Introduction
An arbitration clause is commonly assumed to cover every dispute arising from a contract. That assumption breaks down in a large number of commercial, government, infrastructure, and insurance contracts in India. Many such contracts contain arbitration clauses that appear broad on their face but are narrowed by carve-outs. Indian arbitration law refers to these carve-outs as “excepted matters.”
Excepted matters are disputes that contracting parties have deliberately kept outside the scope of arbitration. The carve-out may be express naming an officer, engineer, or authority whose decision on a specified issue is final or it may operate through a gateway mechanism, where only a defined class of claims qualifies for arbitration and a contractually designated authority decides whether a claim falls within that class.
This structure creates a recurring dispute of its own. When a party invokes arbitration, the opposing side frequently argues that the claim is not arbitrable because it falls within an excepted category. The claimant counters that this very question should be decided by the Arbitral Tribunal. The real controversy is therefore procedural as much as substantive: who decides whether a dispute is an excepted matter, and at what stage of the proceeding?
The Supreme Court of India’s approach to this question has evolved considerably. Older rulings placed the burden of screening excepted matters on the referral court at the Section 11 stage. Recent rulings have moved that responsibility to the Arbitral Tribunal itself, applying the competence-competence principle enshrined in the Arbitration and Conciliation Act, 1996.
What Are “Excepted Matters” Under the Arbitration and Conciliation Act, 1996?
The Arbitration and Conciliation Act, 1996 does not use or define the term “excepted matters.” The concept has been developed entirely through judicial precedent, particularly in disputes arising from government contracts and long-form commercial agreements.
An excepted matter, in essence, is any dispute that the contracting parties have agreed not to refer to arbitration. This exclusion can take several contractual forms:
- A clause stating that the decision of a named officer, engineer, general manager, or authority on a specific category of claims is final and binding.
- A clause stating that certain claims are not payable or will not be entertained under the contract.
- A clause restricting arbitration to only those claims that satisfy a prescribed contractual condition (such as being included in a “final bill” or “notified” through a defined procedure).
- A clause requiring a preliminary decision by a named authority before any claim can be referred to arbitration at all.
The doctrinal foundation for excepted matters is party autonomy. Arbitration exists because parties consent to it. If parties are free to submit disputes to arbitration by agreement, they are equally free to exclude specific categories of disputes from that agreement. An excepted-matter clause, in this sense, defines the outer boundary of the Arbitral Tribunal’s jurisdiction rather than operating as an exception carved out after the fact.
However, courts have consistently cautioned against loosely branding a defence as an “excepted matter.” A respondent cannot defeat arbitration merely by asserting that a claim is time-barred, unsupported, exaggerated, waived, or otherwise not payable under the contract these are ordinarily defences on merits that the Tribunal itself must adjudicate. A plea becomes a genuine jurisdictional objection only where the contract clearly and unambiguously removes that category of dispute from arbitration, or vests final adjudicatory power in another named forum.
The Traditional Doctrine: Contractual Exclusion and Party Autonomy
Food Corporation of India v. Sreekanth Transport
In Food Corporation of India v. Sreekanth Transport, (1999) 4 SCC 491, the arbitration clause excluded matters for which the contract itself provided a decision-making mechanism specifically, a clause making the decision of the senior regional manager final regarding certain losses. The Supreme Court affirmed that such excepted-matter clauses are valid, since the contract itself supplies an alternative adjudicatory route. On facts, however, the Corporation had bypassed its own contractual mechanism by directly filing civil proceedings, and the Court held that this conduct amounted to an abandonment of its right to invoke the exclusion.
This ruling established two enduring propositions: excepted-matter clauses are enforceable, and the conduct of the party relying on the exclusion can affect whether that exclusion still applies.
Harsha Constructions v. Union of India
In Harsha Constructions v. Union of India, (2014) 9 SCC 246, the contract identified certain clauses as excepted matters standing wholly outside arbitration. Despite this, the arbitrator proceeded to decide a dispute over payment for extra work. The Supreme Court set this aside, holding that jurisdiction over a non-arbitrable dispute is not created merely because the dispute was referred to arbitration or an issue was framed on it. If a matter is genuinely excepted by contract, an arbitrator has no authority to rule on it, regardless of procedural developments during the reference.
