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Safeguarding one of fundamental principles of law and establishing another precedent of fairness, the Supreme Court of India in the case of M/s ABS Marine Services v. Andaman & Nicobar Administration (2026 INSC 274) vide judgement dated 23rd March 2026 has adjudicated on the question of whether the State and its instrumentalities can insulate their own decisions from judicial or arbitral scrutiny, by exercising their superiority over private entities under the garb of contractual clauses.

Deciding on the appeal emanating from the judgement of the High Court of Calcutta in CAN No. 054 of 2018 with FMA No. 002 of 2018 dated 11.7.2018, the apex court adjudicated a dispute that arose from the Andaman and Nicobar Administration unilaterally imposing and recovering costs from the Appellant, a marine service provider for the loss that occurred due to a vessel collision involving the subject vessel MV Long Island, the liability of which was beyond the scope of their contract of manning with the Appellant. This was in the context of the manning agreement between the parties dated 26th December 2008. When the Appellant disputed their liability, the Respondent, relying unilaterally on Clause 3.20 (prohibitory clause), recovered a sum of INR 2,87,84,305 towards penalty for grounding of the vessel from the pending bills of the Appellant.

The dispute was referred to arbitration, wherein the Learned Arbitrator inter alia held that Clause 3.20 was void and in contravention of Section 28 of the Indian Contract Act, 1872, as it unilaterally imposes finality and restrains any decision being challenged in a court of law. The arbitrator, whilst awarding against the Respondent, also held that since the Respondent did not raise a dispute on the arbitrator being appointed, it could not be permitted to claim that the arbitration proceedings were without jurisdiction. The Respondent filed a Section 34 application, which was rejected and thereafter appealed, wherein the Hon’ble Division Bench set aside the award. It is that Division Bench order that was appealed before the Hon’ble Supreme Court.