Primacy of the “Mother Agreement” and Issue Estoppel in Foreign-Seated Arbitrations: Commentary on Balaji Steel Trade v. Fludor Benin S.A.

1. Introduction

The Supreme Court of India’s decision in Balaji Steel Trade v. Fludor Benin S.A. & Ors., 2025 INSC 1342 squarely addresses a recurring problem in cross-border commercial arrangements involving multiple contracts and multiple group entities: can a party “re-anchor” a foreign-seated arbitration into the Indian arbitral regime by relying on arbitration clauses in later, ancillary contracts that provide for Indian-seated arbitration?

The petitioner, an Indian partnership firm, sought to invoke Section 11(6) read with Section 11(12)(a) of the Arbitration and Conciliation Act, 1996 (“the 1996 Act”) for appointment of a sole arbitrator in India. It argued that the dispute, though arising under a Buyer and Seller Agreement (BSA) with a Benin company (respondent no. 1), was part of a composite transaction involving subsequent Sales Contracts with a Dubai company (respondent no. 2) and High Seas Sale Agreements (HSSAs) with an Indian company (respondent no. 3), all allegedly under the umbrella of the TGI Group.

The core questions before the Court were:

Whether a Section 11 petition is maintainable where the “mother agreement” expressly provides for arbitration in a foreign seat (Benin) governed by foreign law (Benin law).
Whether later contracts with India-seated arbitration clauses novate, supersede, or override the arbitration clause in the BSA.
Whether the dispute qualifies for a composite reference by invoking the group of companies doctrine.
Whether the dismissal of an earlier anti-arbitration injunction suit and the findings therein bind the petitioner by issue estoppel.

The Supreme Court dismissed the petition, holding that (i) Benin is the juridical seat under the BSA; (ii) the BSA is the “mother agreement” and remains unaffected by the Sales Contracts and HSSAs; (iii) Part I of the 1996 Act and Section 11 are inapplicable to a foreign-seated arbitration; and (iv) the petitioner is barred by issue estoppel from re-litigating issues already decided by the Delhi High Court in an anti-arbitration injunction suit. The Court also rejected reliance on the group of companies doctrine on the facts of the case.

2. Summary of the Judgment

The Supreme Court’s key holdings may be summarised as follows:

Nature of arbitration and exclusion of Part I: The dispute between Balaji Steel Trade (Indian entity) and Fludor Benin S.A. (Benin entity) under the BSA constitutes an “international commercial arbitration” under Section 2(1)(f) of the 1996 Act. Since the arbitration is expressly to “take place in Benin”, and the Addendum provides that the BSA is governed by the laws of Benin, the seat is Benin and the curial law is Benin law. By virtue of Section 2(2) and the BALCO line of cases, Part I of the 1996 Act does not apply and Section 11 jurisdiction is ousted.
BSA as “mother agreement”; no novation by later contracts: The BSA and its Addendum are the principal or “mother” agreements defining the long-term relationship between the petitioner and respondent no. 1. The subsequent Sales Contracts (with respondent no. 2) and HSSAs (with respondent no. 3) are standalone, consignment-specific arrangements and do not incorporate, supersede, or novate the BSA or its arbitration clause. Section 62 of the Contract Act is not attracted.
Arbitration in Benin already concluded: Prior to, and during the pendency of, the Section 11 petition, respondent no. 1 had already invoked arbitration in Benin; the Benin Commercial Court had appointed a sole arbitrator; and a final award dated 21.05.2024 had been rendered. Launching a parallel Indian arbitration for the same dispute is impermissible and undermines the finality and territoriality of arbitral proceedings.
Effect of Delhi High Court’s decision & issue estoppel: The Delhi High Court, in an anti-arbitration injunction suit, had already:
- held that the BSA and Addendum are the operative contracts;
- affirmed Benin as the chosen place of arbitration and Benin law as governing/curial law; and
- held that the Sales Contracts and HSSAs are separate, standalone agreements.
These are findings of jurisdictional fact. The petitioner is therefore barred by issue estoppel from re-agitating the same issues in a Section 11 proceeding.
Rejection of group of companies doctrine in this context: The attempt to invoke the group of companies doctrine to bind respondents 2 and 3 (non-signatories to the BSA) and to create a composite India-seated arbitration was rejected. Mere common shareholding or group affiliation does not suffice in the absence of evidence of a common intent to be bound by the BSA arbitration clause.
Abuse of process; Section 11 petition dismissed: The Section 11(6) petition was held to be misconceived and barred in law and on account of estoppel. The Court declined to appoint any arbitrator and left parties to bear their own costs.

