The Supreme Court has asked for the 2009 decision in Bharat Drilling & Foundation Treatment Pvt. Ltd. v. State of Jharkhand to be reviewed by a larger bench, citing concerns over its repeated and incorrect use when interpreting prohibitory claim clauses in government contracts. The decision came on December 5, 2025, in The State of Jharkhand v. The Indian Builders Jamshedpur (Civil Appeal Nos. 8261–8262 of 2012).
The case focused on whether an Arbitral Tribunal can award claims that a contract explicitly bars. The State of Jharkhand challenged a High Court judgment that had restored an arbitral award for claims related to underutilised overheads, idle machinery, and loss of profit. These claims had been refused earlier by a Civil Court under Section 34 of the Arbitration and Conciliation Act, 1996.
Counsel for the State argued that the High Court relied entirely on the Bharat Drilling ruling and ignored clear contractual clauses that prohibited such claims. The contract stated that no claims would be allowed for idle labour or machinery and that business loss claims would not be entertained.
The bench of Justices Pamidighantam Sri Narasimha and Atul S. Chandurkar noted that the High Court did not independently examine these clauses and assumed the issue was fully covered by the 2009 ruling. The Court pointed out that the reasoning in Bharat Drilling, which held that contractual bars apply only to the department and not to an arbitral tribunal, was based on a different case (Port of Calcutta v. Engineers-De-Space-Age) involving the grant of interest, not prohibited claims.
Reaffirming party autonomy as central to arbitration, the Court said that excepted or prohibitory clauses must be enforced as written and observed that more recent judgments have taken a different approach from Bharat Drilling. It concluded that the earlier ruling needs reconsideration to ensure consistency and clarity.
The registry has been directed to present the matter to the Chief Justice for constitution of a larger bench.
Case Details
Case Title: The State of Jharkhand v. The Indian Builders Jamshedpur
Case Numbers: Civil Appeal Nos. 8261–8262 of 2012
Coram: Justices Pamidighantam Sri Narasimha and Atul S. Chandurkar
Date of Judgment: December 5, 2025
Advocates:
For Appellant: Mr. Rajiv Shankar Dwivedi
For Respondent: Mr. Manoj C. Mishra
