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Civil · Reportable judgment

The State of Jharkhand vs The Indian Builders Jamshedpur

Court
Supreme Court of India
Date
5 December 2025
Case No.
Civil Appeal No(s). 8261-8262 of 2012
Bench
Pamidighantam Sri Narasimha
Citation
[2025] 12 S.C.R. 417 : 2025 INSC 1308
Supreme Court Reports [2025] 12 S.C.R. 417 : 2025 INSC 1308
Issue for consideration
Bharat Drilling & Foundation Treatment Pvt. Ltd. v. State of Jharkhand and Ors. (2009) 16 SCC 705, if requires to be referred to a larger bench for reconsideration and authoritative decision in order to obviate uncertainty and for clear declaration of law as regards applicability of prohibited claims in a contract.
Headnote

Arbitration and Conciliation Act, 1996 – Arbitral Tribunal allowed certain claims of the respondent-claimant but the Civil Court set aside the claims 3, 4 and 6 on the ground that they were specifically prohibited under the contract between the parties – Appeal filed by the respondent, allowed by the High Court on the ground that the issue arising for consideration is covered by decision of this Court in Bharat Drilling and thus, allowed the claims barred under the contract restoring the arbitratal award – Challenge to – Plea of the State that the decision in Bharat Drilling is being applied, regularly and wrongly, to interpret prohibitory claim clauses in all Government contracts and thus, there is a compelling necessity to clarify the position of law: Held: Bharat Drilling is not an authority for the proposition that an excepted clause or a prohibited claim in a contract applies only to the employer and not to the Arbitral Tribunal – High Court did not examine the contractual clauses and proceeded to dispose of the appeal under the impression that the issue is conclusively covered by the decision of this Court in Bharat Drilling – In Bharat Drilling, the Court has not examined the contractual clauses that have fallen for consideration herein – Contractual clauses that limit claims are founded on freedom to contract – They are agreements that crystalise informed choices of parties – Applicability of excepted or prohibitory clauses would primarily depend upon the agreement between the parties, which alone is the guiding principle for the Arbitral Tribunal – The judgment in Bharat Drilling, relying on the judgment of this Court in Port of Calcutta, dealing with the principle of grant of interest pendente lite, is not appropriate – Further, the approach adopted in Bharat Drilling is not in tune with the principles laid down by this Court in the recent decisions of Cox and Kings Ltd. v. SAP India Private Ltd. CORE and In Re: Interplay Between Arbitration Agreements Under Arbitration and Conciliation Act, 1996 and Stamp Act, 1899 – In order to ensure clarity and consistency, the ratio of Bharat Drilling requires to be reconsidered – Bharat Drilling referred to a larger bench for reconsideration and authoritative decision – Registry to place the present judgment and order before the Hon’ble Chief Justice for appropriate orders for placing the matter before a larger bench of appropriate strength. [Paras 1, 8, 9, 11]

Keywords: Excepted clause · Prohibited claim in a contract · Prohibitory clauses · Claims barred under the contract · Bharat Drilling referred to a larger bench for reconsideration

As published in the Supreme Court Reports, Supreme Court of India. Headnotes prepared by: Divya Pandey Central Bank of India v. Ravindra, (2002) 1 SCC 367, para 39; Central Coop. Bank Ltd. v. S. Kamalaveni Sundaram, (2011) 1 SCC 790, para 13 : (2011) 1 SCC (Civ) 331. (2024) 4 SCC 1. 2023 SCC OnLine SC 1666.. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.

Full Judgment Text

Judgment 1. In view of our opinion that Bharat Drilling & Foundation Treatment Pvt. Ltd. v. State of Jharkhand and Ors1 is not an authority for the proposition that an excepted clause or a prohibited claim in a contract applies only to the employer and not to the Arbitral Tribunal, for the reasons to follow, in order to obviate uncertainty and for clear declaration of law, we are referring Bharat Drilling (supra) to a larger bench for reconsideration and authoritative decision. The context in which we have referred the matter to a larger bench is as follows. 2. State of Jharkhand is in appea
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