statutory structure is reinforced by Section 5 of the Act, which limits judicial intervention and mandates that no judicial authority shall intervene except where the Act itself permits such intervention.
Supreme Court Traces the Evolution of Judicial Scrutiny
The Court undertook a useful review of the evolution of the law governing judicial scrutiny at the stage preceding or accompanying a reference to arbitration.
In Konkan Railway Corpn. Ltd. v. Mehul Construction Co. and Konkan Railway Corpn. Ltd. v. Rani Construction (P) Ltd., questions concerning the existence of an arbitration agreement and arbitrability were left to the Tribunal under Section 16.
That position changed with the seven-Judge Bench decision in SBP & Co. v. Patel Engineering Ltd., which treated the power under Section 11 as judicial and permitted wider scrutiny.
Thereafter, National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd. classified issues arising under Section 11 into categories. Significantly, issues concerning whether a claim fell within an arbitration clause—including matters reserved for final determination by departmental authorities and excluded from arbitration—were identified as matters for the Arbitral Tribunal.
The legislative landscape changed further with the Arbitration and Conciliation (Amendment) Act, 2015, which inserted Section 11(6A).
The Supreme Court in Duro Felguera, S.A. v. Gangavaram Port Ltd. famously confined the referral court’s enquiry to whether an arbitration agreement exists, “nothing more, nothing less”.
Similarly, Mayavati Trading (P) Ltd. v. Pradyuat Deb Burman recognised that Section 11(6A) had legislatively displaced the wider scrutiny contemplated under the earlier decisions.
‘When in Doubt, Do Refer’
The Court then referred to Vidya Drolia v. Durga Trading Corporation, which harmonised the standards applicable under Sections 8 and 11.
Under Vidya Drolia, a court should refuse reference only where it is manifestly and ex facie certain that the arbitration agreement does not exist, is invalid, or that the dispute is non-arbitrable.
The governing principle, the Court reiterated, is:
“when in doubt, do refer.”
This has come to be described as the “eye of the needle” standard of judicial scrutiny. The approach reflects a conscious preference for allowing the arbitral process to proceed rather than converting the referral stage into a detailed adjudication of disputed questions.
Referral Court Only Conducts Prima Facie Scrutiny
The Supreme Court also relied on SBI General Insurance Company Ltd. v. Krish Spinning, where the distinction between the court’s power to “examine” and the Tribunal’s power to “rule” was emphasised.
The judgment reproduced the following significant passage:
“The use of the term ‘examination’ under Section 11(6-A) as distinguished from the use of the term ‘rule’ under Section 16 implies that the scope of enquiry under Section 11(6-A) is limited to a prima facie scrutiny of the existence of the arbitration agreement, and does not include a contested or laborious enquiry, which is left for the Arbitral Tribunal to ‘rule’ under Section 16.”
Crucially, even the referral court’s prima facie opinion regarding the existence of an arbitration agreement does not bind either the Arbitral Tribunal or the court subsequently enforcing the award.
Who Decides Whether a Claim Is an ‘Excepted Matter’?
The Supreme Court’s answer was unequivocal.
It held:
“the question whether a particular claim is covered by, or falls outside, an ‘excepted matters’ clause of a works contract is a matter squarely within the competence of the Arbitral Tribunal under Section 16”
The Court further held that such a question is not for a court exercising even the wider appointment-stage jurisdiction under Section 11, “much less” for a court exercising discretionary jurisdiction under Article 226.
This distinction is important. The existence of an “excepted matters” clause does not itself authorise a court to conclusively decide, before the Tribunal, whether a particular claim falls within that exclusion.
There is a difference between recognising that the contract contains an exclusion and determining whether the particular dispute actually falls within it. The latter is a jurisdictional determination which Section 16 entrusts to the Tribunal in the first instance.