Mitra Guha Builders (India) Co. v. ONGC
Mitra Guha Builders (India) Co. v. ONGC, (2020) 3 SCC 222, concerned a dispute over levy of compensation for delay, where the contract vested the Superintending Engineer with final decision-making power on that specific issue, expressly excluding it from arbitration. The Supreme Court held that the arbitrator could not sit in appeal over a decision the parties had consciously entrusted to a named contractual authority.
Oriental Insurance Co. Ltd. v. Narbheram Power & Steel (P) Ltd.
Oriental Insurance Co. Ltd. v. Narbheram Power & Steel (P) Ltd., (2018) 6 SCC 534, is better understood as a conditional-arbitration-clause case rather than a pure excepted-matters case. The clause applied only where liability was admitted and the dispute was limited to quantum. Since the insurer had repudiated liability altogether, the Supreme Court held the arbitration clause was never triggered. The case reinforces a broader interpretative rule relevant to excepted matters: courts must read an arbitration clause as drafted, without expanding it on grounds of convenience or presumed fairness.
Together, these rulings form the classical doctrine — excepted matters are a legitimate expression of party autonomy, not a judicially disfavoured exception to it, but exclusion from arbitration cannot be readily inferred without clear contractual language.
Vidya Drolia and the Broader Non-Arbitrability Framework
Vidya Drolia v. Durga Trading Corporation, (2021) 2 SCC 1, situated excepted matters within the Supreme Court’s wider framework on non-arbitrability. The Court recognised that a dispute can be non-arbitrable not only where its subject matter concerns rights in rem or is reserved for public fora, but also where the dispute simply falls outside the scope of what the parties agreed to arbitrate precisely the situation with excepted matters.
Critically, Vidya Drolia also addressed who decides arbitrability. It endorsed the competence-competence principle under Section 16 of the Arbitration and Conciliation Act, 1996, holding that the Arbitral Tribunal is ordinarily the preferred first authority to rule on questions of jurisdiction and arbitrability. At the same time, it permitted a limited prima facie review by the referral court under Section 11, allowing courts to decline reference only where non-arbitrability was manifest, ex facie, and not reasonably debatable.
This created a working balance: tribunals retained primary authority over jurisdictional questions, while courts kept a narrow gatekeeping role for plainly non-arbitrable claims.
Indian Oil Corporation v. NCC Ltd.: The Notified Claims Model
Indian Oil Corporation Ltd. v. NCC Ltd., (2023) 2 SCC 539, is among the most significant modern rulings on excepted matters. The contract confined arbitration to “notified claims” that were included in the final bill through a defined contractual procedure, and expressly assigned the General Manager the power to decide whether a claim qualified as a notified claim — with the Arbitral Tribunal having no jurisdiction over claims falling outside that category.
The Supreme Court held that this was not a mere procedural formality but a genuine jurisdictional gateway built into the arbitration agreement itself. Once the General Manager had consciously determined that a claim was not a notified claim, that claim could not be referred to arbitration at all. The ruling confirms that parties may validly and narrowly define the scope of arbitrable claims, and an Arbitral Tribunal cannot expand its own jurisdiction beyond that contractually defined gateway.
Emaar India v. Tarun Aggarwal Projects: The Pre-Interplay Threshold Review
Emaar (India) Ltd. v. Tarun Aggarwal Projects LLP, (2023) 13 SCC 661, extended the threshold-scrutiny approach to the Section 11 appointment stage itself. The contract there contained both a special adjudicatory mechanism for certain matters and a separate arbitration clause for the rest. When the High Court appointed an arbitrator without first examining whether the dispute fell within the excepted category, the Supreme Court set aside that appointment and directed a preliminary inquiry into whether the dispute was excepted or arbitrable, relying on the limited prima facie review permitted in Vidya Drolia.
This approach, however, has since been substantially overtaken by subsequent rulings, discussed below.
Interplay Judgment and SBI General Insurance v. Krish Spinning: Narrowing the Section 11 Enquiry
The next major shift came through the Supreme Court’s reconsideration of the referral court’s role under Section 11 of the Arbitration and Conciliation Act, 1996.
