SC Rejects Jurisdiction Claim Based On Ancillary Contracts In Arbitration Case

New Delhi, Nov 24 (KNN) The Supreme Court has ruled that Indian courts have no jurisdiction to appoint an arbitrator in a foreign-seated arbitration, if the principal contract is ruled by foreign laws, even when one of the parties or both the parties are Indian entities.

A bench of Justices P.S. Narasimha and Atul S. Chandurkar dismissed a plea seeking the appointment of an arbitrator in a dispute arising from a Buyer–Seller Agreement (BSA) dated June 6, 2019 which designated Benin as the seat of arbitration and Beninese law as governing law.

The petitioner, Balaji Steel, had argued that subsequent ancillary contracts contained India-seated arbitration clauses and sought to rely on the Group of Companies (GoC) doctrine to bring the dispute under Indian jurisdiction.

The Court rejected this argument, holding that the BSA was the principal contract and that later Sales Contracts and High Seas Sale Agreements were only ancillary arrangements for individual shipments.

Since the dispute stemmed from the BSA, the chosen juridical seat remained Benin, the bench held.

Reiterating earlier rulings in Bharat Aluminium Co. v. Kaiser Aluminium and BGS SGS SOMA JV v. NHPC Ltd., the Court clarified that Part I of the Arbitration and Conciliation Act, including Section 11, does not apply to foreign-seated arbitrations.

The bench also rejected reliance on the GoC doctrine, noting, citing Cox & Kings Ltd. v. SAP India, that the doctrine applies only in rare cases where a clear intention exists to bind a non-signatory.

The plea was found to be legally untenable and contrary to the parties’ contractual choices, the Court concluded.

(KNN Bureau)