Indian Courts Lack Authority to Appoint Arbitrator in Foreign-Seated Arbitration

In a significant ruling delivered on 21 November 2025, the Supreme Court of India clarified the limits of judicial interference in international commercial arbitration, particularly when the parties have expressly chosen a foreign seat. The Court, in Balaji Steel Trade v. Fludor Benin S.A. & Ors. (2025 INSC 1342), held that Indian courts do not possess the authority to appoint an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996, when the arbitration is seated outside India—in this case, Benin.

This decision reinforces the foundational principles of party autonomy and territoriality, confirming that once the parties select a foreign seat and foreign governing law, the supervisory jurisdiction shifts entirely to the courts of that seat. The ruling also addresses issues of contractual hierarchy, the independence of ancillary agreements, the inapplicability of the Group of Companies Doctrine, and the implications of issue estoppel arising from prior judicial findings.

Through this judgment, the Supreme Court has provided much-needed clarity on the boundaries of Indian judicial intervention in cross-border disputes, ensuring that contractual choices regarding arbitration are respected and upheld.

Factual Background

The dispute arises out of a series of intertwined transactions involving four entities:

• Petitioner: Balaji Steel Trade (India), a partnership firm.
• Respondent 1: Fludor Benin S.A., a Benin-incorporated company.
• Respondent 2: Vink Corporations DMCC (Dubai).
• Respondent 3: Tropical Industries International Pvt. Ltd. (India).

The core contractual arrangement was the Buyer-Seller Agreement (BSA) dated 06.06.2019 between the petitioner and Respondent 1. This agreement superseded an earlier collaboration contract and governed a long-term supply arrangement for cottonseed cakes. Importantly:

• The BSA contained an arbitration clause providing that arbitration “will take place in Benin.”
• An addendum later clarified that the agreement would be governed by the laws of Benin.

Subsequently:

• Respondent 1 assigned certain obligations to Respondent 2, resulting in several Sales Contracts, all containing Indian-seated arbitration clauses.
• Respondent 3 entered into High Sea Sale Agreements (HSSAs) with the petitioner, each with its own arbitration clause (oddly referring to the old Arbitration Act, 1940).

When supply disputes arose, Respondent 1 invoked arbitration before CAMEC-CCIB, Benin. Instead of participating, the petitioner:

1. Objected to the Benin arbitration,
2. Filed an anti-arbitration injunction suit before the Delhi High Court,
3. Simultaneously invoked arbitration in India,
4. Filed the present Section 11 petition before the Supreme Court seeking appointment of an arbitrator in India for a composite arbitration against all three respondents.

However, while these Indian proceedings were pending, the Benin arbitration not only commenced but also culminated in a final, reasoned award on 21.05.2024.

Issues Before the Supreme Court

The Supreme Court addressed several key issues:

1. Whether Section 11 can be invoked for disputes arising from a contract prescribing a foreign seat of arbitration (Benin).
2. Whether later Sales Contracts and HSSAs, containing Indian arbitration clauses, novated or superseded the BSA.
3. Whether disputes arising from various agreements warranted a composite reference under the “Group of Companies Doctrine.”
4. Whether the dismissal of the anti-arbitration injunction suit by the Delhi High Court created an ‘issue estoppel’ preventing re-litigation of the same issues.
5. Whether the initiation and culmination of the Benin arbitration would bar a fresh arbitral process in India.

Court’s Analysis

1. Characterisation as International Commercial Arbitration

The Court noted that Respondent 1 is a foreign corporation incorporated in the Republic of Benin. Therefore, the dispute qualifies as an International Commercial Arbitration under Section 2(1)(f) of the Act.

This categorization directly triggers Section 2(2), which mandates:

• Part I of the Act applies only if the seat of arbitration is in India.
• A foreign seat removes Indian court jurisdiction for supervisory functions, including the appointment of arbitrators.

Thus, once the seat is foreign, Section 11 cannot be invoked.

