High Court Oversteps: Madhya Pradesh Bench Voids Arbitral Award in Foreign Firm Dispute

In a landmark ruling, a Division Bench of the High Court of Madhya Pradesh at Jabalpur —comprising Chief Justice Sanjeev Sachdeva and Justice Vinay Saraf —has declared an arbitral award a nullity, holding that High Courts lack jurisdiction to appoint arbitrators in international commercial arbitrations (ICA) involving foreign entities. The decision, pronounced on April 22, 2026 , in Arbitration Appeal Nos. 14 & 25 of 2023 ( M/s SSANGYONG Engineering vs. M/s S.B. Engineering Associates ), underscores the exclusive authority of the Chief Justice of India under Sections 2(1)(f) and 11 of the Arbitration and Conciliation Act, 1996 .

From Highway Dreams to Arbitration Nightmares

The saga began in 2006 when the National Highway Authority of India (NHAI) awarded a contract to Korean giant SSANGYONG Engineering and Construction Company Ltd for a 4-lane highway stretch on NH-26 (Jhansi-Lakhnadon section). SSANGYONG sub-contracted earthwork and flyover construction to Indian firm S.B. Engineering Associates (SBE) in 2007 for Rs. 19.55 crore, later amended.

Tensions escalated, leading SSANGYONG to terminate the contract on June 2, 2009 , citing SBE's poor performance. SBE invoked arbitration via Clause 19, which empowered SSANGYONG to appoint a sole arbitrator at Jabalpur. When SSANGYONG didn't act, SBE approached the Madhya Pradesh High Court under Section 11(6) in 2009. The court appointed retired Justice P.C. Naik as arbitrator on November 17, 2009 —despite SSANGYONG being a foreign-incorporated entity, triggering ICA status.

The arbitrator's January 31, 2016 award (corrected April 28, 2016 ) favored SBE with Rs. 7.62 crore (net after counterclaims). Both parties challenged it under Section 34 before the Commercial Court, Jabalpur , which dismissed the petitions in December 2022 . Appeals under Section 37 followed, with SSANGYONG questioning the High Court's appointment jurisdiction for the first time.

Core questions : Did the High Court have power to appoint in an ICA? Is the award void ab initio ? Can jurisdictional objections be waived via participation?

SSANGYONG's Jurisdictional Strike: No Waiver for Nullities

SSANGYONG, represented by Senior Advocate Ravindra Singh Chhabra , argued the dispute qualified as ICA under Section 2(1)(f) (ii) since it was a Korean body corporate. Section 11(9) & (12) vests exclusive appointment power in the Chief Justice of India for ICAs. The High Court's 2009 order was coram non judice , rendering proceedings and award non est .

Participation didn't waive rights, as mandatory provisions aren't derogable under Section 4 . Citing Amway India (2021) for ICA definition, Hindustan Zinc (2019) for nullity pleas at any stage, and recent Central Organisation for Railway Electrification (2024) affirming non-waivability, SSANGYONG urged setting aside the award.

SBE's Waiver Defense Crumbles Under Participation

SBE countered, stressing SSANGYONG's silence during Section 11 proceedings, arbitration (including counterclaims), Section 9 , and Section 34 filings amounted to waiver under Section 4 . No Section 16 challenge to jurisdiction. Invoking Quippo Construction (2020) and Gayatri Projects (2025) , SBE argued post-award jurisdictional pleas are barred, especially as proceedings were domestic (seat: Jabalpur).

Decoding the Bench's Razor-Sharp Reasoning

The Bench meticulously dissected the Arbitration Act . SSANGYONG's foreign incorporation irrefutably made it ICA ( Amway India ). Section 11(12)(a) mandates Chief Justice of India for ICA appointments—non-derogable, as Central Organisation clarified: parties' autonomy yields to mandatory rules; Section 4 waives only derogable provisions.

Echoing Hindustan Zinc , inherent jurisdictional defects render awards nullities, raisable anytime, even collaterally—consent can't cure. Soham Shah ( Bombay HC , 2016) reinforced: courts must suo motu check ICA status. SBE's precedents ( Quippo , etc.) dismissed as domestic arbitration cases. Notably, the Bench referenced a post-reservation Supreme Court overruling in Bhadra International (2026) aligning with Hindustan Zinc .

As media reports noted, "High Court can't appoint arbitrator in international commercial disputes," integrating the Bench's key phrase: jurisdiction "is a mandatory provision and is not derogable."

Key Observations

"A conjoint reading of Sections 2(1)(f), 4 and 11 of the Arbitration Act , shows that the jurisdiction to appoint the sole or third arbitrator in an International Commercial Arbitration lies only with the Chief Justice of India... and it is a mandatory provision and is not derogable."

"If there is an inherent lack of jurisdiction, the plea can be taken up at any stage and also in collateral proceedings... A defect of jurisdiction... strikes at the very authority of the Court to pass any decree, and such a defect cannot be cured even by consent of parties." ( Hindustan Zinc quoted)

"The appointment of the Sole Arbitrator by the designate of the Chief Justice of the High Court cannot be treated valid as said designated person was not competent... The entire proceedings suffer from a patent illegality ."

Award Annihilated: Implications for Global Deals

Arbitration Appeal No. 14/2023 (SSANGYONG) allowed; No. 25/2023 (SBE) dismissed. The award stands set aside as void ab initio .

This ruling fortifies ICA boundaries: High Courts must scrutinize foreign party status suo motu . Foreign firms gain leverage to challenge delayed jurisdictional pleas; domestic seats don't domesticate ICAs. Future Section 11 filings demand CJI route for cross-border disputes, potentially streamlining but centralizing appointments—and reminding: waiver bows to mandates. No costs ordered.