The sentence that should not have been there
Read the operative part of the Telangana High Court’s order on its own and it looks like a win for the contractor. GVV Constructions, whose South Central Railway contract had been terminated, could raise its claims before an arbitral tribunal. An earlier finding against it had been set aside.
Then came nine words: “strictly in accordance with the terms of the contract”. The Division Bench had used them in its direction to the tribunal. GVV appealed over that qualification, arguing that it could restrict the arbitrator’s enquiry before the tribunal had decided the scope of its own authority.
On 8 September 2026, the Supreme Court clarified that the direction could not constrain that authority. Its judgment in GVV Constructions v. Union of India, 2026 INSC 976, left the merits of the termination dispute open. The contract was not rewritten, and the contractor had not won its underlying claim.
What was at stake
GVV executed a contract on 30 November 2017 for works on the Guntur–Guntakal track-doubling project, including earthwork, bridges and road underbridges. On 10 June 2022, the Railways terminated the contract under Clause 62 of the General Conditions of Contract, forfeited the performance guarantee and security, and held the contractor disentitled to compensation for loss.
The contractor challenged the termination in a writ petition. The Single Judge dismissed it because the dispute involved serious and complicated questions of fact. Although the judge noted that GVV had already invoked arbitration, the order also recorded that there was no irregularity in the termination.
On 16 December 2025, the Division Bench set aside that finding as unsupported by reasons. Upholding the termination in advance would leave the tribunal little room to decide in the contractor’s favour. The appellate court gave GVV liberty to pursue its claims, but added the qualification that led to the Supreme Court appeal.
By then, arbitration was underway. A former Supreme Court judge had been appointed sole arbitrator, proceedings had commenced on 20 January 2026, and twelve issues had been framed. They included the validity of the termination and whether claims were time-barred, non-arbitrable or covered by “excepted matters”. These dates and procedural steps are recorded in paragraphs 3–7 of the judgment.
Illustration: whether a claim falls within an excluded category is itself a question to examine.
Who decides what the contract excludes?
Clause 63 identifies specified contractual matters as “excepted matters”, excludes them from arbitration and makes the Railway authority’s decisions on them final and binding under the contract. Clause 64’s arbitration mechanism is subject to that exclusion. The judgment reproduces both provisions in paragraph 12.
The dispute was about whether this termination fell within that exclusion. Section 16 of the Arbitration and Conciliation Act gives an arbitral tribunal authority to rule on its own jurisdiction, including objections concerning the arbitration agreement. The Supreme Court held that the tribunal must address the excepted-matters question in the first instance.
That leaves a real possibility that a claim, or part of it, falls outside arbitration. The judgment does not abolish the exclusion. It protects the tribunal’s ability to examine its scope without a writ court prescribing the answer.
What each side argued
For the Union, Additional Solicitor General Vikramjit Banerjee argued that bringing the termination issue to arbitration violated Clause 63. He submitted that a civil-court remedy remained available for excepted matters and relied on earlier decisions concerning the contractual exclusion.
GVV’s counsel, Senior Advocate Gaurav Agarwal, argued that termination was directly linked to the other issues before the tribunal. He also relied on ABS Marine Services v. Andaman and Nicobar Administration.
The Supreme Court expressly found ABS Marine inapplicable to these facts. That case concerned differently worded provisions excluding both court proceedings and arbitration. Clause 63 here excluded specified matters from arbitration without barring the jurisdiction of a court of law. That distinction appears in paragraph 21 and limits what can be drawn from the comparison.
Why the writ court’s direction went too far
Justice Alok Aradhe wrote the judgment for a bench also comprising Justice Pamidighantam Sri Narasimha. The Court traced the changing limits on judicial scrutiny when appointing arbitrators, from Konkan Railway through SBP & Co., Boghara Polyfab and the 2015 amendment introducing Section 11(6A).
In its account of the later cases, the Court described a narrow examination at the referral stage. Vidya Drolia permits refusal where the absence or invalidity of an agreement, or non-arbitrability, is manifestly clear. SBI General Insurance v. Krish Spinning, a 2024 decision, distinguishes that preliminary examination from the contested enquiry entrusted to the tribunal.
The comparison served a specific purpose. If a court appointing an arbitrator could not predetermine how the tribunal should address an excepted-matters objection, a writ appellate court reviewing the dismissal of a termination challenge had no basis to do so either. Arbitrability of the termination dispute was not an issue before the Division Bench.
In paragraphs 18–20, the Court explained that the disputed direction constrained the arbitrator’s enquiry, including the authority to decide jurisdiction. Whether the termination dispute was wholly or partly excluded, and what remedy remained if it was, belonged to the arbitrator in the first instance.
Illustration: the tribunal examines its jurisdiction before resolving the claim.
What the Court changed
The Supreme Court clarified how the High Court’s sentence must be read. It said the direction could not impinge on the tribunal’s jurisdiction to adjudicate the termination dispute and expressly declined to comment on the merits. It disposed of the appeal without an order as to costs.
The clarification did not invalidate Clause 63, decide whether the termination was lawful or award compensation. Nor does it permit an arbitrator to disregard the contract. It prevents this writ-appellate direction from restricting the tribunal’s statutory enquiry into its own authority.
What construction teams can take from it
For a contractor reviewing a termination dispute, the practical task is to map each claim against the wording of the applicable exclusion. A clause number alone does not resolve how an exclusion applies to the facts. The contract, termination notice, procedural history and precise relief sought all need to be read together.
For employers and their advisers, the case shows how apparently routine wording in a proposed court order can create a further jurisdictional dispute. A direction giving liberty to arbitrate should be checked for qualifications that might pre-empt an issue already before the tribunal.
Those observations should not be applied mechanically to NHAI or other public-sector contracts. Their wording and dispute-resolution provisions require separate examination. GVV concerned the Railway GCC clauses reproduced in this judgment.
What remains unresolved
The judgment records the tribunal’s issues, but gives no final answer on the termination or the excepted-matters objection. This article does not establish a subsequent award or jurisdictional ruling. The next substantive record to examine is the tribunal’s decision on those questions, if it becomes publicly available.
For further study of writ proceedings and construction arbitration, see Brenman’s Construction Law Programme.