High Court Could Not Circumscribe the Arbitrator’s Enquiry
The Supreme Court found that if even a court exercising jurisdiction under Section 11(6A) cannot enter upon or pre-determine the basis on which an Arbitral Tribunal must decide whether a claim is an excepted matter, a writ appellate court certainly cannot do so.
The Division Bench’s direction that the arbitrator decide the claims “strictly in accordance with the terms of the contract”, irrespective of its intention, could have the effect of limiting the scope of the arbitrator’s enquiry.
The Court observed:
“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.”
Accordingly, the Division Bench could not prescribe in advance how that question was to be adjudicated or impose constraints upon the Tribunal’s determination. The Court additionally noted that the arbitrability of the termination dispute was not itself an issue before the Division Bench.
ABS Marine Services Distinguished
The appellant had relied upon ABS Marine Services v. Andaman and Nicobar Administration. The Supreme Court, however, held that the decision did not apply because the contractual clauses were differently worded.
Clause 3.20 involved in ABS Marine Services excluded the jurisdiction of courts and also prohibited arbitration. Clause 63 of the GCC in the present case was materially different: it did not bar the jurisdiction of courts but placed “excepted matters” outside the scope of arbitration.
The Court also found the respondents’ reliance on General Manager, Northern Railway v. Sarvesh Chopra unhelpful because that case concerned Section 20 of the Arbitration Act, 1940, whereas the 1996 Act represented a decisive departure from the earlier statutory regime.
Supreme Court’s Final Decision
The Supreme Court ultimately clarified that the Division Bench’s direction requiring the arbitrator to decide the claims strictly according to the terms of the contract could not be interpreted as restricting the Tribunal’s jurisdiction to adjudicate the dispute concerning termination.
The Court held:
“It is clarified that this Court has not expressed any opinion on the merits of the case.”
The appeal was accordingly disposed of without any order as to costs. Importantly, therefore, the Supreme Court did not decide that the termination dispute was necessarily arbitrable. Nor did it hold that Clause 63 was ineffective. Instead, it preserved the distinction between the substantive answer to arbitrability and the authority competent to determine that question in the first instance. That authority, under Section 16, is the Arbitral Tribunal.
Why the Judgment Matters
The judgment strengthens three interconnected principles of Indian arbitration law.
First, it reinforces kompetenz-kompetenz. An Arbitral Tribunal is not merely empowered to decide the merits of disputes placed before it; it possesses statutory authority to rule on objections to its own jurisdiction.
Second, the ruling reinforces the increasingly narrow role of courts at the pre-arbitral and referral stages. The Supreme Court’s discussion of Duro Felguera, Vidya Drolia, Krish Spinning and related authorities shows a consistent movement towards prima facie judicial scrutiny rather than a detailed examination of contested jurisdictional questions.
Third, the decision is particularly significant for government and infrastructure contracts containing elaborate “excepted matters” provisions. Such clauses remain relevant in determining the eventual scope of arbitration. However, where a dispute arises over whether a particular claim actually falls within the contractual exclusion, courts cannot ordinarily pre-empt the Tribunal’s Section 16 determination.
The judgment thus does not erase the contractual boundary between arbitrable and non-arbitrable matters. Rather, it identifies who must determine where that boundary lies in a contested case.
Conclusion
M/s GVV Constructions Private Limited v. Union of India & Ors. reinforces arbitral autonomy while maintaining the contractual significance of “excepted matters”. The Supreme Court has made it clear that courts should not transform a preliminary or writ proceeding into a determination of questions that Parliament has entrusted to the Arbitral Tribunal.
The central proposition emerging from the judgment is straightforward but consequential: whether a particular dispute falls within an “excepted matters” clause is itself a jurisdictional question, and Section 16 empowers the Arbitral Tribunal to decide that question in the first instance.
By preventing writ courts from prescribing or restricting the manner in which that jurisdictional enquiry must be undertaken, the Supreme Court has reaffirmed both the kompetenz-kompetenz principle and the broader statutory policy of minimal judicial intervention embodied in the Arbitration and Conciliation Act, 1996.
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