INTRODUCTION
The Supreme Court on 21st November 2025 in Balaji Steel Trade v. Fludor Benin S.A. & Ors., Arbitration Petition No. 65 of 2023 held 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 two-judge Bench of Justice PS Narasimha and Justice Atul S Chandurkar 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.
BACKGROUND
The facts could be briefly traced to the Buyer and Seller Agreement (BSA) dated 06.06.2019 executed between the present petitioner and respondent no.1, Fludor Benin S.A, which is a private limited company incorporated under the laws of Republic of Benin, a country in West Africa. The said BSA also incorporated an arbitration clause providing for ad hoc arbitration to be conducted in Benin. Subsequently, the Petitioner and Respondent no. 2 entered into a series of Sales Contracts and the petitioner and respondent no. 3 entered into High Sea Sale Contracts HSSA both of which provided for reference of dispute under the Arbitration and Conciliation Act, 1996. Disputes arose between the parties and the Respondent no.1 invoked arbitration under the laws of Benin to the petitioner to which the petitioner objected.
Instead of submitting to the Benin arbitration, the petitioner issued its own notice invoking arbitration to all the three respondents purportedly in terms of Section 21 of the Act, 1996 referring the disputes arising out of the BSA, Sales Contract and HSSAs to arbitration and proposed the name of sole arbitrator. Respondent no. 1 however continued to proceed with Benin arbitration and filed an application before the Benin Court seeking appointment of arbitrator which was allowed. Petitioner however proceeded to institute Anti-Arbitration Injunction Suit before the High Court of Delhi praying for a decree of permanent injunction restraining the respondent no. 1 from proceeding/continuing with the Benin Arbitration. Pending disposal of the anti-arbitration injunction suit, petitioner on 23.08.2023 filed the present application under Section 11(6) read with Section 11(12)(a) of the Act, 1996 for appointment of sole arbitrator for adjudication of the disputes.
KEY POINTS
- Upon examining the arguments advanced and documents submitted, the Supreme Court observed that Respondent no. 1 being a company incorporated under the laws of Benin, the present dispute squarely falls within the ambit of international commercial arbitration. Thereby, in the instant case, Part I of the 1996 Act stands excluded by virtue of the parties’ choice of the seat of arbitration and the governing law and so the jurisdiction of this Court to entertain the application is ousted at the threshold.
- The Court further relied upon its previous precedents including Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc, (2012) 9 SCC 552 where it was held that Part I of the 1996 Act has no application to arbitrations seated outside India. At the threshold, it is common ground that the relationship between the petitioner and respondent no. 1 was crystallised in the BSA and the arbitration clause contained in Article 11 of the BSA explicitly provides the geographical location of arbitration and the governing law. The dual indications together leave little scope for doubt that Benin was intended to be the juridical seat with laws of Benin as the curial law.
- Further, it was observed that BSA dated 06.06.2019 constituted the principal or “mother” contract between the petitioner and respondent no. 1 and Arbitration Clauses in Sales Contracts and HSSAs were inapplicable to disputes arising from BSA. None of these contracts incorporate or refer to the BSA or its arbitration clause, nor did they expressly substitute, novate, or supersede the BSA. The arbitration agreements in the Sales Contracts or HSSAs cannot displace or override the arbitration clause in the BSA.
- It is significant to note, the Benin-seated arbitral tribunal had already rendered a final and reasoned award dated 21.05.2024. This means that the arbitral process agreed to by the parties in the BSA has already culminated. In such a case, the petitioner cannot seek to initiate a parallel arbitral process in India in respect of the same subject matter as allowing it would be antithetical to the principles of finality of arbitral proceedings. The High Court of Delhi had dismissed the anti-arbitration injunction suit filed by the petitioner and thereby the petitioner is now barred by issue estoppel from reagitating those issues before the Supreme Court. The petitioner’s endeavor to confer jurisdiction is contrary to the territorial principle that lies at the heart of the 1996 Act.
RECENT DEVELOPMENTS
The Supreme Court held that 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 Petition filed under Section 11(6) read with Section 11(12)(a) of the Act, 1996 was dismissed. 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
CONCLUSION
It could be concluded that this judgement is an undeniable reaffirmation of the territorial principle and preserved the autonomy of the foreign seated arbitral process. It reiterated that Indian courts are ousted of jurisdiction to appoint an arbitrator for a foreign-seated arbitration. Most importantly, it highlights that the courts do not go contrary to the simple, plain meaning and intent of the contract in international commercial transactions.
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WRITTEN BY : AMYUKTA RAJAGOPAL
