A Question of Jurisdiction: When Does Indian Law Yield to International Arbitration?

Introduction 

Imagine an Indian company locked in a bitter commercial dispute with a foreign counterpart, their contract explicitly stating that any conflict must be resolved through arbitration in a country thousands of miles away under that nation’s laws. When the dispute flares up, and one party rushes to an Indian court, can the local judiciary step in to appoint an arbitrator, or must it bow to the parties’ original foreign agreement? This pivotal question, touching upon the delicate balance between party autonomy in international commerce and the jurisdictional limits of domestic courts, was recently settled by the Supreme Court of India in Balaji Steel Trade Versus Fludor Benin S.A. & Ors¹. In a ruling that underscores the supremacy of a foreign-seated arbitration clause, the Court definitively held that “Indian courts lack the jurisdiction to appoint an arbitrator for a foreign-seated arbitration, irrespective of the Indian nationality or domicile of any party.”

The controversy before the bench of Justices PS Narasimha and Atul S Chandurkar centered on a dispute arising from a Buyer–Seller Agreement (BSA) that clearly stipulated the arbitration seat would be Benin and governed by Beninese law. The petitioner, Balaji Steel, attempted to invoke later ancillary contracts containing Indian arbitration clauses and the Group of Companies (GoC) doctrine to argue for a domestic proceeding. The Supreme Court, however, dismissed this plea, recognizing the BSA as the principal contract and thereby confirming Benin as the undisputed juridical seat.

The Court’s firm rejection of the plea illuminates a critical principle in the sphere of international commercial arbitration. To truly grasp the significance of this judgment, this article will delve into the underlying legal principles, particularly exploring how the concept of the “juridical seat” and the statutory scheme of the Arbitration and Conciliation Act, 1996, dictate that “Indian Courts have no jurisdiction to appoint an arbitrator for a foreign-seated arbitration, irrespective of the nationality or domicile of the parties,” which formed the decisive basis of this landmark judgment.

A party seeking to compel arbitration in India must first satisfy the court that the matter falls within its jurisdiction. The foundation for an Indian court’s power to appoint an arbitrator rests primarily on Section 11(6) of the Act, often read with Section 11(12)(a) for international commercial arbitrations. At this initial stage, the Court, as highlighted in SBI General Insurance Co. Ltd. v. Krish Spinning² and In Re: Interplay between Arbitration Agreements under Arbitration and Conciliation Act, 1996 and Stamp Act, 1899^3, confines its analysis to the foundational question of whether a valid and enforceable arbitration agreement exists, steering clear of a “roving enquiry into merits.” But even before the validity of the agreement is tested, what seminal question must be addressed regarding the petition’s very maintainability?

The Act itself provides the answer. Section 2(1)(f) defines ‘international commercial arbitration’ as one where at least one of the parties is a foreign national or body corporate, a condition indisputably met here, as one respondent is a company incorporated under the laws of Benin. Once this characterisation is made, Section 2(2) becomes the critical jurisdictional gatekeeper. 

This provision explicitly states that Part I of the Act (which includes Section 11) “shall apply only where the place of arbitration is in India.” If the parties have chosen a foreign seat, Part I is mandatorily excluded. This principle, established with unequivocal authority in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. (BALCO)⁴ and consistently reaffirmed, is rooted in the “juridical significance” of the seat, which determines the courts that hold supervisory jurisdiction over the arbitral process. Given the centrality of the “seat,” how do Indian courts determine its location when analyzing the parties’ intent?

The answer lies in the unambiguous intention of the parties gathered from the contract as a whole. In the present case, the Buyer–Seller Agreement (BSA), the principal contractual arrangement, contained a dispute resolution clause stating arbitration shall “take place in Benin” and be “governed and interpreted in accordance with the laws of Benin.” As the Supreme Court observed in Mankastu Impex Pvt. Ltd. v. Airvisual Ltd⁵. and BGS SGS SOMA JV v. NHPC Ltd⁶., where an express “venue” is designated, and that designation is combined with a choice of a supranational body of rules or foreign governing law, and there are no significant contrary indicia, the conclusion is “inexorable” that the stated venue is the juridical seat. The dual choice of “place” (Benin) and “governing law” (Benin law) in the BSA left “little scope for doubt” that Benin was intended as both the juridical seat and the curial law. But what happens when later, ancillary contracts appear to contradict this choice, providing a potential “contrary indicia?”

