Supreme Court Reaffirms Territoriality: Limits on Section 11 in Foreign-Seated Arbitration

Posted On - 3 March, 2026 • By - Navod Prasannan

Introduction

Indian law governs arbitration based on the territory where arbitration occurs. Therefore, only Indian courts supervise Indian arbitration (as established by the Supreme Court’s ruling in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc.[BALCO]).1

The ruling in the BALCO case clarified that arbitration that occurs outside of India will not have the supervisory jurisdiction of Indian courts under Part I of the Arbitration and Conciliation Act, 1996, as those courts have no jurisdiction over arbitration that occurs outside of India. The ruling further harmonizes Indian law governing arbitration with international norms practiced globally (typically referred to as “international commercial arbitration”) and with the UNCITRAL Model Law which places great importance on the relationship between an arbitral seat and the arbitral proceedings.2

In addition to the clarity provided by the BALCO ruling, courts in India have continued to entertain alternative or indirect means of compelling Indian arbiters to take jurisdiction over evaluations made by foreign arbiters through proceedings initiated under Section 11(1) of the Arbitration Act, the establishment of an auxiliary relationship between two entities through auxiliary contracts, or attempts to apply the Group of Companies (“GoC”) doctrine to assert jurisdiction over arbitral proceedings taking place outside of India. The continued efforts to assert jurisdiction over foreign arbitral orders have illustrated a serious and continuing tension between the realities of international commerce and the long-standing interventionist approach courts in India have taken towards arbitration. In 2024, in Balaji Steel Trade v. Fludor Benin S.A.3, Supreme Court addressed this continuing tension by refusing a request to entertain a Section 11 petition based on an auxiliary relationship between two parts, as well as by limiting the application of the GoC doctrine. As such, it has reaffirmed the territorial principle and provided increased coherence to Indian arbitration law.

Territoriality and Section 11

Territoriality is a key principle contained within the scope of the Indian Arbitration and Conciliation Act, 1996 (the “1996 Act”). Section 2(2) provides that the scope of Part I is limited to arbitrations seated in India, with limited exceptions. The case of BALCO provided clarification on this absolute territoriality limitation – even an Indian Court does not have supervisory jurisdiction over a foreign-seated arbitration. Nonetheless, Section 11, the provision allowing Courts to appoint arbitrators, became an area of jurisdictional contention. Often when petitioners filed applications requesting arbitrators to be appointed under Section 11 they framed them as purely procedural requests, as opposed to a request for judicial intervention. The appointment of an arbitrator is a judicial act, rather than administrative in nature; therefore, allowing for judicial intervention in a foreign-seated arbitration would be a direct contradiction of the principle of seat-centric arbitration.

Until recently, Indian Courts used to take an activist role in resolving arbitration disputes under the Arbitration Act, 1940 by treating arbitration as an extension of litigation. This was not the intention of the 1996 Act when it was enacted, and it was perceived that there was some level of judicial control over arbitration due to the continued existence of such vestiges of this role. Subsequently, following the case of BALCO, Indian Courts have occasionally continued to entertain petitions filed under Section 11 concerning foreign-seated arbitrations and have interpreted the contract in detail, thereby determining the parties to the arbitration. This has resulted in confusion as to whether the Courts are undertaking a fundamental analysis based only on threshold scrutiny or whether they are making a substantive assumption regarding jurisdiction.

The Supreme Court in Balaji Steel reaffirmed the key principles of arbitration. The petitioner tried to rely on later contracts which specified Indian seated arbitration as the method of settling disputes, even though the main Buyer-Seller Agreement (BSA) explicitly required Benin arbitration. The Supreme Court dismissed the petitioner’s argument as “fundamentally misconceived”, stating that Indian courts have no jurisdiction to appoint arbitrators for arbitrations seat in other countries (foreign seat of arbitration), regardless of the nationality of the parties involved in the arbitration. The court has confirmed once and for all that the jurisdiction of a court in relation to arbitration occurs at the location of the arbitration and does not depend on convenience, nationality, or litigation strategy of the parties.

The Balaji Steel decision also clarifies how multi-contract transactions are to be treated under international law. In international commercial transactions, there is generally one principal or framework agreement and there will be multiple supporting or related agreements for performance and shipping. When there are inconsistencies in the arbitration provisions of these agreements, it is commonly argued by the parties that each expressed arbitration provision is independent and valid as a choice of forum. However, following this technical analysis ignores the hierarchy of the entire transaction as well as the intent or purpose of the underlying document.

In Balaji Steel, the Supreme Court stated that the Primary Supply Agreement (BSA) is the main contract for their commercial dealings (as such, it was designated the “Mother Agreement”), and the Secondary Supply Agreements (Sales Contracts) (and High Seas Agreement) are simply related documents or attachments to the Primary Supply Agreement to assist with fulfilling it. If a dispute arises from a breach of the Primary Supply Agreement, that dispute cannot be recharacterized as a dispute under a Secondary Supply Agreement or under a High Seas Agreement merely to change the jurisdiction where the dispute is being resolved. By upholding the importance of the Primary Supply Agreement (BSA) as the body of agreements governing this situation, it has stopped parties from taking advantage of jurisdictional differences for business reasons and allowed parties involved in International contracts to have an expected outcome without needing to bear the uncertainty that jurisdictional differences create.

