### Excepted matters clause cannot be invoked where delays and breach are attributable to the Employer.

The Appellant (Union of India) issued a work order to the Respondent on July 19, 2011, for the construction of a viaduct and station building.

Due to alleged execution failures, the Appellant terminated the contract on November 10, 2017.

Disputes were referred to an Arbitral Tribunal, which published an award on March 9, 2021 (corrected November 27, 2021), allowing claims 1, 2, 3, 7, 8, and 11 in favor of the Respondent while dismissing the Appellant’s counterclaims.

The Appellant challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996.

The Single Judge partially allowed the challenge, setting aside the award for claims 2, 8, and 11, while upholding claims 1, 3, and 7.

Both parties appealed this decision.

Whether the claims adjudicated by the Arbitral Tribunal fell within the "Excepted Matters" clause, thereby ousting the Tribunal's jurisdiction.

Whether the Section 34 Court erred in setting aside the award specifically regarding Claim Nos. 2 (Security Deposit), 8 (Bank Guarantee Commission), and 11 (Interest).

What is the scope of appellate interference under Section 37 of the Arbitration and Conciliation Act, 1996.

The Court applied Section 34 and Section 37 of the Arbitration and Conciliation Act, 1996, regarding the setting aside of awards and the scope of appeals.

It relied on *Harsha Constructions v. Union of India*, establishing that arbitrators cannot decide "excepted matters" beyond their jurisdiction.

*Indian Oil Corporation Ltd. v. NCC Limited*, which mandates strict construction of arbitration clauses.

Conversely, it applied *J.G. Engineers Pvt. Ltd. v. Union of India*, holding that a party cannot be the sole judge of its own breach, thus rendering issues of responsibility for delay arbitrable.

Regarding interest, it followed *Dr. Poornima Advani v. Govt. of NCT*, affirming the right to restitution/interest when a party is deprived of money.

The Court noted that the Arbitral Tribunal found the Appellant responsible for delays in handing over sites and unilaterally introducing new items.

The Tribunal correctly held that "Excepted Matters" cannot be read in isolation if the Appellant failed to follow the requisite contractual procedures for recording measurements or resolving representations.

The Court determined that since the termination of the contract was found meritless and the Appellant was guilty of breaches, the claims for Security Deposit (Claim 2) and Bank Commission (Claim 8) were inextricably intertwined with the merits and not hit by the "Excepted Matters" clause.

The Court found that the Section 34 Judge improperly re-evaluated these claims without finding them severable from the main award.

Furthermore, under the doctrine of restitution, interest (Claim 11) was a necessary consequence of the wrongful withholding of funds.

The Court set aside the Single Judge’s order that had disallowed claims 2, 8, and 11, thereby restoring the Arbitral Tribunal's original award in its entirety.

It held that the Section 34 Court had exercised irregular jurisdiction by interfering with plausible findings of the Tribunal regarding interwoven claims and the inapplicability of the "Excepted Matters" clause.