2026 INSC 976 1

[REPORTABLE ]

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. OF 2026

(@ SPECIAL LEAVE PETITION (CIVIL) NO. 7338 OF 2026)

M/s. GVV Constructions

Private Limited … Appellant

Versus

The Union of India & Ors. … Respondents

J U D G M E N T

Alok Aradhe, J.

1. Leave granted.

2. This appeal takes exception to the judgment dated 16.12.2025

passed by the Division Bench of the High Court for the State of

Telangana at Hyderabad.

FACTS

3. The facts leading to the filing of the present appeal may be stated

briefly. The appellant is a private limited company and is engaged

in construction and infrastructure works. On 21.02.2017, South

Central Railway namely, respondent no. 2 invited tenders for the

work of “Doubling of track between Guntur-Guntakal Section-

Earthwork in formation including blanketing to GE: 0014

2

specifications, construction of bridges, RUBs for LCs and other

miscellaneous works….” (‘Work’). In response to the aforesaid

tender, the appellant submitted its bid. The appellant’s bid was

accepted, and on 30.11.2017, a formal Contract Agreement was

executed stipulating the due date of completion of the Work as

23.10.2018.

4. On 10.06.2022, the said contract was terminated under Clause

62 of Indian Railways Standard General Conditions of Contract

(‘GCC’) and the performance guarantee and security furnished

by the appellant were also forfeited. Further, the appellant was

held to be disentitled to any compensation for any loss.

5. The appellant sought quashing of the aforesaid order of

termination in a writ petition inter alia on the ground that the

same is in contravention of the procedure laid down under GCC

and sought a consequential direction to respondents to follow

Clause 17 of the GCC. The learned Single Judge by an order

dated 18.10.2022, dismissed the writ petition inter alia on the

ground that serious and complicated questions of fact were not

amenable to adjudication under Article 226 of the Constitution

of India. In paragraph 35 of the order, the learned Single Judge

further held that since the appellant had already invoked the

3

arbitration clause by filing an arbitration petition it could take

all its defences before the Arbitral Tribunal. However, it was also

recorded as a finding that there existed no irregularity in the

order of termination of contract.

6. Being aggrieved, the appellant preferred an appeal. The Division

Bench of the High Court vide its judgment dated 16.12.2025,

held that the finding recorded by the learned Single Judge that

the contract of the appellant had been validly terminated, was

without assigning any reason. It was further held that if the

validity of the order of termination of contract is upheld, there

would be no scope left for the Arbitral Tribunal or any other

forum to decide the dispute in favour of the appellant. The

Division Bench accordingly set aside the finding contained in

paragraph 35 of the order of the learned Single Judge which

stated that there exists no irregularity in termination of the

contract of the appellant. The appellant was granted the liberty

to raise all its claims before the Arbitral Tribunal, which in turn

was granted the liberty to decide the claims of the appellant

strictly in accordance with the terms of the contract agreed upon

between the parties. The Division Bench clarified that the

Arbitral Tribunal shall take a decision in accordance with law

4

without being influenced by the observations made either by it

or by the learned Single Judge.

7. In pursuance of the order passed by the Division Bench of the

High Court, a former judge of this Court was appointed as the

Sole Arbitrator and arbitration proceedings commenced on

20.01.2026. The Arbitral Tribunal framed twelve issues

including the issue of the validity of the order of termination

dated 10.06.2022 and the question whether any claims are

barred by limitation or fall under “excepted matters” or are not

otherwise arbitrable.

SUBMISSIONS

8. Mr. Gaurav Agarwal, learned senior counsel for the appellant

submitted that the reasons for delay in completion of the Work

were not attributable to the appellant. It was contended that the

contract was illegally terminated. It was pointed out that

respondents themselves admitted in paragraph 1 of the counter

affidavit filed in the writ petition, that the same is not

maintainable, as appellant has an effective and alternative

remedy of arbitration. Therefore, the respondents cannot now

turn around and dispute that the issue of termination of contract

cannot be decided by the Arbitral Tribunal. It was urged that the

5

only grievance of the appellant in the present appeal pertains to

the direction issued by the Division Bench to the Arbitra l

Tribunal to decide all claims of the appellant in accordance with

the terms of the contract agreed upon by the parties. It was

contended that the issue of the illegal termination of the contract

is directly and intrinsically linked with all other issues pending

before the Arbitral Tribunal and, therefore, it should be permitted

to decide the issue of termination of contract as well. It was

submitted that the impugned direction is contrary to the decision

of this Court in ABS Marine Services v. Andaman and Nicobar

Administration

1

.