2. Determining the Seat of Arbitration: Benin

The BSA contained the clause:

“All the disputes will be resolved … (and if arbitration becomes the only option) then it will take place in Benin.”

Combined with Article 5 of the Addendum declaring Benin as the governing law, the Court concluded:

Benin was not just the venue but the juridical seat of arbitration.

Citing precedents such as:

• BALCO (2012)
• Mankastu (2020)
• BGS SGS Soma JV (2020)

the Court reaffirmed that:

• Once the seat is foreign, Indian courts have no authority to appoint an arbitrator.
• The petitioner’s argument that Indian arbitration clauses in later Sales Contracts override the BSA was rejected.

3. No Novation or Supersession of the BSA

The Court found that:

• The BSA is the “mother agreement” governing the core relationship.
• The Sales Contracts and HSSAs are standalone, consignment-based agreements with separate parties, terms, and limited scopes.
• There was no incorporation, no cross-reference, and no intention to substitute or supersede the BSA.

Thus, no novation under Section 62 of the Indian Contract Act occurred.

Consequently, the Indian arbitration clauses in these later agreements cannot neutralise the Benin-seated arbitration agreement under the BSA.

4. Benin Arbitration Already Completed

The Court emphasised that Respondent 1 had validly invoked arbitration in Benin, and:

• A tribunal was appointed under Benin’s arbitration law (OHADA).
• The tribunal ruled on its competence ( doctrine of kompetenz-kompetenz).
• A final, reasoned award was delivered on 21.05.2024.

Allowing a parallel Indian arbitration after final adjudication would:

• Undermine the finality of arbitral awards,
• Contrary to the principles of territoriality,
• Violate party autonomy.

5. Effect of Dismissal of Anti-Arbitration Suit — Issue Estoppel

Delhi High Court had earlier held:

• BSA and the Addendum are the operative contracts.
• Benin is the chosen arbitration seat.
• Disputes arise from BSA, not Sales Contracts or HSSAs.

Since these findings became final, the petitioner cannot re-litigate identical issues before the Supreme Court under a different statutory provision. The doctrine of issue estoppel applies.

The Supreme Court cited Hope Plantations v. Taluk Land Board Peermade & Anr. (1999) and Anil v. Rajendra (2015) to reinforce that once an issue is decided, it cannot be reopened in subsequent proceedings.

6. Rejection of the Group of Companies Doctrine

The petitioner argued that since all respondents were part of the TGI Group, they should be clubbed into a composite arbitration.

The Court rejected this argument, reiterating the principles laid down in Cox & Kings (2023):

• Mere common shareholding or corporate affiliation is insufficient.
• Intention to bind non-signatories must be clearly demonstrated.
• Sales Contracts and HSSAs were independent, short-term arrangements.

Thus, respondents 2 and 3 could not be forced into arbitration under the BSA.

Conclusion

The Supreme Court’s ruling in Balaji Steel Trade v. Fludor Benin S.A. firmly reiterates the primacy of party autonomy and the territorial nature of arbitration law in India by holding that Indian courts cannot appoint an arbitrator for a foreign-seated arbitration. Once the parties agreed that disputes under the Buyer-Seller Agreement would be arbitrated in Benin and governed by Benin law, Part I of the Arbitration and Conciliation Act, 1996—including Section 11—ceased to apply, placing the dispute entirely outside Indian judicial intervention.

The Court further held that subsequent Sales Contracts and HSSAs containing Indian arbitration clauses neither superseded nor novated the principal agreement, and that the dismissal of the anti-arbitration suit by the Delhi High Court created an issue estoppel barring re-litigation of the same questions.

By upholding the Benin-seated arbitral process, which had already culminated in a final award, and rejecting the application of the Group of Companies Doctrine, the Court clarified that contractual design cannot be altered to manufacture jurisdiction where none exists. This judgment strengthens India’s arbitration regime by reinforcing respect for chosen foreign seats and preventing parallel or conflicting arbitral proceedings.

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