Indian Courts Have No Jurisdiction To Appoint Arbitrator For Foreign-Seated Arbitration : Supreme Court

The Supreme Court on Friday (November 21) dismissed a plea seeking the appointment of an arbitrator in an international commercial arbitration, holding that once the principal contract is governed by foreign law and provides for a foreign-seated arbitration, Indian courts lose jurisdiction, irrespective of the Indian nationality of any party.

“Indian Courts have no jurisdiction to appoint an arbitrator for a foreign-seated arbitration, irrespective of the nationality or domicile of the parties.”, observed a bench of Justices PS Narasimha and Atul S Chandurkar while deciding a case where at the heart was the dispute pertaining to the Buyer–Seller Agreement (BSA) of 06.06.2019, which clearly provided that arbitration “will take place in Benin” and that the agreement would be governed by Beninese law. The petitioner, Balaji Steel, had relied on later ancillary contracts containing Indian-seated arbitration clauses to invoke the Group of Companies (“GoC”) doctrine to argue for a domestic arbitration.

The Court rejected this approach, holding that the BSA was the principal contract, with the later Sales Contracts and High Seas Sale Agreements merely executing specific shipments. Since the alleged breaches stemmed from the BSA itself, Benin was the juridical seat.

“On the facts as well, the BSA and its Addendum constitute the mother agreement, containing a clear and deliberate choice of Benin as the juridical seat of arbitration and Benin law as the governing and curial law. The subsequent Sales Contracts and HSSAs are merely ancillary, facilitating performance of isolated shipments, and cannot override the dispute resolution framework of the BSA. Thus, both in principle and in the factual circumstances of the case, the arbitration agreement in the BSA prevails. The disputes raised by the petitioner arise squarely from the BSA, and the parties' chosen forum for their adjudication is arbitration in Benin. Accordingly, the invocation of Part I and the present request under Section 11(6) of the 1996 Act is fundamentally misconceived, legally untenable, and contrary to the statutory scheme as well as the autonomy of the parties' contractual design.”, the Court said.

Relying on Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., 1 (2012) 9 SCC 552 and BGS SGS SOMA JV v. NHPC Ltd. (2020) 4 SCC 234, the Court reiterated that Part I of the Arbitration Act, including Section 11, does not apply to foreign-seated arbitrations. Once parties choose a foreign seat, Indian courts cannot appoint arbitrators for the same dispute, the court added.

“The petitioner's endeavor to confer jurisdiction upon this Court by invoking ancillary contracts of a different genus, executed with different parties, and containing materially different arbitration clauses, is wholly misconceived and contrary to the territorial principle that lies at the heart of the 1996 Act. The petition, therefore, is not merely untenable, it is foreclosed both in law and on account of estoppel arising from the petitioner's own prior litigation conduct.”, the court added.

The Court also rejected the Appellant's reliance on the Group of Companies doctrine to invoke arbitration in India. The bench, citing Cox & Kings Ltd. v. SAP India (P) Ltd., 2023 SCC OnLine SC 1634, stated that “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 to an arbitration agreement. Such intention may be inferred from direct participation in negotiation, performance of contract, or from the role played in the overall transaction. However, a mere overlap of shareholding, or the fact that entities belong to the same corporate family, is not by itself sufficient.”

The arbitration petition was dismissed.

Cause Title: BALAJI STEEL TRADE VERSUS FLUDOR BENIN S.A. & ORS.

Citatiion : 2025 LiveLaw (SC) 1132

Click here to download judgment

Appearance:

For Petitioner(s) : Mr. Devadatt Kamat, Sr. Adv. Ms. Shruti Sabharwal, Adv. Mr. Nishant Doshi, Adv. Ms. Soumya Prasad, Adv. Mr. Harsh Pandey, Adv. Mr. Hruday Bajentri, Adv. Mr. S. S. Shroff, AOR

For Respondent(s) : Mr. Nakul Dewan, Sr. Adv. Mr. Vijayendra Pratap Singh, Adv. Mr. Abhijnan Jha, AOR Ms. Urvashi Misra, Adv. Mr. Arnab Ray, Adv. Ms. Sadhvi Chhabra, Adv. Ms. Shailaja Rawal, Adv. Mr. Susshil Daga, Adv. Mr. Pallav Mongia, AOR Mr. Anurag Kalavatiya, Adv. Mr. Chitransh Mathur, Adv. Ms. Parul Singhal, Adv. Mr. Ashish Sharma, Adv. Mr. Utkarsh Misra, Adv. Mr. Aditya Sharma, Adv. Ms. Pragya Khubani, Adv. Mr. Chetan Verma, Adv. Ms. Shristi Mathur, Adv. Mr. Anubhav Mishra, Adv.