9. Mr. Vikramjit Banerjee, learned Additional Solicitor General,

submitted that appellant by seeking to submit the issue of

validity of termination of contract to arbitration is acting in direct

violation of Clause 63 of GCC which was signed and accepted by

both the parties. It was further submitted that exclusion of

validity of termination of the contract from the scope of

arbitration does not prevent the appellant from approaching the

civil court which is the designated forum for “excepted matters”.

It was contended that the reliance placed on the decision of this

1

2026 SCC OnLine SC 460.

6

Court in ABS Marine Services (supra), is misplaced as the

clauses in GCC are different from the Clause struck down by this

Court in the said decision. It was urged that the Arbitral Tribunal

has no jurisdiction over “excepted matters” under the GCC and

the impugned judgment does not call for any interference in this

appeal. In support of the aforesaid submissions, reliance has

been placed on the decisions of this Court in General Manager,

Northern Railway and Another

2

v. Sarvesh Chopra and

Harsha Constructions v. Union of India and Others

3

.

ANALYSIS

10. We have carefully considered the rival submissions advanced by

the learned counsel for the respective parties and have perused

the record.

ISSUE

11. The solitary issue which arises for consideration in this appeal is

whether the observation of the Division Bench that “the

Arbitrator is at liberty to decide the claim of the appellant strictly

in accordance with the terms of the contract agreed upon

between the parties”, travels beyond the scope of the jurisdiction

of a court exercising power of judicial review under Article 226 of

2

(2002) 4 SCC 45.

3

(2014) 9 SCC 246.

7

the Constitution of India and impinges upon the jurisdiction of

the Arbitral Tribunal under Section 16 of the Arbitration and

Conciliation Act, 1996 (‘Act’).

RELEVANT CLAUSES OF THE AGREEMENT

12. Before proceeding to deal with the issue, it is apposite to take

note of Clause 63 and relevant parts of Clause 64 of the GCC :-

“63. Matters Finally Determined By The

Railway: All disputes and differences of any kind

whatsoever arising out of or in connection with

the contract, whether during the progress of the

work or after its completion and whether before

or after the determination of the contract, shall

be referred by the contractor to the GM and the

GM shall, within 120 days after receipt of the

contractor’s representation, make and notify

decisions on all matters referred to by the

contractor in writing provided that matters for

which provision has been made in Clauses 8,

18, 22(5), 39, 43(2), 45(a), 55, 55-A(5), 57,

57A, 61(1), 61(2) and 62(1) to (xiii)(B) of

Standard General Conditions of Contract or

in any Clause of the Special Conditions of the

Contract shall be deemed as ‘excepted

matters’ (matters not arbit rable) and

decisions of the Railway authority, thereon

shall be final and binding on the contractor;

provided further that ‘excepted matters’

shall stand specifically excluded from the

purview of the Arbitration Clause.

64.(1) Demand for Arbitration

8

64.(1)(i) In the event of any dispute or difference

between the parties hereto as to the

construction or operation of this contract, or the

respective rights and liability of the parties on

any matter in question, dispute or difference on

any account or as to the withholding by the

Railway of any certificate to which the

contractor may claim to be entitled to, or if the

Railway fails to make a decision within 120

days, then and in any such case, but except in

any of the “excepted matters” referred to in

Clause 63 of these conditions, the contractor,

after 120 days but within 180 days of his

presenting his final claim on disputed matters

shall demand in writing that the dispute or

difference be referred to arbitration.

64.(1)(ii) The demand for arbitration shall

specify the matters which are in question, or

subject of the dispute or difference as also the

amount of claim item-wise. Only such dispute(s)

or difference(s) in respect of which the demand

has been made, together with counter claims or

set off, given by the Railway, shall be referred to

arbitration and other matters shall not be

including in the reference.”

Thus, a conjoint reading of Clause 63 and relevant part of Clause

64 of the GCC, makes it clear that Clause 63 only excludes the

excepted matters from the purview of the Arbitration Clause but

does not exclude the jurisdiction of the Court of Law to examine

the validity of the decision taken in respect of excepted matters.

