The Supreme Court of India has clarified questions raised about the jurisdiction of Indian courts in cross- border commercial contracts and arbitration. In Balaji Steel Trade v Fludor Benin SA & Ors (2025), the court held that in international commercial arbitration, Indian courts do not have jurisdiction to appoint an arbitrator for parties that have agreed to a foreign-seated arbitration as stated in their agreement.
The court relied on its decisions in Bharat Aluminium Co v Kaiser Aluminium Technical Services Inc (2012), which held that part I of the Arbitration and Conciliation Act, 1996 (1996 Act), had no application in arbitrations seated outside India. Further reliance was also placed on Mankastu Impex Private Limited v Airvisual Limited (2020), BGS SGS SOMA JV v NHPC Ltd (2019) and PASL Wind Solutions Private Limited v GE Power Conversion India Private Limited (2021).
The issue arose in the Balaji Steel Trade case. Indian company Balaji, which trades in steel and agricultural commodities, signed a contract with West African enterprise Fludor Benin on 10 December 2018 to establish, manufacture and supply cottonseed cake.
The contract stated that any disputes would be decided at the Centre d’Arbitrage de Médiation et de Conciliation de la Chambre de Commerce et d’Industrie du Bénin (CAMEC-CCIB), the alternative dispute resolution institution established under the Chamber of Commerce and Industry of Benin. A subsequent supersession agreement between the parties dated 6 June 2019 also made Benin the place of arbitration for both parties.
Fludor then assigned some of its obligations under the agreement to UAE-based Vink Corporation DMCC. Then Balaji and Vink signed a contract that mentioned New Delhi as the place of arbitration to be conducted as per the 1996 Act.
On 9 January 2021, Balaji and Fludor signed an addendum to the 2018 mother agreement, where the Benin company was allowed to sell the product to other entities as well. After this, there was a supply shortfall to Balaji, which then signed a contract with Tropical Industries International, stating that Delhi in India was the place of arbitration.
However, the supply shortfall persisted, leading Balaji to send a notice to the three companies, Fludor, Vink and Tropical. But Vink and Tropical denied any responsibility, saying they were not part of the 2018 mother agreement and claimed to be separate entities of Fludor. However, Balaji said all three companies were owned and controlled by Tropical Green Investments Group.
On 6 September 2022, Balaji terminated the 2018 mother agreement. However, on 12 April 2023, Balaji received a CAMEC-CCIB notice that Fludor had requested arbitration under the 2018 agreement. But when Balaji objected in a 15 May 2023 letter, Fludor invoked the arbitration clause in the mother agreement on 31 May 2023.
Balaji objected to the seat of arbitration and the exclusion of Vink and Tropical on 30 June 2023. It then sent a notice invoking arbitration to all three companies under the 1996 Act.
Meanwhile, Fludor continued with the arbitration before the CAMEC-CCIB and on 26 July 2023, the Commercial Court of Cotonou in Benin appointed Dr Gilbert Ahouandjinou as the sole arbitrator.
In response, Balaji approached Delhi High Court on 10 August 2023, seeking a permanent injunction restraining Fludor from continuing the arbitration in Benin.
Balaji also filed an application before the Supreme Court of India on 23 August 2023 seeking the appointment of a sole arbitrator as per the 1996 Act. The sole arbitrator in Benin gave his award on 21 May 2025.
Delhi High Court also dismissed Balaji’s application for a permanent injunction on 8 November 2024.
Balaji argued before the Supreme Court that the three parties were interconnected, the disputes relate to all three and were inseparable, and a composite reference was required under the group of companies doctrine. Balaji also argued that the 2018 mother agreement was novated by the subsequent contracts signed between Balaji, Vink and Tropical. Finally, Balaji also said that, under the mother agreement, Benin was only the venue of arbitration not the juridical seat.
Fludor contested and argued that the mother agreement presented Benin as both the venue and the juridical seat of arbitration, making the arbitration between the parties an international commercial arbitration. Fludor also argued that it was not bound by the contracts between Balaji, Vink and Tropical as they were executed independently. It was also pointed out that the mother agreement did not refer or incorporate those contracts, in the subsequent contracts signed between Fludor and Balaji under the mother agreement.
Both Vink and Tropical argued that their contracts were independent of the mother agreement, and that no dispute had arisen between them and Balaji under the contracts they signed.
In its decision, the Supreme Court held that it did not have jurisdiction over the present dispute under the law laid down in existing precedents. The court observed that the principle agreements between the parties include the main agreement signed on 10 December 2018 and its addendum signed on 9 January 2021.
The court also reiterated that the law required that any novation between the parties of an existing contract must be clear and unequivocal. However, it was observed that the contracts signed by Balaji with Vink and Tropical were only limited purpose instruments and did not expressly substitute, novate or supersede the mother agreement.
Finally, the court, relying on its decision in Balasore Alloys Limited v Medima LLC (2020), observed that “where several contracts co-exist, the arbitration clause of the mother agreement governs the dispute unless a later contract unequivocally replaces it”.
The court reiterated that “Indian courts have no jurisdiction to appoint an arbitrator for a foreign-seated arbitration, irrespective of the nationality or domicile of the parties”.
