Delhi HC – National Security Overrides Arbitration despite arbitration clause
Order dated 18.9.2026 of the High Court of Delhi in CS (COMM_ 1008 of 2026 of Hindustan Shipyard Limited Vs. M/s Anadolu Deniz Insaat Kizaklari Sanayi VE Ticaet A.S. and another
Section 37 Declaration Suit & Injunction against Arbitration
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”).
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.
ide 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. CS(COMM) 1008/2026 Page 2 of 48 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 sett
Article 23.8 provides that in the event the performance of the CC becomes impossible as a result of “any such governmental prohibition”, the defendant no.1 would not be entitled to a claim for payment of the contract price, however would be entitled to retain all amounts already paid and received together with all amounts that are agreed and due as per Article 3.7 of the CC. It also provides that the defendant no.1 would be entitled to what is expressed as “stage payment”
Since this Court is, prima facie, of the opinion that the decision dated 23.08.2023 of the MoD, GoI falls within the ambit of a “decision of the sovereign” in the context of matters relatable to or concerning the security of the nation and would be “inherently non-arbitrable ab initio”, it would be in the interests of justice to keep the e-mail dated 19.08.2026 issued by the defendant no.2 in ICA Case No.INTARB-0035, in abeyance till the next date of listing..