This contention hinges on the doctrine of novation under Section 62 of the Indian Contract Act, 1872, which requires a “clear and unequivocal intention” of the parties to substitute the earlier agreement with a new one. The Court decisively rejected this argument. The BSA was the “mother” contract defining the long-term relationship, while the Sales Contracts and HSSAs were merely “subsequent, limited-purpose instruments” facilitating isolated shipments. Crucially, none of the later contracts incorporated the BSA’s arbitration clause, nor did they expressly novate or supersede it. As held in Balasore Alloys Ltd., when several contracts coexist, the arbitration clause of the mother agreement governs the dispute unless a later contract unequivocally replaces it. Since the core dispute, such as short-supply which emanated from the obligations under the BSA, the arbitration clause in the BSA, pointing to Benin, must prevail. Beyond the contractual framework, what overarching legal principles and previous court proceedings further acted as a barrier to the petitioner’s plea?

The legal position was further cemented by two critical developments: the culmination of the Benin-seated arbitration and the prior proceedings before the Delhi High Court. First, before the Indian court could decide the Section 11 application, the arbitral process in Benin had already been initiated and culminated in a final and reasoned award. The Benin Commercial Court, in line with the doctrine of kompetenz–kompetenz (the power of the tribunal to rule on its own jurisdiction), had appointed an arbitrator who subsequently asserted jurisdiction and delivered the award. Allowing a parallel Section 11 proceeding would be “wholly antithetical to the principles of finality” and would “defeat the territorial principle” that the courts of the seat (Benin) exercise supervisory jurisdiction.

 Second, the petitioner had previously filed an anti-arbitration injunction suit before the Delhi High Court, attempting to resist the Benin arbitration. The High Court, in an order allowing the respondent’s application under Section 45 (which governs the enforcement of a foreign arbitration agreement under Part II of the Act), had already made a “categorical finding” that the BSA was the principal contract and that the later agreements did not supersede the Benin arbitration clause. 

The Supreme Court invoked the doctrine of issue estoppel, noting that the petitioner, having unsuccessfully argued the “identity of the issue” (the operative agreement and the seat) before a competent court, was barred from reagitating those same jurisdictional facts in the Section 11 proceeding. This application of issue estoppel ensures judicial efficiency and coherence, a principle underscored in cases like Hope Plantations Ltd. v. Taluk Land Board Peermade & Anr. and Anil v. Rajendra⁷, which noted that a final refusal to refer a dispute to arbitration under Section 8 (power of judicial authority to refer parties to arbitration) bars a subsequent petition under Section 11(6). Finally, could the “Group of Companies Doctrine” have succeeded in creating a composite Indian-seated arbitration despite the BSA’s clear mandate?

The Court thus concluded that the invocation of Part I, including Section 11(6), was “fundamentally misconceived”because: the dispute is an International Commercial Arbitration (Section 2(1)(f)); the seat is foreign (Benin); and therefore Part I is excluded (Section 2(2)). This aligns with the emphatic reiteration in PASL Wind Solutions Pvt. Ltd. v. GE Power Conversion India Pvt. Ltd⁸. that Indian Courts have no jurisdiction to appoint an arbitrator for a foreign-seated arbitration, irrespective of the nationality or domicile of the parties. The reliance on the Group of Companies (GoC) doctrine for roping in non-signatory group entities (Respondents 2 and 3) was also dismissed. This doctrine is not, as the Court clarified, an automatic key to implementing every corporate entity. As emphasized in Cox & Kings Ltd. v. SAP India Pvt. Ltd⁹., the doctrine is applied sparingly, and only where there is “compelling evidence of mutual intention of all the parties concerned to bind a non-signatory.” A mere overlap of shareholding or belonging to the same corporate family is insufficient. Since the Sales Contracts and HSSAs were of a “different genus” and contained materially different arbitration clauses, the attempt to confer jurisdiction through the GoC doctrine was equally “wholly misconceived,” and could not override the territorial principle established by the BSA. The collective weight of statutory mandate and judicial precedent is clear: once parties deliberately choose a foreign seat, Indian courts must respect that choice, effectively closing the door on domestic applications for arbitrator appointment under Section 11(6).

