Summary
| Category | Data |
|---|---|
| Court | Supreme Court of India |
| Case Number | ARBITRATION PETITION No. 65 of 2023 |
| Diary Number | 34759/2023 |
| Judge Name | HON’BLE MR. JUSTICE PAMIDIGHANTAM SRI NARASIMHA |
| Bench | HON’BLE MR. JUSTICE PAMIDIGHANTAM SRI NARASIMHA; HON’BLE MR. JUSTICE ATUL S. CHANDURKAR |
| Precedent Value | Affirms existing precedent |
| Overrules / Affirms | Affirms existing law as laid down in BALCO, Mankastu Impex, BGS SGS SOMA JV, PASL Wind |
| Type of Law | International Commercial Arbitration under the Arbitration and Conciliation Act, 1996 |
| Questions of Law |
|
| Ratio Decidendi |
The buyer-seller agreement and its addendum, governing disputes under Benin law and stipulating arbitration “in Benin,” constitute the mother agreement with a foreign seat, excluding Part I of the ACA 1996. Subsequent sales contracts and HSSAs are limited, standalone instruments that neither refer to nor novate the mother agreement’s arbitration clause. Indian courts lack power under Section 11 to appoint an arbitrator for a foreign-seated arbitration, and the petitioner is estopped by the Delhi High Court’s Section 45 findings. The group-of-companies doctrine does not automatically bind related entities absent clear common intention. |
| Judgments Relied Upon |
|
| Logic / Jurisprudence / Authorities Relied Upon by the Court |
|
| Facts as Summarised by the Court |
The petitioner and Respondent No. 1 entered into a five-year Buyer and Seller Agreement (06.06.2019) and an Addendum (09.01.2021) governed by Benin law with arbitration in Benin. Respondent No. 1 assigned supply obligations via sales contracts (R2) and HSSAs (R3) each with Indian-seat clauses. Disputes over shortfall led to termination, a Benin arbitration notice, a Delhi HC anti-injunction suit (dismissed under Section 45), and a Section 11 petition. The Benin tribunal delivered an award on 21.05.2024; the Section 11 petition was dismissed. |
Practical Impact
| Category | Impact |
|---|---|
| Binding On | All Indian courts |
| Persuasive For | Other High Courts considering seat-jurisdiction issues |
| Follows | BALCO; Mankastu Impex; BGS SGS SOMA JV; PASL Wind |
What’s New / What Lawyers Should Note
- Reaffirmation that Part I of the ACA 1996 (including Section 11) is excluded when the parties choose a foreign seat of arbitration.
- The mother (primary) agreement’s arbitration clause cannot be novated or overridden by later, consignment-specific sales or high-seas sales contracts absent clear substitution language.
- Indian courts lack jurisdiction to appoint an arbitrator for arbitration seated outside India, even if subsequent agreements contain Indian-seat clauses.
- Issue estoppel arising from a dismissed anti-arbitration injunction under Section 45 bars a later Section 11 challenge to the same jurisdictional facts.
- The group-of-companies doctrine does not bind non-signatories unless there is compelling evidence of common negotiation and intention to arbitrate jointly.
Summary of Legal Reasoning
- Characterisation as international commercial arbitration under Section 2(1)(f) ACA 1996 since one party is a foreign entity.
- Part I exclusion by Section 2(2) once the seat is outside India; Supreme Court’s BALCO line of authority.
- Seat determined from parties’ intention: Article 11 of the BSA (“take place in Benin”) and Article 5 of the Addendum (Benin law).
- No novation under Section 62 of the Contract Act: sales contracts (R2) and HSSAs (R3) are ancillary, limited to specific consignments, without any express replacement of the mother agreement.
- Benin tribunal’s kompetenz–kompetenz ruling and final award (21.05.2024) preclude parallel proceedings in India.
- Issue estoppel: Delhi HC’s dismissal of the anti-injunction suit under Section 45 conclusively determined the seat and operative agreement.
- Group-of-companies doctrine inapplicable without clear common intention; mere common shareholding insufficient.
Arguments by the Parties
Petitioner
- The disputes form a composite transaction under common shareholding, invoking the group-of-companies doctrine.
- The BSA arbitration clause was novated by subsequent sales contracts and HSSAs providing for Indian-seat arbitration.
- Alternatively, “Benin” in Article 11 was venue only, not juridical seat; the governing law and conduct point to India.
- Benin arbitration is non-est as Benin is not a reciprocating territory under Section 44(b) of ACA 1996.
- Delhi HC’s Section 45 findings are irrelevant; Section 11 inquiry is limited to existence of an arbitration agreement.
Respondent No. 1
- Part I inapplicable: BSA disputes are international arbitrations seated in Benin under Benin law.
- Sales contracts/HSSAs cannot bind R1; mother agreement prevails.
- No novation or supersession; disputes arise under BSA and Addendum alone.
- Issue estoppel from Delhi HC’s Section 45 dismissal bars re-litigation.
Respondent No. 2
- Sales contracts are standalone agreements; arbitration clause limited to disputes under those specific contracts.
Respondent No. 3
- HSSAs are separate, each with an arbitration clause under the Indian Arbitration Act, 1940, limited to those contracts.
Factual Background
Petitioner Balaji Steel Trade and Respondent No. 1 executed a Buyer and Seller Agreement on 06.06.2019 and an Addendum on 09.01.2021, governed by Benin law with arbitration “in Benin.” Respondent No. 1 assigned supply duties via sales contracts with R2 and high-seas sales contracts (HSSAs) with R3, each containing separate arbitration clauses seated in India. Disputes over shortfalls led to termination of the BSA, a Benin arbitration notice, and the petitioner’s anti-arbitration injunction suit in Delhi HC (dismissed under Section 45). Petitioner then filed a Section 11 petition before the Supreme Court, but the Benin tribunal issued its award on 21.05.2024, and the Section 11 petition was dismissed.
Statutory Analysis
- Section 2(1)(f), ACA 1996: Defines “international commercial arbitration.”
- Section 2(2), ACA 1996: Excludes Part I if the seat is outside India.
- Sections 11(6) & 11(12)(a), ACA 1996: Enable Chief Justice to appoint arbitrator under Part I.
- Section 45, ACA 1996: Governs anti-arbitration injunctions.
- Section 62, Indian Contract Act 1872: Defines effect of novation.
Alert Indicators
- ✔ Precedent Followed – Supreme Court reaffirms established law on seat-jurisdiction and Part I exclusion.