1. Contract for railway track doubling — Termination and forfeiture of performance guarantee — Dispute over validity of termination. (Para 3 , 4 , 5 )
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2026 Supreme(SC) 1095
SUPREME COURT OF INDIA
PAMIDIGHANTAM SRI NARASIMHA, ALOK ARADHE, JJ.
M/s. GVV Constructions Private Limited – Appellant
Versus
The Union of India & Ors. – Respondent
Civil Appeal No. 12525 of 2026 (@ Special Leave Petition (Civil) No. 7338 of 2026)
Decided On : 08-09-2026
Advocates appeared:
For Petitioner(s): Mr. Gaurav Agarwal, Sr. Adv. Mr. P. Mohith Rao, AOR Mr. Kasi Nageshwar Rao, Adv. Mr. A.s Vasudevan, Adv. Mr. J. Akshitha, Adv. Mr. J. Venkat Sai, Adv. Mr. Eugene S Philomene, Adv. Mr. Dipankar Mukherjee, Adv. Mr. Nakul Patwardhan, Adv. Ms. Sejal Jain, Adv. Mr. Jagatjeet Singh, Adv. Ms. Kaarunya Lakshmi, Adv. Ms. Shrija Rawat, Adv. Mr. Utkarsh Krishna, Adv.
For the Respondent(s): Mr. Vikramjit Banerjee, A.S.G. Mr. Abhishek Singh-ii, Adv. Mr. Bharat Sood, Adv. Mr. Gaurav Arya, Adv. Mr. Padmesh Mishra, Adv. Ms. Dumni Soren, Adv. Mr. Amrish Kumar, AOR Dr. Arun Kumar Yadav, Adv.
For Petitioner(s): Mr. Gaurav Agarwal, Sr. Adv. Mr. P. Mohith Rao, AOR Mr. Kasi Nageshwar Rao, Adv. Mr. A.s Vasudevan, Adv. Mr. J. Akshitha, Adv. Mr. J. Venkat Sai, Adv. Mr. Eugene S Philomene, Adv. Mr. Dipankar Mukherjee, Adv. Mr. Nakul Patwardhan, Adv. Ms. Sejal Jain, Adv. Mr. Jagatjeet Singh, Adv. Ms. Kaarunya Lakshmi, Adv. Ms. Shrija Rawat, Adv. Mr. Utkarsh Krishna, Adv.
For the Respondent(s): Mr. Vikramjit Banerjee, A.S.G. Mr. Abhishek Singh-ii, Adv. Mr. Bharat Sood, Adv. Mr. Gaurav Arya, Adv. Mr. Padmesh Mishra, Adv. Ms. Dumni Soren, Adv. Mr. Amrish Kumar, AOR Dr. Arun Kumar Yadav, Adv.
The Arbitral Tribunal, under the principle of kompetenz-kompetenz (Section 16), has primary jurisdiction to determine its own competence, including whether a matter is "excepted" from arbitration. A court exercising Article 226 jurisdiction cannot predetermine this scope or constrain the Tribunal's jurisdictional inquiry.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Sections 5, 11, 16 - Constitution of India - Article 226 - Competence of Arbitral Tribunal to rule on its own jurisdiction (*kompetenz-kompetenz*) - Section 16 empowers the Tribunal to rule on its jurisdiction, including objections to the existence or validity of the arbitration agreement (Para 13) - Judicial intervention is restricted under Section 5, and the scope of examination by a court at the appointment stage under Section 11(6A) is limited to a prima facie scrutiny of the existence of the arbitration agreement (Paras 15, 17).
(B) Excepted Matters - Questions regarding whether a claim falls within "excepted matters" (matters excluded from arbitration by the terms of the contract) are squarely within the competence of the Arbitral Tribunal under Section 16 (Para 18) - A court exercising discretionary jurisdiction of judicial review under Article 226 of the Constitution cannot predetermine the touchstone by which the Tribunal is to adjudicate such claims or place constraints upon the Tribunal's adjudication of its own jurisdiction (Paras 19, 20).
Facts of the case:
A construction company's contract with a railway authority was terminated, and its performance guarantee was forfeited. The company challenged the termination via a writ petition. While the Single Judge found no irregularity in the termination, the Division Bench set aside this finding and granted liberty to the company to raise claims before an Arbitral Tribunal, directing that the Tribunal decide the claims strictly in accordance with the terms of the contract. The company appealed, contending that this direction restricted the Tribunal's jurisdiction to determine the legality of the termination.
Findings of Court:
The direction issued by the Division Bench to the Arbitrator to decide claims strictly in accordance with the terms of the contract shall not be construed to impinge upon the jurisdiction of the Arbitral Tribunal to adjudicate the dispute regarding the termination of the contract.
Issues: Whether the observation of a Division Bench that an Arbitrator is at liberty to decide claims strictly in accordance with the terms of the contract travels beyond the scope of judicial review under Article 226 of the Constitution and impinges upon the jurisdiction of the Arbitral Tribunal under Section 16 of the Arbitration and Conciliation Act, 1996.
Ratio Decidendi: Under the principle of *kompetenz-kompetenz* codified in Section 16, the Arbitral Tribunal is the primary authority to rule on its own jurisdiction, including whether a dispute is an "excepted matter" excluded from arbitration. Since the role of a referral court under Section 11 is limited to examining the existence of the arbitration agreement, a writ court exercising appellate jurisdiction under Article 226 has no authority to prescribe the manner of adjudication or constrain the Tribunal's ability to rule on the scope of its own jurisdiction.
Result: Appeal disposed of.
Legal Category Hierarchy
-
practice and procedure
- arbitration
- judicial review
- administrative law
- constitutional law
Table of Contents
2. Appellant: termination illegal, arbitrable. Respondent: termination is an excepted matter excluded from arbitration. (Para 8 , 9 )
3. Appeal disposed of. Direction to arbitrator clarified: does not impinge on tribunal's jurisdiction over termination dispute. (Para 22 , 23 , 24 )
4. What is the scope of judicial intervention under the Arbitration and Conciliation Act, 1996?
Section 5 mandates no judicial authority shall intervene except as provided. Courts have progressively narrowed intervention, especially at the appointment stage under Section 11(6A). (Para 13 , 14 , 15 , 16 , 17 )
5. Can a writ appellate court in a judicial review prescribe how an arbitral tribunal must adjudicate a dispute?
No. A writ appellate court cannot circumscribe the arbitral tribunal's authority under Section 16 to rule on its own jurisdiction, including whether a matter is an excepted matter. (Para 18 , 19 , 20 )
6. What is the effect of an 'excepted matters' clause in an arbitration agreement?
Clause 63 of the GCC excludes excepted matters from arbitration but does not bar the jurisdiction of courts, preserving the right to challenge decisions on excepted matters before a civil court. (Para 12 )
7. What is the principle of kompetenz-kompetenz under the Arbitration and Conciliation Act, 1996?
Section 16 incorporates kompetenz-kompetenz, empowering the arbitral tribunal to rule on its own jurisdiction, including objections regarding the existence or validity of the arbitration agreement. (Para 13 )
8. What standard should a court apply when deciding whether to refer a dispute to arbitration?
The court should decline reference only if it is manifestly and ex facie certain that the arbitration agreement is non-existent, invalid, or the dispute non-arbitrable. When in doubt, refer. (Para 16 )
JUDGMENT :
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 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 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 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 c
