Let the Arbitrator Decide: Supreme Court Says High Court Cannot Fence In the Tribunal on Railway ‘Excepted Matters’

Case at a glance: A railway contractor whose contract was terminated went to the Telangana High Court, which in writ appeal left it free to raise its claims before the arbitrator but added that the arbitrator should decide them strictly in accordance with the contract. The Supreme Court held that whether a dispute is an ‘excepted matter’ is for the arbitral tribunal under Section 16 of the Arbitration Act, and clarified that the High Court’s direction will not curtail the tribunal’s jurisdiction over the termination dispute.

South Central Railway awarded the appellant a contract for doubling of the Guntur–Guntakal section; the agreement was signed on 30 November 2017. On 10 June 2022 the railway terminated it under Clause 62 of the Indian Railways General Conditions of Contract (GCC), forfeiting the performance guarantee and security.

A Single Judge of the Telangana High Court dismissed the contractor’s writ petition, observing that there was no irregularity in the termination. On 16 December 2025 a Division Bench set aside that finding as unreasoned and gave the contractor liberty to raise all claims before the arbitral tribunal, which was to decide them “strictly in accordance with” the contract. A former Supreme Court judge, appointed sole arbitrator, framed twelve issues, including whether the termination is an excepted matter.

The Key Question Before the Court

Did the High Court’s direction that the arbitrator decide the claim strictly according to the contract go beyond Article 226 review and trench on the tribunal’s power under Section 16?

Kompetenz-Kompetenz and Excepted Matters

Reading Clauses 63 and 64 of the GCC together, the Court said Clause 63 keeps ‘excepted matters’ out of arbitration but does not shut out court scrutiny of decisions on them. Tracing the law on referral courts from Konkan Railway and SBP & Co. through Vidya Drolia, the seven-judge Stamp Act reference and SBI General v. Krish Spinning, it held that whether a claim falls within an excepted-matters clause is for the arbitral tribunal under Section 16, not for a court under Section 11 or Article 226.

The Division Bench’s direction, the Court said, had the inevitable effect of circumscribing the arbitrator’s enquiry, including his Section 16 authority, and arbitrability was not even before the High Court. It distinguished ABS Marine, where the clause ousted court jurisdiction, and Sarvesh Chopra, decided under the 1940 Act.

What the Court Actually Held

• Whether a claim falls within an excepted-matters clause is for the arbitral tribunal under Section 16.
• The High Court could not prescribe how the tribunal should adjudicate the termination dispute.
• The Division Bench’s direction shall not be construed to impinge on the tribunal’s jurisdiction over the termination.
• No opinion was expressed on merits; the appeal was disposed of without costs.

Why This Judgment Matters

• It protects the tribunal’s competence to rule on its own jurisdiction in railway contracts.
• It warns writ courts against directions that pre-shape arbitral outcomes.
• It clarifies that GCC Clause 63 does not oust court scrutiny of excepted-matter decisions.

What Should Advocates Take Away From the Judgment?

For Contractors

• Raise arbitrability and excepted-matter questions before the tribunal under Section 16.
• Challenge writ directions that limit the tribunal’s enquiry.

For Railways and PSUs

• Argue excepted-matter objections before the arbitrator first.
• Note the distinction drawn from clauses that expressly oust court jurisdiction.

Key Takeaways

Frequently Asked Questions

No. It expressed no opinion on merits.

The High Court’s direction can no longer be read as limiting the tribunal’s jurisdiction over the termination dispute.

The arbitral tribunal, at the first instance.

Conclusion