Supreme Court Clarifies Scope Of Judicial Scrutiny: Whether Claims Falling Within ‘Excepted Matters’ Are To Be Determined By The Arbitral Tribunal

The Supreme Court (“Court”), vide its judgment in GVV Constructions Private Limited v. Union of India, Special Leave Petition No. 7338 of 2026., clarified the scope of judicial scrutiny at the stage of referring disputes to arbitration. The Bench comprising Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe, on September 8, 2026, held that the jurisdiction of a referral court or writ court is limited at the referral stage. Such courts cannot undertake assessment or lay down a touchstone which an arbitral tribunal shall follow to adjudicate a claim. The Court held that whether a claim falls within the ‘excepted matters’ clause is a matter exclusively within the jurisdiction of the arbitral tribunal, and a referral or writ appellate court cannot enter into such an enquiry.

Brief Facts:

South Central Railway, Respondent, and GVV Constructions Private Limited (“GVV”), Appellant, entered into a contract for laying railway tracks. The contract set a completion date and provided for the resolution of disputes by arbitration, except for certain matters in respect of which the decision of the railway authority was final and binding. The works were not completed by the due date, and Respondent terminated the contract. GVV challenged the validity of the termination by filing a writ petition before the High Court of Telangana (“High Court”).

The Single Judge of the High Court opined that the case involved complicated questions of fact and was not amenable to writ jurisdiction. Noting that GVV had already invoked the arbitration clause, the Single Judge upheld the termination and dismissed the writ petition. Being aggrieved by this observation, GVV assailed the order by way of a writ appeal before the High Court. The Division Bench of the High Court observed that the findings of the Single Judge and the subsequent affirmation of the termination were self-contradictory and without any reason. Accordingly, the Division Bench set aside the findings and granted liberty to GVV to raise claims before the arbitrator and to the arbitrator to decide the claims strictly in accordance with the terms of the contract.

Aggrieved, GVV preferred an appeal against the order of the Division Bench before the Supreme Court.

Issues before the Court:

The primary issue for consideration before the Court was whether the Division Bench, while directing the arbitrator to decide claims strictly in accordance with the contract, travelled beyond the scope of jurisdiction under Article 226 of the Constitution of India,1950 and impinged upon the jurisdiction of the arbitrator under Section 16 of the Arbitration and Conciliation Act, 1996 (“Act”).

Contentions of the Parties:

The Appellant contended that the contract was unlawfully terminated. It was argued that the Division Bench erred in providing a touchstone for the arbitrator to adjudicate the claims. It was well within the arbitrator’s jurisdiction to decide the issue of termination of the contract, as it was intrinsically linked to the other issues.

The Respondents contended that the issue of validity of termination could not be referred to arbitration as the same was an ‘excepted matter’ within the contract conditions. It was argued that GVV always has an alternative remedy before a civil court for grievances related to ‘excepted matters’.

Legal Position Governing Scope of Powers Available to Referral Court or Writ Court at the Stage of Reference of Disputes to Arbitration:

Section 16 of the Act incorporates the principle of kompetenz-kompetenz and empowers the arbitral tribunal to rule on its own jurisdiction, including the existence or validity of an arbitration agreement. The interpretation of judicial scrutiny at the reference stage has evolved in phases in Indian law. In Konkan Railway Corporation Limited v. Mehul Construction Company, (2000) 7 SCC 201., the Court held that every contested question, including the existence of an agreement or the arbitrability of a dispute, was to be decided by the arbitrator under Section 16. That observation was overruled by a seven-judge bench of the Apex Court in SBP & Company v. Patel Engineering Limited, (2005) 8 SCC 618 (“SBP & Company”). In SBP & Company, the power was held to be judicial rather than administrative, as earlier held, and it was observed that the courts at the reference stage were required to decide, inter alia, the existence of a valid arbitration agreement.

The observation in SBP & Company was further refined in National Insurance Company Limited v. Boghara Polyfab Private Limited, (2009) 1 SCC 267., where it was held that the decision on the arbitrability of claims lay solely with the arbitral tribunal. Subsequently, Section 11(6-A) was inserted into the Act by way of an amendment in 2015, confining the scope of examination of a referral/writ court to the determination of the existence of an arbitration agreement at the stage of appointment. The Court affirmed this while applying the amended provision in Duro Felguera, S.A. v. Gangavaram Port Limited, (2017) 9 SCC 729. Further, in Mayavati Trading Private Limited v. Pradyuat Deb Burman, (2019) 8 SCC 714., it was settled that Section 11(6-A) overruled the wider scrutiny prescribed by the Court in SBP & Company.

In 2020, the Court clarified the scope of the referral court’s powers in Vidya Drolia v. Durga Trading Corporation, (2021) 2 SCC 1., harmonising the standard of review and balancing mechanical reference to arbitration with protection for parties against prima facie non-arbitrable or dead claims. It held that a court may refuse to refer a dispute to arbitration only where it is ex facie clear that the dispute is non-arbitrable or that the agreement is non-existent or invalid. However, where there is even a slight doubt, the courts should refer disputes to arbitration. This restricted review was intended to check and protect parties from being forced to arbitrate when the matter is demonstrably non-arbitrable. This principle was consistently followed by courts, including in BSNL v. Nortel Networks (India) Private Limited, (2021) 5 SCC 738., NTPC Limited v. SPML Infra Limited, (2023) 9 SCC 385., Arif Azim Company Limited v. Aptech Limited, (2024) 5 SCC 313., and Elfit Arabia v. Concept Hotel Barons Limited, 2024 SCC OnLine SC 1739., where the courts adopted a wider interpretation and held that rejection of ex facie non-arbitrable or dead claims is necessary to protect a party from a protracted arbitration process. The position, however, was narrowed in SBI General Insurance Company Limited v. Krish Spinning, (2024) 12 SCC 1., wherein the Apex Court observed that the scope of enquiry is limited to a prima facie scrutiny of the existence of the arbitration agreement and does not include a contested or laborious enquiry within the jurisdiction of the arbitral tribunal. This view was further reiterated in Office for Alternative Architecture v. Ircon Infrastructure and Services Limited, 2025 SCC OnLine SC 1098.

Decision of the Court:

Applying the law laid down to the present case, the Court opined that the enquiry as to whether a claim is covered by/ falls outside ‘excepted matters’ or remedies available to a party in that regard is within the purview of an arbitral tribunal under Section 16 of the Act and not for a referral court or writ court to decide. It was observed that a writ appellate court, whose task was confined to determine the validity of termination of contract, has no jurisdiction to lay down directions for the arbitral tribunal in the manner of adjudication of claims or place constraints on such adjudication. In light of these observations, the Court observed that the Division Bench erred in making observations regarding the arbitrability of the agreement and disposed of the appeal.

Please find attached a copy of the judgment here.

This update has been contributed by R. Sudhinder (Senior Partner) and Anushka Sharma (Associate).