In In re: Interplay Between Arbitration Agreements under the Arbitration Act, 1996 and the Stamp Act, 1899, (2024) 6 SCC 1, a seven-judge Bench emphasised arbitral autonomy, minimum judicial interference, and the competence-competence principle. Although the immediate controversy concerned stamping of arbitration agreements, its reasoning that a Section 11 court’s role is confined to examining the prima facie existence of an arbitration agreement and not other issues that could delay the arbitral process has since been extended well beyond the stamping context.
This reasoning was applied directly to excepted matters in SBI General Insurance Co. Ltd. v. Krish Spinning, (2024) 12 SCC 1. The dispute concerned whether execution of a discharge voucher amounted to a full and final settlement barring arbitration altogether. The Supreme Court held that such objections — accord and satisfaction, discharge, waiver, or coercion — ordinarily require factual assessment and must be left to the Arbitral Tribunal rather than being conclusively decided by the Section 11 court. It further held that after the Interplay ruling, earlier observations in Vidya Drolia and NTPC Ltd. v. SPML Infra Ltd., (2023) 9 SCC 385, permitting referral courts to screen out ex facie non-arbitrable claims, could no longer operate with the same latitude.
The combined effect is that a Section 11 court can no longer conduct a detailed, claim-wise dissection of exclusionary clauses. That exercise demands contractual interpretation and factual assessment better suited to the Tribunal under the competence-competence framework of Section 16.
Office for Alternative Architecture v. Ircon Infrastructure & Services Ltd.: The Present Position
Office for Alternative Architecture v. Ircon Infrastructure & Services Ltd., 2025 SCC OnLine SC 1098, applies the post-Interplay approach directly to excepted matters. The High Court, while appointing a Tribunal under Section 11, had itself excluded certain claims on the ground that they were non-arbitrable or fell within an excepted category.
The Supreme Court set aside that exclusion, holding that once a court finds that an arbitration agreement exists, it should not split claims into arbitrable and non-arbitrable categories at the Section 11 stage. The correct course is to appoint the Arbitral Tribunal and leave the question of excepted matters to be raised before the Tribunal under Section 16. Significantly, the Court expressly declined to follow Emaar India on this point, confining that decision’s relevance to the earlier, now-superseded phase of Section 11 jurisprudence.
The Present Legal Position: A Stage-Sensitive Framework
Reconciling these rulings requires a stage-sensitive reading of Indian arbitration law on excepted matters:
First, excepted matters remain valid in principle. Parties may agree that a named authority’s decision on defined issues is final, and courts and tribunals must respect that contractual choice, a principle rooted in Food Corporation of India, Harsha Constructions, and Mitra Guha Builders.
Second, exclusion from arbitration must be clear and cannot be readily inferred. A clause stating a claim is “not payable” is ordinarily a merits defence, not a jurisdictional exclusion.
Third, a contractual defence (accord and satisfaction, waiver, limitation) is distinct from a jurisdictional exclusion (a category of dispute the contract never permitted to be arbitrated). Indian Oil v. NCC illustrates this distinction by treating the “notified claims” mechanism as a true jurisdictional boundary.
Fourth, the enforcement of excepted-matter objections has shifted from the referral court to the Arbitral Tribunal. Following Interplay, Krish Spinning, and Office for Alternative Architecture, a Section 11 court’s enquiry is now confined to the prima facie existence of an arbitration agreement; it should not conduct claim-wise scrutiny of exclusionary clauses.
Fifth, this shift does not extinguish excepted matters it defers the enquiry to the Tribunal under Section 16. If a Tribunal wrongly assumes jurisdiction over a genuinely excepted matter, the aggrieved party retains recourse by challenging the award under Section 34 of the Arbitration and Conciliation Act, 1996.
Conclusion
The law on arbitrability of excepted matters in India has moved from a court-centric threshold model toward a tribunal-centric one, without abandoning the underlying principle that parties may validly limit the scope of what they agree to arbitrate. Excepted matters continue to mark the outer boundary of arbitral jurisdiction under the Arbitration and Conciliation Act, 1996, but the responsibility for drawing that boundary in the first instance has, after Interplay, Krish Spinning, and Office for Alternative Architecture, moved from the Section 11 referral court to the Arbitral Tribunal itself, consistent with the competence-competence principle under Section 16 subject always to eventual judicial review under Section 34.
The issues explored in Cross-Border Legal Privilege in International Arbitration complement the legal principles governing which disputes may be referred to arbitration and the allocation of decision-making authority between arbitral tribunals and courts.
