{"id":369581,"date":"2025-12-11T16:30:01","date_gmt":"2025-12-11T11:00:01","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=369581"},"modified":"2025-12-11T16:47:58","modified_gmt":"2025-12-11T11:17:58","slug":"bharat-drilling-prohibited-claim-clauses-arbitration-sc-larger-bench","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2025\/12\/11\/bharat-drilling-prohibited-claim-clauses-arbitration-sc-larger-bench\/","title":{"rendered":"Supreme Court: Bharat Drilling Not an Authority on Applicability of prohibited claim clauses to Arbitral Tribunal; Larger Bench to reconsider"},"content":{"rendered":"<style>\n.animate-charcter{background-image: linear-gradient(-225deg, #231557 0%, #44107a 29%, #ff1361 67%, #fff800 100%); background-size: 200% auto; -webkit-background-clip: text; -webkit-text-fill-color: transparent; animation: textclip 0s linear infinite;}\n@keyframes textclip {to {background-position: 200% center;}}\n<\/style>\n<div style=\"text-align: justify; line-height: 150%;\">\n<p style=\"margin-bottom: 3%;\"><span style=\"font-weight: bold;\">Supreme Court<\/span>: In a case dealing with applicability of prohibitory clauses in arbitration, the bench of <span style=\"font-weight: bold;\">Pamidighantam Sri Narasimha*<\/span> and Atul S. Chandurkar, JJ., has found that the law laid down in <span style=\"font-style: italic;\">Bharat Drilling &amp; Foundation Treatment Pvt. Ltd. v. State of Jharkhand<\/span> <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0000042674\" target=\"_blank\">(2009) 16 SCC 705<\/a> requires reconsideration as is not in tune with the principles laid down by this Court in the recent decisions of <span style=\"font-style: italic;\">Cox and Kings Ltd. v. SAP India Private Ltd.<\/span>, <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-9002015612\" target=\"_blank\">(2024) 4 SCC 1<\/a> and <span style=\"font-style: italic;\">In Re: Interplay Between Arbitration Agreements Under <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002726958\" target=\"_blank\">Arbitration and Conciliation Act, 1996<\/a> and <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002831277\" target=\"_blank\">Stamp Act, 1899<\/a><\/span>, <a href=\"http:\/\/www.scconline.com\/DocumentLink\/m024up40\" target=\"_blank\">2023 SCC OnLine SC 1666<\/a> and has hence, referred the matter to a larger bench.<\/p>\n<h3>Background of the Case<\/h3>\n<p style=\"margin-bottom: 3%;\">In the case at hand, the Indian Builders Jamshedpur i.e. the contractor made some claims against the State of Jharkhand under a construction contract. The Arbitral Tribunal allowed certain claims relating to underutilised overheads, loss due to underutilised tools and machinery, and loss of profit. The State of Jharkhand, however, objected to these claims under Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001544939\" target=\"_blank\">34<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002726958\" target=\"_blank\">Arbitration and Conciliation Act, 1996<\/a>, contending that they were expressly barred by contractual clauses i.e. Clause 4.20.2 prohibited claims for idle labour and machinery, and Clause 4.20.4 prohibited claims for business loss or similar losses. The Civil Court set aside these claims.<\/p>\n<p style=\"margin-bottom: 3%;\">The Jharkhand High Court, relying on <span style=\"font-style: italic;\">Bharat Drilling &amp; Foundation Treatment Pvt. Ltd. v. State of Jharkhand<\/span> <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0000042674\" target=\"_blank\">(2009) 16 SCC 705<\/a>, restored the claims without examining the contractual clauses in detail, based on the impression that the issue was conclusively covered by the said decision.<\/p>\n<p style=\"margin-bottom: 3%;\">The State of Jharkhand challenged the same on the ground that the <span style=\"font-style: italic;\">Bharat Drilling<\/span> decision is fact-specific and not a binding precedent for all government contracts.<\/p>\n<h3>Supreme Court&#8217;s Analysis<\/h3>\n<p style=\"margin-bottom: 3%;\">The Court observed that contractual clauses that limit claims are founded on freedom to contract. They are agreements that crystalise informed choices of parties. It was further stated that 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.<\/p>\n<p style=\"margin-bottom: 3%;\">The Court placed reliance on Central Organisation for Railway Electrification (CORE) v. Union of India (2024 INSC 857), which underscores party autonomy as the &#8220;brooding and guiding spirit&#8221; of arbitration.