The conclusion of the Court reflects a much larger issue of Commercial Reality. Commercial Framework Agreements (BSA) establish a negotiated understanding of who takes what business risk, where (if anywhere) the transaction relationship will be governed by local laws, and what will be the means for resolving disputes. Ancillary Agreements (Sales Contracts, High Seas Agreement) are operationally focused on providing a means for the buyer or seller to effectively perform on the Primary Supply Agreement. Thus, treating the arbitration language as standalone in minor contracts misses the reality of how sufficiently large/complex global contracts are structured. Historically, many Indian courts have focused on reviewing and enforcing performance obligation contracts in isolation, resulting in fragmented arbitration outcomes. The Balaji Steel decision aligns Indian law with best practices of International Law by encouraging parties to operate within the intent of the overall body of agreements.

Limitations on the Doctrine of Group of Companies

Petitioner’s attempt to rely on the Group of Companies doctrine will not likely succeed as this doctrine allows arbitration clauses to also impose upon non-signatory companies within a corporate group if there is a clear intention by the parties to create such obligation. In India, the Group of Companies doctrine has through time at times been utilized to expand the available scope of arbitration beyond the need for true consent of all parties to the arbitration agreement. In addition to this decision, the Supreme Court has placed limits on the application of the Group of Companies doctrine and has clarified in Cox & Kings Ltd v. SAP4 India that the Group of Companies doctrine should be used only when both parties to the arbitration agreement have mutually consented to the application of the Group of Companies doctrine and that mere corporate affiliation is not in itself sufficient to subject a non-signatory to binding effect of arbitration.

The Court further observed that in cross-border commercial agreements, the certainty of the seat of arbitration is crucial. Therefore, consent-based doctrines such as the Group of Companies doctrine will not allow for a departure from the seat of arbitration as agreed to through the express agreement of the parties. Weakening of the territorial principle of arbitration risks diminishing commercial certainty and renders unfulfilled the parties’ agreements concerning both the seat of arbitration and the intent of the parties to arbitrate. The Balaji Steel Case underscores the need for consent-based doctrines to remain within the territorial limits of the agreement.

Litigation Conduct and Estoppel

An important, albeit understated, element of the Court’s rationale relates to the ‘conduct’ of parties to a dispute in a manner that manifests ‘litigation conduct’, as described by the Supreme Court. The petitioner initially agreed to arbitrate outside of India but subsequently attempted to access the Indian Courts after a dispute arose. The Supreme Court observed that this inconsistent conduct constitutes a violation of both the principles of estoppel and good faith and may not be relied upon as a basis for establishing jurisdiction.

In other words, the Supreme Court stated that the validity of arbitration is established by parties’ consent both at the moment they enter into a contract, as well as by their adherence to the procedural framework of the contract until the dispute is resolved. The Supreme Court added that allowing parties to change their forum, and to shift their respective claims from one jurisdiction to another, based upon the strategic consideration of litigation, would encourage forum shopping and further undermine confidence in arbitration. The holding of Balaji Steel is a reaffirmation of established international norms with respect to arbitration agreements that require both consistency and procedural soundness regarding the conduct of parties that engage in arbitration.

Judicial Restraint and Restoring Consistency

The most significant aspect of Balaji Steel is that it illustrates the Court’s restraint in terms of the Judiciary. Rather than introducing new exceptions to existing law or creating a new tort, the Court reaffirmed fundamental principles of the law; namely, Section 11 of the Arbitration and Conciliation Act, 1996,5 cannot be used to circumvent the principles of territoriality. Further, that an ancillary arbitration agreement may not supersede the principal arbitration agreement and that any and all documents produced, based on consent to jurisdiction, must also be limited to the principles of territoriality. By concentrating on the design and selection of a seat for an arbitration commencement, the Court provided predictability, consistency and conformity to international arbitration practices.

Balaji Steel’s ruling re-establishes the crucial principles of (i) hierarchy between the seat of arbitration (ii) contractual intent (iii) consent; and that arbitration is a structured, reliable and internationally aligned process for dispute resolution. The decision clarifies that jurisdiction must be established through a deliberate choice of the parties not through convenience or litigation strategies (e.g., depending on the nationality of the parties). As a result of the above-mentioned clarifications, India benefits from the ability to offer internationally recognised authoritative guidance regarding arbitration law.

Conclusion

Ultimately, Balaji Steel defines Indian arbitration law, and clarifies the jurisdictional limitations of Indian Courts when it comes to foreign-seated arbitration; limits the availability of Section 11 petitions as procedural loopholes; prohibits ancillary agreements from modifying the principal arbitration framework; prohibits broadening the ambit of the GoC Doctrine; mandates adherence to established procedures to secure parties’ consent; and through a breaking of contractual hierarchy, consent and seat, places India on an equal footing with countries that provide predictable and reliable forums for the resolution of commercial disputes on a global level.

  1. Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., MANU/SC/0722/2012 ↩︎
  2. Arbitration and Conciliation Act, No. 26 of 1996 ↩︎
  3. Balaji Steel Trade v. Fludor Benin S.A. and Others, MANU/SC/1566/2025 ↩︎
  4. Cox & Kings Ltd. v. SAP India (P) Ltd., MANU/SC/0986/2024 ↩︎
  5. Section 11 of the Arbitration and Conciliation Act, 1996 ↩︎