1. In view of our opinion that Bharat Drilling & Foundation Treatment Pvt. Ltd. v. State of Jharkhand and Ors1 is not an authority for the proposition that an excepted clause or a prohibited claim in a contract applies only to the employer and not to the Arbitral Tribunal, for the reasons to follow, in order to obviate uncertainty and for clear declaration of law, we are referring Bharat Drilling (supra) to a larger bench for reconsideration and authoritative decision. The context in which we have referred the matter to a larger bench is as follows.

8. It is quite evident from the order impugned before us that the High Court has not examined the contractual clauses extracted hereinabove and has proceeded to dispose of the appeal under the impression that the issue is conclusively covered by the decision of this Court in Bharat Drilling (supra). As has been already indicated, in Bharat Drilling (supra), the Court has not examined the contractual clauses that have fallen for our consideration herein. Contractual clauses that limit claims are founded on freedom to contract. They are agreements that crystalise informed choices of parties. Explaining the incorporation of party autonomy in the statutory scheme of the Act, this Court in Central Organisation for Railway Electrification (CORE), explained this position:

“22. The basis of any arbitration is the freedom of the parties to agree to submit their disputes to an individual or to a panel of individuals whose judgment they are prepared to trust and obey. Party autonomy is fundamental to international commercial arbitration because it allows the parties to design the arbitration proceedings to suit their needs and commercial reality. Party autonomy has been described by this Court as the “brooding and guiding spirit” and “backbone” of arbitrations. The principle of minimum judicial interference supplements the autonomy of parties by prohibiting courts from interfering in arbitral proceedings unless mandated by the law. This principle respects the autonomy of the parties to mutually chart the course of the arbitral proceedings.

23.The Arbitration Act has given pre-eminence to party autonomy throughout the arbitral process. The Arbitration Act has used phrases such as “unless otherwise agreed by the parties”, “failing any agreement”, “the parties are free to agree”, “failing such agreement”, and “unless the agreement on the appointment procedure provides other means” to recognize the autonomy of parties to determine the arbitral proceedings. The use of the above phrases also indicates that an arbitrator is bound by the procedures agreed upon between the parties.” (emphasis supplied)

9. 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. In similar circumstances, interpreting the contractual clauses, this Court in Pam Developments Private Limited v. State of West Bengal held as follows:

“12. This submission is persuasive, but the contract clauses speak for themselves. In fact, the High Court did what the arbitrator should have done. Examine what the contract provides. This is not even a matter of interpretation. It is the duty of every Arbitral Tribunal and court alike and without exception, for contract is the foundation of the legal relationship. Having considered the above referred clauses in the contract the High Court came to the conclusion that awarding any amount towards idle, machinery, etc. is prohibited under the “Special Terms and Conditions” of the contract. The arbitrator did not even refer to the contractual provisions and the District Court dismissed the objections under Section 34 with a standard phrase as extracted hereinabove. The High Court exercising jurisdiction under Section 37 did its duty and we are of the opinion that the conclusions of the High Court are correct and cannot be interfered with.” (emphasis supplied)