THE ARBITRATION AND CONCILIATION ACT, 1996

13. The Act is modelled on the UNCITRAL Model Law and is intended

to bring the domestic as well as International Commercial

9

Arbitration in consonance with the UNCITRAL Model, the New

York Convention and the Geneva Convention, as has been held

by a three-Judge Bench of this Court in Chloro Controls India

Pvt. Ltd. v. Severn Trent Water Purification Inc. & Ors.

4

Section 5 of the Act prescribes the extent of judicial intervention

and begins with a non-obstante clause and mandates that “no

judicial authority shall intervene except where so provided in this

part”. Section 16(1) of the Act empowers the Arbitral Tribunal to

rule on its jurisdiction “including ruling on any objections with

respect to existence or validity of the arbitration agreement”.

Section 16 incorporates the principle of kompetenz-kompetenz,

which lies at the foundation of the Act and makes a decisive

departure from the preceding statutory regime contained in the

Arbitration Act, 1940.

PERMISSIBLE EXTENT OF JUDICIAL SCRUTINY PRIOR OR

AT THE STAGE OF REFERENCE OF DISPUTE

14. The extent of judicial scrutiny permissible even at the stage

anterior to appointment of an Arbitrator or at the stage of

appointment of an Arbitrator under Section 11 of the Act has

travelled through four distinct phases each marking a

4

(2013) 1 SCC 641.

10

progressively narrower conception of the Court’s role,

culminating in the position that holds the field today. In Konkan

Railway Corpn. Ltd. & Ors. v. Mehul Construction Co .

5

,

reaffirmed by a Constitution Bench in Konkan Railway Corpn.

Ltd. v. Rani Construction (P) Ltd.

6

, this Court characterised the

power of appointment under Section 11(6) as purely

administrative, leaving every contested question, including the

existence of the agreement and arbitrability, to the Arbitral

Tribunal under Section 16. The aforesaid view was overruled by

a seven-Judge Bench in SBP & Co. v. Patel Engineering. Ltd.

and Another

7

, wherein it was held the power to be judicial,

requiring the court, at the referral stage, to decide, amongst other

things, the existence of a valid arbitration agreement. This view

was refined in National Insurance Co. Ltd. v. Boghara Polyfab

(P) Ltd.

8

, which classified the issues arising on a Section 11

application into three categories, of which “Category III” issues,

namely whether the claim made falls within the arbitration

clause, illustratively including “a matter which is reserved for the

final decision of a departmental authority and excepted or

5

(2000) 7 SCC 201.

6

(2002) 2 SCC 388.

7

(2005) 8 SCC 618.

8

(2009) 1 SCC 267.

11

excluded from arbitration”, were held to be decided by the

Arbitral Tribunal alone, and not by the referral court.

15. The Arbitration and Conciliation (Amendment) Act, 2015, on the

basis of the recommendations contained in the 246

th Report of

the Law Commission of India, inserted Section 11(6A)

9

in the Act,

by which the scope of examination by the Court,

“notwithstanding any judgment, decree or order of any Court”, is

confined, at the stage of appointment, to the existence of the

arbitration agreement. In Duro Felguera, S.A. v. Gangavaram

Port Ltd.

10

, this Court applied the amended provision literally,

holding that the referral court is only required to examine “if an

arbitration agreement exists, nothing more, nothing less”. A

three-Judge Bench of this Court in Mayavati Trading (P) Ltd. v.

Pradyuat Deb Burman

11

, held that Section 11(6A) legislatively

overruled the wider scrutiny contemplated by SBP & Co. and

Boghara Polyfab (supra).

16. Another three-Judge Bench of this Court in Vidya Drolia and

Others v. Durga Trading Corp oration

12

, harmonised the

standard of review under Sections 8 and 11 of the Act and held

9

Sub-section (6A) omitted by Act 33 of 2019, sec 3(v) [Date of enforcement yet to be notified.]

10

(2017) 9 SCC 729.

11

(2019) 8 SCC 714.

12

(2021) 2 SCC 1.

12

that a court should decline reference only where it is manifestly

and ex facie certain that the arbitration agreement is non-

existent, invalid, or that the dispute is non-arbitrable; short of

that, the governing maxim is “when in doubt, do refer.” This “eye

of the needle” standard has since been applied consistently, in

subsequent decisions by this Court in Uttarakhand Purv Sainik

Kalyan Nigam Ltd. v. Northern Coal Field Ltd.

