Summary: Sowil Ltd's attempt to settle a contract disagreement through arbitration was turned down by the Bombay High Court because a contract rule only allowed arbitration for claims under 20% of the total contract value.
On January 28, 2026, the Bombay High Court, under Justice Sandeep V. Marne, gave a decision in the case involving M/s. Sowil Limited and the Deputy Chief Engineer of Indian Railways, Bhusawal. The disagreement came from a contract dated May 7, 2018, which was about designing bridges for the Manmad-Jalgaon rail line project.
The contract was worth ₹84,52,157.61, but Sowil Ltd claimed they lost ₹3 crores because the Railways ended the contract without good reason on December 23, 2021. The contract had a rule that only allowed arbitration for claims up to 20% of the contract's total value, which Sowil Ltd disagreed with.
"The value of the contract was ₹84,52,157.61, whereas the estimated claim amount is ₹3 crores."
Sowil Ltd, represented by Mr. Shardul Singh, said that the arbitration rule was unfair and biased. They argued that it limited their ability to settle disputes through arbitration, while the Railways could make claims without such a limit.
The Railways, represented by Mr. Narayan Bubna, argued that the contract clearly said arbitration was only for claims below 20% of the contract's value. They said Sowil Ltd could go to court for claims that were more than this limit.
Justice Marne supported the contract's arbitration rule, focusing on the idea that parties have the right to decide how their disputes are settled. The court decided that the rule was not unfair or unreasonable, and it did not stop Sowil Ltd from seeking other legal options outside of arbitration.
"The contract explicitly states that claims exceeding 20% of the contract value are not subject to arbitration."
The court referred to several past legal decisions, including rulings from the highest court and other High Courts, that supported the enforcement of such arbitration rules. The decision emphasized the importance of allowing parties to decide how they want to handle arbitration.
The court rejected Sowil Ltd's request for arbitration, confirming that the contract rule limiting arbitration to smaller claims was valid. This case highlights the importance of carefully writing and understanding arbitration rules in contracts.
