By the Court.—The Northern Railway had floated a tender on 24 June 2008 for the construction of quarters within its Shantipuram Railway Colony at Alambagh, Lucknow; for the replacement of old quarters and other ancillary work. The petitioner submitted a bid which was accepted on 3 July 2008. The total cost of the work envisaged is stated to have been Rs. 8.70 crores. A formal contract agreement was entered into on 24 November 2008. In pursuance of the agreement, the petitioner is stated to have submitted a bank guarantee in the amount of Rs. 43,52,470/-. The petitioner invoked the arbitration clause in terms of the arbitration agreement between the parties. Clause 64 of the Standard General Conditions of Contract in connection with Engineering Works contains an arbitration agreement.

2. The record would indicate that the petitioner had submitted its claims to the competent authority by a letter dated 14 October 2013 (Annexure 8), raising the following claims :

1. Loss of profit 15% of Balance work 5,932,405.52

2. Loss of over head 66,64,734.00

3. Loss due to under utilization of machine 3,000,000.00

& shuttering material

4. Loss of security guard 1,880,000.00

5. Payment of Balance work done 3,000,000.00

6. Loss due to intt on bank guarantee @ 15% P.A. 2,557,076.13

7. Loss due to intt on cash security @ 15% P.A. 2,557,076.13

8. Loss due to bank charges on bank 409,132.18

guarantee @ 2.4% P.A.

Total 2,60,00432.96

3. On 27 March 2014, the Deputy Chief Engineer called upon the petitioner to submit its options with reference to a proposed panel of names, out of which, it was stated that the General Manager would appoint an arbitrator to act as a nominee of the petitioner. The petitioner, by a letter dated 11 April 2014, suggested two names. On 8 May 2014, the Deputy Chief Engineer intimated to the petitioner of the constitution of an arbitral tribunal. A partial reference of the claims made by the petitioner was made in terms of Annexure ‘A’ to the letter containing both the claims of the contractor and the counter claims of the railways. On 17 May 2014, the petitioner addressed a communication to the Deputy Chief Engineer inquiring as to why all the claims which had been addressed, had not been referred to the arbitral tribunal. By a communication dated 18 June 2014, the petitioner was informed that claims 1, 2, 3, 4, 6, 7 and 8 had not been referred to arbitration since they constituted excepted matters in terms of Clause 61(3), Clause 21.5 and Clause 63 as well as under Clause 5.2 of the Special Tender Conditions. That has given rise to the filing of the present proceedings.

4. The submission which has been urged on behalf of the petitioner is that under Section 16 of the Arbitration and Conciliation Act, 1996 (the Act), the Arbitral Tribunal is entitled to rule on its own jurisdiction, including with respect to the existence or validity of an arbitration agreement. It has been submitted that the issue as to whether a matter falls within an ‘’excepted matter’’ under the agreement, falls within the jurisdiction of the Arbitral Tribunal to decide and it is not open to the competent authority to refuse to refer a claim to arbitration on the ground that it relates to an excepted matter.

5. On the other hand, the learned counsel appearing on behalf of the respondents has supported the impugned communication dated 18 June 2014 on the ground that once a claim falls within an excepted matter in the opinion of the competent authority, it could not be referred to arbitration and the jurisdiction of the arbitral tribunal to rule on an excepted matter would be ousted.

6. Section 16 of the Act empowers the arbitral tribunal to rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement. Whether a particular claim falls within the excepted category of claims which are not arbitrable, cannot be in the exclusive domain of one of the parties. The arbitral