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M/s. ABS Marine Services v. Andaman and Nicobar Administration

Civil Appeal · 2026 INSC 274Decided 23 Mar 2026
C.A. No.-003658-003659 - 2022
Justice J.B. Pardiwala · Justice K.V. Viswanathan · Justice S.V.N. Bhatti

Background

The appellant had a "Manning Agreement" with the Andaman and Nicobar Administration to crew 17 vessels, while a separate company acted as Technical Manager. In 2009 one of the vessels, M.V. Long Island, struck a submerged rock in rough seas while under the Technical Manager's operational control, and in 2013-14 the Administration unilaterally recovered over Rs. 2.87 crore as a penalty from the appellant's pending bills. An arbitrator ruled in the appellant's favour and the District Judge upheld the award, but the Calcutta High Court (Circuit Bench, Port Blair) set aside the award, holding the dispute fell within a "prohibited/excepted matters" clause of the contract and so was not arbitrable.

Decision Breakdown

The Supreme Court held that the manning agent (the appellant) had no on-board or operational responsibility for the safe navigation of the vessel, that function belonged to the Technical Manager, so the dispute over the grounding penalty did not fall within the "excepted matters" clause barring arbitration. The Court emphasized that the rule of law and fair interpretation of contractual clauses apply equally to the State and its instrumentalities, rejecting the Administration's reliance on a strict reading of the exclusion clause. It found the High Court's reasoning "seriously flawed," set aside the High Court's judgment, allowed the appeals, and restored the arbitral award dated 8 May 2017, with no order as to costs.

Lesson Learnt

Government bodies cannot invoke contractual exclusion clauses to escape arbitration where the dispute genuinely falls outside those clauses' scope. Courts will scrutinise who actually bore the relevant contractual responsibility rather than accepting a State party's broad characterization of a dispute as non-arbitrable.

Official source (sci.gov.in)View Judgment (PDF)

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