Who Decides “Excepted Matters”? Supreme Court Reaffirms the Tribunal’s Primacy Under Section 16
The Supreme Court clarifies that an arbitral tribunal is the first forum to decide whether a contractual claim is within an “excepted matters” clause, thereby reducing judicial interference in arbitration.
Many times, government works contracts contain “excepted matters” clauses that exclude specific types of disputes from arbitration. However, who determines whether a claim is covered by such an exclusion, the court or the arbitral tribunal? In M/s. GVV Constructions Pvt. Ltd. v. Union of India (2026 INSC 976) decided on 8 September 2026, the Supreme Court clarified that this determination is within the tribunal’s competence under Section 16 of the Arbitration and Conciliation Act, 1996.
Background
The dispute arose from a works contract awarded by South Central Railway for doubling the Guntur-Guntakal railway track. In June 2022, the contract was terminated and GVV Constructions challenged the termination in the Telangana High Court. The Division Bench allowed the contractor to make its claims before the arbitral tribunal but also stated that it must be adjudicated strictly according to the contract.
The contractor appealed this order before the Supreme Court, saying it would limit the jurisdiction of the tribunal.
What the Court held
The Bench of Justices Pamidighantam Sri Narasimha and Alok Aradhe held that whether a claim falls within an “excepted matters” clause is a question for the arbitral tribunal under Section 16. The Court emphasised the principle of kompetenz-kompetenz, that is, the tribunal’s authority to rule on its own jurisdiction.
The Court clarified that the High Court’s direction does not limit the jurisdiction of the Tribunal in deciding the dispute on termination. The appeal was dismissed on this clarification and the relevant jurisdictional issues were to be decided at the first instance by the tribunal.
Why it matters
The ruling confirms the difference between a contractual exclusion of arbitration and the arbitrator’s power to exclude. Contractors should be aware of claims that may be excluded from the contract and should make jurisdictional objections to the tribunal as necessary. It is also important that the government and the PSUs expand their contractual exclusions before the tribunal and recognize that the applicability of the contractual exclusions is in the statutory framework. The decision underscores the importance of drafting the definition of “excepted matters” with care and to make a clear distinction between excepted matters and matters for which other remedies are available. The order is designed to ensure that the tribunal’s jurisdiction is decided first and that the court is not called upon to intervene unless there are remedies under the Arbitration and Conciliation Act, 1996.