<\/p>\n<p style=\"margin-bottom: 3%;\">The Court noted that in <span style=\"font-style: italic;\">Bharat Drilling<\/span>, the Court had not examined the contractual clauses that the Court was examining in the case at hand were not examined. The said decision had relied on <span style=\"font-style: italic;\">Board of Trustees For The Port of Calcutta v. Engineers-De-Space-Age<\/span>, <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0000022526\" target=\"_blank\">(1996) 1 SCC 516<\/a> concerning payment of interest, which stands on a completely different footing from prohibitory clauses.<\/p>\n<p style=\"margin-bottom: 3%;\">The Court observed that as the issues relating to payment of interest arising under Section 31(7) of the Act stand on a different footing from that of contractual clauses excepting or prohibiting certain claims, the judgment in <span style=\"font-style: italic;\">Bharat Drilling<\/span>, relying on the judgment in <span style=\"font-style: italic;\">Board of Trustees For The Port of Calcutta v. Engineers-De-Space-Age<\/span>, <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0000022526\" target=\"_blank\">(1996) 1 SCC 516<\/a>, dealing with the principle of grant of interest pendente lite, was not appropriate.<\/p>\n<p>The Court, hence, observed that<\/p>\n<p class=\"animate-charcter\" style=\"margin-left: 36pt; margin-bottom: 3%;\">&#8220;In view of our opinion that <span style=\"font-style: italic;\">Bharat Drilling <\/span> is not an authority for the proposition that an <span style=\"font-style: italic;\">excepted clause<\/span> or a <span style=\"font-style: italic;\">prohibited claim<\/span> in a contract applies only to the employer and not to the Arbitral Tribunal&#8221;<\/p>\n<p style=\"margin-bottom: 3%;\">Hence, in order to obviate uncertainty and for clear declaration of law, the Court referred <span style=\"font-style: italic;\">Bharat Drilling<\/span> to a larger bench for reconsideration and authoritative decision.<\/p>\n<p style=\"margin-bottom: 3%;\">[<span style=\"font-weight: bold; color: #632423;\">State of Jharkhand v. Indian Builders, <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-9003023389\" target=\"_blank\">2025 SCC OnLine SC 2717<\/a>, decided on 05.12.2025<\/span>]<\/p>\n<p style=\"text-indent: 18pt;\"><strong><span style=\"color: #000080;\">*Judgment authored by: Pamidighantam Sri Narasimha<\/span><\/strong><\/p>\n<hr\/>\n<p>Advocates who appeared in this case:<\/p>\n<p style=\"margin-left: 18pt;\"><span style=\"font-weight: bold;\">For Appellant(s):<\/span> Mr. Rajiv Shankar Dwivedi, Adv. Ms. Tulika Mukherjee, AOR Mr. Beenu Sharma, Adv. Mr. Venkat Narayan, Adv.<\/p>\n<p style=\"margin-left: 18pt;\"><span style=\"font-weight: bold;\">For Respondent(s):<\/span> Mr. Manoj C. Mishra, AOR Mr. Vishesh Jain, Adv. Mr. Chandan Kumar, Adv. Mr. Rajesh Gupta, Adv.<\/p>\n<h3 style=\"color: #000080;\">Buy Arbitration and Conciliation Act, 1996 &nbsp; <a href=\"https:\/\/www.ebcwebstore.com\/product_info.php?products_id=382\" target=\"_blank\">HERE<\/a><\/h3>\n<p style=\"margin-bottom: 3%;\"><a href=\"https:\/\/www.ebcwebstore.com\/product_info.php?products_id=382\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/06\/arbitration-and-conciliation-act-1996-191x300.png\" alt=\"arbitration and conciliation act, 1996\" width=\"191\" height=\"300\" class=\"aligncenter size-large wp-image-294803\" srcset=\"https:\/\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/06\/arbitration-and-conciliation-act-1996-191x300.png 191w, https:\/\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/06\/arbitration-and-conciliation-act-1996-38x60.png 38w, https:\/\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/06\/arbitration-and-conciliation-act-1996.png 620w\" sizes=\"auto, (max-width: 191px) 100vw, 191px\" \/><\/a><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p style=\"font-style: italic;\">In order to obviate uncertainty and for clear declaration of law, the Court referred Bharat Drilling to a larger bench for reconsideration and authoritative decision.<\/p>\n","protected":false},"author":121,"featured_media":369587,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,9],"tags":[3226,23334,94693,55255,94692,76401,52209,94691,50888,34169],"class_list":["post-369581","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-casebriefs","category-supremecourt","tag-arbitration","tag-arbitration-conciliation-act","tag-bharat-drilling","tag-construction-contracts","tag-excepted-clauses","tag-larger-bench-reference","tag-party-autonomy","tag-prohibitory-clauses","tag-reference-to-larger-bench","tag-supreme-court-of-india"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.4 (Yoast SEO v27.4) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>SC: Larger bench to reconsider Bharat Drilling| SCC Times<\/title>\n<meta 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