13

(holding that

limitation, being a mixed question of fact and law bound up with

the Tribunal’s Section 16 jurisdiction, is ordinarily for the

Arbitral Tribunal) and in In Re: Interplay Between Arbitration

Agreements and the Indian Stamp Act, 1899

14

(holding by a

seven-Judge Bench, that even insufficiency of stamping is a

curable, evidentiary question for the Tribunal, and thus

overruling N.N. Global Mercantile (P) Ltd. v. Indo Unique

Flame Ltd.)

15

.

17. A three-Judge Bench of this Court in SBI General Insurance

Company Ltd. v. Krish Spinning

16

, in paragraph 114 held as

follows,

“The use of the term “examination” under Section 11(6-

A) as distinguished from the use of the term “rule”

13

(2020) 2 SCC 455.

14

(2024) 6 SCC 1.

15

(2023) 7 SCC 1 (overruled).

16

(2024) 12 SCC 1.

13

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. The prima facie view on existence of the

arbitration agreement taken by the Referral Court does

not bind either the Arbitral Tribunal or the Court

enforcing the arbitral award.”

This view was reiterated by a two-Judge Bench of this Court in

Office for Alternative Architecture v. Ircon Infrastructure

and Services Ltd.

17

18. What emerges from the foregoing survey is that, under the Act,

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, and not a question for a court exercising even

the wider, appointment-stage jurisdiction under Section 11,

much less for a court exercising the discretionary jurisdiction of

judicial review under Article 226 of the Constitution, whose very

engagement with the merits of the dispute, in the present case,

was declined on the ground that it involved complicated

questions of fact.

17

2025 SCC OnLine SC 1098.

14

19. If a court exercising the power of appointment under Section

11(6A) has no jurisdiction to enter upon, still less to pre-

determine, the touchstone by reference to which the Arbitral

Tribunal is to adjudicate a claim said to fall within an “excepted

matters” clause, a writ appellate court, whose task was confined

to testing the correctness of the learned Single Judge’s disposal

of a writ petition impugning a termination notice, had, by parity

of reasoning and a fortiori, no such jurisdiction. The direction

that the Arbitrator “is at liberty to decide the claim of the

appellant strictly in accordance with the terms of the contract

agreed upon between the parties”, whatever the intention behind

it, has the inevitable effect of circumscribing the width of the

Arbitrator’s enquiry, including his authority under Section 16 to

rule upon the scope of his own jurisdiction over the dispute

relating to termination.

20. 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. It was not open to the Division Bench, in the

exercise of its writ appellate jurisdiction, to prescribe in advance

15

the manner of, or to place constraints upon, that adjudication.

For yet another reason, the Division Bench ought not to have

made such an observation as the issue of arbitrability of

termination of agreement was not an issue before it. Accordingly,

the issue is answered.

21. Insofar as reliance placed by the appellant on ABS Marine

Services (supra) is concerned, suffice it to say that same has no

application to the fact situation of the case, as Clauses 3.20 of

the said case and 63 of GCC in the instant case are differently

worded. Clause 3.20 in ABS Marine Services (supra) ousts the

jurisdiction of any court of law and prohibits arbitration

proceedings as well, whereas in the instant case, Clause 63 does

not bar the jurisdiction of the court but only puts the excepted

matters beyond the scope of arbitration. As far as the reliance

placed by the respondents on General Manager Northern

Railway (supra) is concerned, same is of no assistance to them

in the facts of the present case for the reason, that in the said

case, this Court dealt with Section 20 of the Arbitration Act, 1940

and the provisions of the Act make a decisive departure from the

previous statutory regime.

16

CONCLUSION

22. For the foregoing reasons, it is clarified that the direction issued

by the Division Bench to the Arbitrator to decide all claims of the

appellant strictly in accordance with the terms of the contract

agreed upon between the parties shall not be construed to

impinge upon the jurisdiction of the Arbitral Tribunal, to

adjudicate the dispute with regard to termination of contract. It

is clarified that this Court has not expressed any opinion on the

merits of the case.

23. In the result, the appeal is disposed of. There shall be no order

as to costs.

24. Pending applications, if any, shall stand disposed of.

……………..……………………………….J.

[PAMIDIGHANTAM SRI NARASIMHA]

…….…………………………………………J.

[ALOK ARADHE]

NEW DELHI;

SEPTEMBER 08, 2026.