SC Reaffirms Primacy Of Foreign-seated Arbitration & Limits On Composite Reference: Petition To Anchor Benin-seated Arbitration In India Dismissed 

Summary:

The Supreme Court dismissed Balaji Steel Trade’s Section 11 petition seeking appointment of an arbitrator in India for disputes arising from its Buyer–Seller Agreement (BSA) with a Benin-based company. The Court held that the BSA expressly fixed Benin as the seat of arbitration and Benin law as the governing law, making it a foreign-seated international commercial arbitration, thereby excluding Part I of the Arbitration and Conciliation Act, including Section 11. The petitioner’s reliance on arbitration clauses in later Sales Contracts and High Sea Sale Agreements was rejected, as these were separate, consignment-based contracts that did not override or novate the BSA, which is the “mother agreement” as noted by the court, nor justify applying the Group of Companies doctrine. The Court also noted that a final Benin arbitral award had already been rendered and that the Delhi High Court had earlier upheld the Benin seat, creating issue estoppel. Upholding party autonomy and territoriality, the Supreme Court dismissed the petition. 

Facts 

• The parties initially executed a Collaboration Agreement in 2018 for the manufacture and supply of cottonseed cakes, which was later superseded by a comprehensive Buyer–Seller Agreement (BSA) dated 06.06.2019. The BSA governed the long-term commercial relationship between Balaji Steel Trade and Fludor Benin S.A., with Article 11 stipulating that all disputes would be resolved through arbitration “to take place in Benin,” and an Addendum executed in 2021 expressly confirming that the agreement would be governed by the laws of Benin. 

• Pursuant to internal restructuring of supply obligations, Respondent No. 1 assigned performance to Respondent No. 2, a Dubai-based entity, leading to a series of Sales Contracts between the petitioner and Respondent No. 2. These Sales Contracts were consignment-specific, independent arrangements containing India-seated arbitration clauses applicable only to disputes arising from each particular consignment. 

• To address alleged shortfalls in supply quantities, the petitioner also entered into several High Sea Sale Agreements (HSSAs) with Respondent No. 3. Like the Sales Contracts, these HSSAs were standalone agreements limited to specific shipments and contained separate arbitration clauses referring disputes to arbitration under the Indian Arbitration Act, 1940. 

• In 2022, disputes emerged regarding fulfilment of obligations under the BSA, leading Respondent No. 1 to invoke arbitration in Benin before CAMEC. The Benin Commercial Court appointed a sole arbitrator on 26.07.2023. The petitioner, however, objected to the Benin proceedings and independently issued a Section 21 notice seeking to initiate arbitration in India, asserting a composite dispute involving respondents 1, 2, and 3. 

• Parallelly, the petitioner filed an Anti-Arbitration Injunction Suit before the Delhi High Court on 10.08.2023 and, shortly thereafter, a Section 11 petition before the Supreme Court on 23.08.2023 seeking appointment of an arbitrator in India. While these proceedings were pending, the Benin arbitration culminated in a final award on 21.05.2024. Subsequently, on 08.11.2024, the Delhi High Court dismissed the anti-arbitration suit, holding that the BSA and its Addendum formed the operative contract and that Benin was the mutually chosen seat of arbitration. 

Issues

1. Whether a Section 11 petition is maintainable when the BSA provides for a foreign-seated arbitration in Benin. 

2. Whether the arbitration clauses in Sales Contracts and HSSAs novate, supersede, or override the BSA arbitration clause. 

3. Whether Respondents 2 and 3 can be joined in a composite arbitration under the Group of Companies doctrine. 

4. Whether the dismissal of the anti-arbitration injunction suit creates issue estoppel against the petitioner. 

5. Whether the petition survives when a Benin-seated arbitration has already culminated in a final award. 

Judgment

• BSA governs the parties, hence, Benin is the juridical seat: The Court held that the BSA and Addendum constitute the primary and operative agreement. Article 11 explicitly states that arbitration shall “take place in Benin.” Article 5 of the Addendum confirms Benin law as governing law. Thus, the arbitration is foreign-seated, attracting Part II and excluding Part I, including Section 11 jurisdiction. 

• Later contracts do not override or novate the BSA: Sales Contracts with Respondent No. 2 and HSSAs with Respondent No. 3: Are self-contained, consignment-specific agreements. Do not reference or supersede the BSA. Cannot displace the mother agreement’s arbitration clause. Therefore, the BSA arbitration clause prevails. 

• Group of companies doctrine not attracted: The Court found that no evidence of mutual intention for respondents 2 and 3 to be bound by the BSA arbitration clause. Mere common shareholding within the TGI Group is not sufficient and no interdependent or composite performance linking the agreements. 

• Issue estoppel applies:  The Court held that the findings of the Delhi High Court, namely that the BSA and its Addendum constituted the governing contractual framework, that arbitration was required to proceed in Benin, and that the Sales Contracts and HSSAs did not create any unified or composite arbitration mechanism, had attained finality. These conclusions, having been rendered after a full hearing, were binding on the parties and operated as issue estoppel. As a result, the petitioner was barred from re-litigating the same jurisdictional and contractual questions through a Section 11 petition, since the doctrine prevents reopening issues that have already been adjudicated between the same parties. 

• Benin Arbitration Already Concluded: The Court further observed that arbitration under the BSA had already been validly invoked in Benin, the sole arbitrator had been appointed by the Benin Commercial Court, and a final arbitral award dated 21.05.2024 had been delivered. Initiating a parallel arbitration in India would directly conflict with the “kompetenz–kompetenz principle”, undermine the finality of the foreign-seated award, and violate the territoriality principle which mandates that supervisory jurisdiction lies exclusively with the courts at the seat. In view of these factors, the Section 11 petition was held to be not maintainable and was accordingly dismissed, with parties bearing their own costs. 

Analysis:

The Supreme Court’s ruling reinforces the primacy of the contractually chosen seat and solidifies the territoriality principle by unequivocally holding that a Benin-seated arbitration excludes the jurisdiction of Indian courts under Part I, including Section 11. The judgment builds the law by (i) reaffirming that a “mother agreement” with a foreign seat cannot be displaced by subsequent consignment-specific contracts unless there is clear novation, (ii) narrowing the scope of the Group of Companies doctrine by requiring demonstrable mutual intention and interdependent performance, (iii) recognising issue estoppel as a bar to re-litigating jurisdictional findings previously decided by a competent Indian court, and (iv) highlighting that once a foreign-seated arbitral process has culminated in a final award, Indian courts cannot be used to initiate parallel domestic proceedings. Collectively, the ruling strengthens party autonomy, curbs abusive attempts to “anchor” foreign arbitrations in India, and provides doctrinal clarity on composite references, novation, and the limited role of Indian courts in international commercial arbitration.