Conclusion 

The Supreme Court’s definitive dismissal of the application for arbitrator appointment serves as a profound affirmation of the foundational principles underpinning the lex arbitri—the law of arbitration. This verdict is not merely a decision on a contractual dispute; it is a powerful judicial statement upholding the sanctity of party autonomy in international commercial arbitration. By strictly adhering to the territorial bar imposed by Section 2(2) of the Act, the Court has drawn a clear jurisdictional line: the moment parties deliberately choose a foreign seat, they consciously submit their disputes to the supervisory authority of that foreign jurisdiction, thereby insulating the process from the interference of Indian courts. The decisive emphasis on the BSA as the “mother” agreement, coupled with the application of issue estoppel arising from the failed anti-arbitration injunction suit, showcases the Court’s commitment to preventing parallel proceedings and respecting the finality of foreign-seated arbitrations that have already culminated in an award. This disciplined judicial approach reinforces India’s standing as an arbitration-friendly jurisdiction, provided the arbitration is India-seated, while simultaneously demonstrating unwavering respect for foreign-seated processes.

The ramification of this judgment extends far into the future of global commerce involving Indian entities. For domestic parties entering into international contracts, the ruling sounds a clear warning: the choice of the juridical seat, be it London, Singapore, or, in this case, Benin must be deliberate and fully understood, as it decisively determines which nation’s courts will possess the power to supervise the arbitration and intervene in the appointment process. 

The ruling effectively consolidates the BALCO principle, ensuring predictability and minimizing “jurisdictional warfare.” Going forward, the critical question for practitioners will be: How might parties effectively draft an agreement to carve out specific roles for Indian courts without compromising the foreign seat’s integrity, if such an accommodation is desired? Furthermore, as corporate structures become increasingly complex, the Court’s strict interpretation of the Group of Companies doctrine prompts another crucial question: Under what precise and compelling circumstances which are beyond mere corporate group identity, will an Indian court agree to bind a non-signatory to a foreign arbitration clause, particularly when the non-signatory has parallel domestic contracts? This judgment cements the position that the contractual design of the arbitration clause is paramount, and the power of the Indian court, though vast domestically, stops firmly at the territorial boundary of the foreign juridical seat.

Citations 

1. Balaji Steel Trade Versus Fludor Benin S.A. & Ors. Arbitration Petition No. 65 Of 2023
2. SBI General Insurance Co. Ltd. v. Krish Spinning, 2024 SCC OnLine SC 1754.
3. Interplay between Arbitration Agreements under Arbitration and Conciliation Act, 1996 and Stamp Act, 1899, In Re, (2024) 6 SCC 1
4. Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. (BALCO)(2012) 9 SCC 552.
5. Mankastu Impex Pvt. Ltd. v. Airvisual Ltd.(2020) 5 SCC 399
6. BGS SGS SOMA JV v. NHPC Ltd.(2020) 4 SCC 234
7. Hope Plantations Ltd. v. Taluk Land Board Peermade & Anr. and Anil v. Rajendra(1999) 5 SCC 590
8. PASL Wind Solutions Pvt. Ltd. v. GE Power Conversion India Pvt. Ltd.2021 SCC OnLine SC 331
9. Cox & Kings Ltd. v. SAP India (P) Ltd., 2023 SCC OnLine SC 1634. (hereinafter, Cox & Kings)

Expositor(s): Adv. Anuja Pandit