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2026 Supreme(Del) 1300
2026 DHC 8017
IN THE HIGH COURT OF DELHI AT NEW DELHI
Tushar Rao Gedela, J.
Hindustan Shipyard Limited - Plaintiff
Versus
M/S Anadolu Deniz Insaat Kizaklari Sanayi Ve Ticaret A.S. & Anr. - Defendants
CS(COMM) 1008 of 2026, I.A. 25198 of 2026, I.A. 25199 of 2026 & I.A. 25200 of 2026
Decided On : 18-09-2026
Advocates Appeared :
For the Plaintiff : Mr. Tushar Mehta, Solicitor General of India with Mr. Manu Nair, Mr. Siddhartha Datta, Ms. Suhani Dwivedi, Mr. Neelabh Shreesh, Ms. Riya Basu, Ms. Trisha Mukherjee, Mr. Madhav Goel, Mr. Chetan Kabra, Mr. Aryan Roy and Ms. Priyansh Dixit, Advocates.
For the Defendant : Mr. Rajiv Nayar and Mr. Sandeep Sethi, Senior Advocates with Mr. Aseem Chaturvedi, Mr. Kingshuk Banerjee, Mr. Shivank Diddi, Ms. Saher Naqvi, Ms. Fatema, Mr. Kindkhabwala, Ms. Sanjana Lal, Mr. Krisna Gambhir and Ms. Shreya Sethi, Advocates, Dr. Amit George, Mr. Shashwat Kabi, Ms. Rupam Jha, Ms. Tanushree Gupta, Mr. Arnav Bhansali and Mr. Adhishwar Suri, Advocates
For the Appellants/Petitioners: Tushar Mehta, Manu Nair, Siddhartha Datta, Suhani Dwivedi, Neelabh Shreesh, Riya Basu, Trisha Mukherjee, Madhav Goel, Chetan Kabra, Aryan Roy, Priyansh Dixit
For the Respondents: Rajiv Nayar, Sandeep Sethi, Aseem Chaturvedi, Kingshuk Banerjee, Shivank Diddi, Saher Naqvi, Fatema, Kindkhabwala, Sanjana Lal, Krisna Gambhir, Shreya Sethi, Amit George, Shashwat Kabi, Rupam Jha, Tanushree Gupta, Arnav Bhansali, Adhishwar Suri
Decisions taken by the State in the exercise of sovereign functions, especially those relating to national security and defence procurement, are inalienable, non-delegable, and inherently non-arbitrable, falling under the exception of Section 2(3) of the Arbitration and Conciliation Act, 1996.
Headnote:(A) Arbitrability - Sovereign Decisions - Decisions taken by the State in the exercise of sovereign functions, particularly those concerning national security and defence procurement, are inalienable and non-delegable, rendering them inherently non-arbitrable. (Para 18, 20, 22)
(B) Arbitration and Conciliation Act, 1996 - Section 2(3) and Section 5 - Disputes involving sovereign decisions fall within the scope of non-arbitrable matters under Section 2(3), which acts as an exception to the bar on judicial interference provided under Section 5 of the Act. (Para 27)
(C) Territorial Jurisdiction - Cause of Action - Where a suit challenges a sovereign decision taken in a specific location (Delhi), that location can confer territorial jurisdiction under Section 20 of the CPC, regardless of the designated seat of arbitration, provided the subject matter is non-arbitrable. (Para 30, 37)
Issues: Whether the termination of a contract based on a sovereign decision concerning national security is arbitrable and whether the court has territorial jurisdiction to entertain the suit.
Legal Category Hierarchy
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arbitration
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arbitrability
- sovereign functions
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jurisdiction of arbitral tribunal
- competence to rule on jurisdiction
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arbitrability
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practice and procedure
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civil procedure code
- territorial jurisdiction
- rejection of plaint (order vii rule 11)
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civil procedure code
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constitutional law
- sovereign function
ORDER :
Tushar Rao Gedela, J.
I.A. 25199/2026 (Application under Order XXXIX Rules 1 and 2, CPC)
1. This is an application filed under Order XXXIX Rules 1 and 2 read with Section 151 of the Code of Civil Procedure, 1908 (hereinafter referred to as “CPC”) seeking interim reliefs as prayed for.
2. The plaintiff has filed the present suit under Section 37 of the Specific Relief Act, 1963 seeking a declaration and permanent injunction restraining defendant no.1 from proceeding with the arbitral proceedings initiated vide request for arbitration dated 07.08.2026 filed before the defendant no.2 being Indian Council of Arbitration (hereinafter referred to as the ‘ICA’) Case No.INTARB-0035. It further assails the direction issued by ICA vide email dated 19.08.2026 (hereinafter referred to as “impugned letter”).
CONTENTIONS ON BEHALF OF THE PLAINTIFF:-
3. Brief facts culled out of the suit shorn of unnecessary details are as under:
3.1. A Collaborator Contract (hereinafter referred to as “the CC”) is stated to have been entered into by the plaintiff and the defendant no.1 on 20.03.2020 for collaboration in design, and supply of Key Machinery Equipment, technical assistance, and project implementation towards the five Fleet Support Ships (hereinafter referred to as “the FSS”) for the Indian Navy.
3.2. Vide the communication letter dated 16.08.2023, the Cabinet Committee on Security (hereinafter referred to as “the CCS”) approved the said FSS Project, however, decided that the same would be executed through an indigenous industry without the involvement of defendant no.1. Subsequently, vide the letter dated 23.08.2023, the Ministry of Defence (hereinafter referred to as “the MoD”) directed the plaintiff to initiate contract termination proceedings with defendant no.1.
3.3. Pursuant thereto, the plaintiff terminated the CC vide the letter dated 24.08.2023 invoking Article 23.8 of the said contract. In order to settle the pending issues, the plaintiff claims to have sought amicable resolution and initiated the settlement meetings at Visakhapatnam. Despite several efforts, the settlement meetings between both the parties failed.
3.4. It is stated that after a gap of almost 30 months, defendant no.1’s counsel, vide letter dated 10.06.2026, addressed the plaintiff regarding the existence of an arbitration agreement in the CC, wherein, the parties agreed to resolve any disputes in accordance with the rules of arbitration of the ICA, and proposed amendment of Article 25.1(b) to substitute defendant no.2/ICA with Mumbai Centre for International Arbitration (hereinafter referred to as “MIAC”). In response thereto, the plaintiff through its counsel, declined the request on the basis that there existed no arbitrable disputes between the parties which could be referred to the arbitration.
3.5. On 08.07.2026, defendant no.1 through its counsel is stated to have invoked arbitration and proposed the name of its nominee arbitrator. Having received no response in affirmation, defendant no.1 filed its Statement of Claim (hereinafter referred to as “the SoC”) before the defendant no.2 on 07.08.2026. Defendant no.2, on 11.08.2026, registered ICA Case No.INTARB-0035. Vide the email dated 19.08.2026, defendant no.2 directed the plaintiff to file its Statement of Defence (hereinafter referred to as “the SoD”) along with its nominee arbitrator.
3.6. Being aggrieved by the said email, the plaintiff has filed the present suit.
4. Adumbrating the facts of the suit briefly, Mr. Tushar Mehta, learned Solicitor General for India submitted as under: 4.1. At the outset, the learned Solicitor General submitted that the entering into of the CC with the defendant no.1 itself was a sovereign act of the Government of India (hereinafter referred to as the ‘GoI’) undertaken through the plaintiff as an instrumentality of the MoD.
4.2. Equally, he would submit that the termination of the said CC was itself a sovereign act/decision of the GoI carried out pursuant to the decision of the CCS da
