JSA successfully represents ABS Marine Services before the Supreme Court in a landmark judgment on the ambit and scope of clauses dealing with ‘excepted matters’ in arbitration and arbitrability of disputes
Mumbai, 27th March 2026: In a significant and landmark ruling concerning arbitration landscape in India, a bench comprising Hon’ble Mr. Justice J.B. Pardiwala and Hon’ble Mr. Justice K.V. Viswanathan of the Hon’ble Supreme Court of India (“Supreme Court”) has clarified and laid down several important principles, including those pertaining to the (i) ambit and scope of excepted matters; (ii) arbitrability of disputes; (iii) jurisdiction of arbitral tribunals to rule on their own jurisdiction; and (iv) grounds for interference with an arbitral award.
In this matter, JSA Advocates & Solicitors (JSA) successfully represented ABS Marine Services (“ABS Marine”) before the Supreme Court in challenging the judgment (“Impugned Judgment”) passed by a Division Bench of the Hon’ble High Court at Calcutta (Circuit Bench at Port Blair), which had, in turn, set aside an arbitral award (as also an Order passed under Section 34 of the Arbitration & Conciliation Act, 1996 (“Arbitration Act”) upholding that award). Setting aside the Impugned Judgment, the Supreme Court restored the award and held that (i) one party to a contract cannot be a judge of the other’s breach when liability is disputed; (ii) a clause which bars both courts and arbitration creates an impermissible vacuum in legal remedies; and (iii) in the name of excepted matters, one cannot exclude justice.
The relevant facts are set out below:
ABS Marine had entered into a ‘Manning Agreement’ with the Andaman and Nicobar Administration (“A&N Administration”) for manning 17 vessels; and was responsible for providing complement of officers on board the vessels at all times. One vessel viz., M.V. Long Island, when on its way to Campbell Bay from Mazahua, started drifting from its intended track owing to rough sea with winds and struck a submerged rock. At high tide, it refloated on its own and using its engines proceeded to be berthed at Campbell Bay. However, in the process, there was damage caused to the vessel. A&N Administration claimed that it was on account of ABS Marine’s manpower’s neglect and levied certain penalties under a ‘default’ clause of the Manning Agreement. The Manning Agreement also consisted of an arbitration clause.
ABS Marine invoked arbitration challenging unilateral recovery of the above penalties. Relying on the default clause and the restricted reference of disputes to arbitration, A&N Administration claimed that their decision on recovery of penalties was “final and unchallengeable” and raised an objection to arbitrability. The sole arbitrator (Late Justice SS Nijjar) rejected this objection, and, by an award dated 8 May 2017 (“Award”), allowed all claims of ABS Marine, setting aside the penalties.
When A&N Administration challenged the Award under Section 34 of the Arbitration Act, the challenge was rejected and the Award was upheld. However, in a further appeal under Section 37 of the Arbitration Act before the High Court, the Award was set aside on the ground that the default clause was restrictive and expressly barred arbitration. ABS Marine challenged the Impugned Judgment before the Supreme Court; and the Supreme Court has been pleased to set aside the Impugned Judgment restoring the Award.
The decision of the Supreme Court assumes significance for crystallising the following principles:
1. Once a dispute is held to be arbitrable, matters of fact are within the domain of the arbitrator.
2. Non-negotiable principles of Rule of Law are not alien to interpretation of contractual clauses, especially when the State and its instrumentalities are parties to the same.
3. No party can act as a judge in its own cause, i.e., the question whether the other party has committed breach cannot be decided by the party alleging breach. Such question can only be decided by an adjudicatory forum, especially when disputed questions of fact exist.
4. Whether there was a wilful act of omission or negligence on the part of the Manning Agent/ABS Marine or its manpower cannot be decided by A&N Administration itself – which is the party alleging the breach.
5. When a clause speaks of A&N Administration’s decision being final, it can only be in those cases where the wilful action or negligence is not disputed and, in that scenario, when a quantification is done by the administrator. However, where wilful action or negligence is disputed, the administration cannot claim that it is within its ken to decide the aspect of liability also.
6. When ‘wilful act of omission or neglect’ is disputed by the Manning Agent/ABS Marine, such a dispute is arbitrable and within the ambit of the arbitration clause.
7. A clause in restraint of legal remedies strikes at the very heart of the fundamental legal maxim ‘Ubi jus ibi remedium’ i.e. there is no wrong without a remedy. Such clauses must not be interpreted in a manner that create an impermissible vacuum in legal remedies, violating Section 28 of the Indian Contract Act, 1872.
8. A&N Administration’s assertion that a decision by the administration even on the liability cannot be called in question in any court of law or before the arbitrator is opposed to all cannons of rule of law.
9. Discriminatory clauses should not be incorporated in contracts between a private party on the one hand and the State and its instrumentalities on the other, foreclosing even redress through courts of law. Matters may be ‘excepted’ from arbitration, for that is a well-recognized concept, but a vacuum in legal remedies cannot result. ‘Except’ matters one may but ‘Exclude’ justice, one cannot.
The matter was argued by Mr. Niranjan Reddy, Senior Advocate and Mr. Sidharth Sethi, Advocate. A&N Administration was represented by Mr. Vikramjit Banerjee, Ld. Additional Solicitor General.
This decision goes beyond a routine arbitration matter. It is a sharp re-affirmation that contractual drafting cannot override foundational rule-of-law principles. It further clarifies that State authorities cannot unilaterally determine breach of contract, and that arbitral autonomy and access to remedies cannot be contractually engineered out by foreclosing judicial scrutiny of such determinations
The JSA Disputes team comprised Sidharth Sethi, Lead Partner and Shivangi Pathak, Associate.