3. Analysis

3.1 Precedents Cited and Their Influence

(a) BALCO and the territoriality principle

The Court’s reasoning is anchored in the doctrine laid down in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc.¹¹ (“BALCO”), which established:

Part I of the 1996 Act applies only to arbitrations where the seat is in India (Section 2(2)).
For a foreign-seated arbitration, Indian courts:
- do not have supervisory jurisdiction, and
- cannot exercise powers such as appointment of arbitrators under Section 11.

The present judgment faithfully applies BALCO: once Benin is identified as the seat, the arbitral process is governed by Benin law and supervised by Benin courts. Thus, Section 11 jurisdiction is unavailable.

(b) PASL Wind Solutions: no Section 11 for foreign seats

In PASL Wind Solutions Pvt. Ltd. v. GE Power Conversion India Pvt. Ltd.¹⁴, the Supreme Court clarified that parties to an international commercial arbitration can select a foreign seat even if both parties are Indian, and that such arbitration will be governed by Part II of the 1996 Act. While PASL dealt mainly with the validity of a foreign seat between Indian parties and enforcement of foreign awards, it reiterates that:

foreign-seated arbitrations are governed only by Part II, not Part I; and
Indian courts have no power to appoint arbitrators for foreign-seated arbitrations.

The present decision uses this logic to emphasise that, irrespective of the nationality mix, a foreign seat (Benin) ousts Section 11 jurisdiction.

(c) BGS SGS SOMA JV and Mankastu: determining the seat

The Court relies on Bgs Sgs Soma Jv v. Nhpc Ltd.¹² and Mankastu Impex Pvt. Ltd. v. Airvisual Ltd.⁵ to interpret the BSA’s arbitration clause. In BGS SGS SOMA, it was held:

“Wherever there is an express designation of a ‘venue’, and no designation of any alternative place as the ‘seat’, combined with a supranational body of rules governing the arbitration, and no other significant contrary indicia, the inexorable conclusion is that the stated venue is actually the juridical seat…”

In Mankastu, the Court stressed that the intention of the parties, gathered from the agreement as a whole, determines whether a place is merely a venue or the juridical seat.

In the present case:

BSA Article 11: arbitration “will take place in Benin”; and
Addendum Article 5: BSA “shall be construed, governed and interpreted in accordance with the laws of Benin”.

These provisions together leave no doubt that Benin is the seat and Benin law is the governing/curial law. The petitioner’s attempt to treat “Benin” as a mere venue is rejected as inconsistent with these clear contractual indicators.

(d) Balasore Alloys: the “mother agreement” concept

The Court also relies on Balasore Alloys Ltd. v. Medima LLC⁸, where the Supreme Court considered a structure involving a principal agreement with a dispute resolution clause and subsequent agreements with different clauses. It held that the principal (“mother”) agreement’s arbitration clause prevails unless the parties clearly intend to substitute it.

In Balaji Steel Trade, this principle is central:

The BSA is declared the “mother agreement”, forming the backbone of the commercial relationship.
The Sales Contracts and HSSAs are merely ancillary, limited to specific consignments.
There is no express or implied novation of the BSA arbitration clause; hence it retains primacy.

(e) Cox & Kings: careful use of group of companies doctrine

In Cox & Kings Ltd. v. SAP India (P) Ltd.⁴, a Constitution Bench clarified and somewhat tightened the contours of the group of companies doctrine. It held that non-signatory group entities can be bound by an arbitration clause only where:

there is sufficient evidence of the common intention of all relevant parties to be bound;
the non-signatory participated in negotiation or performance such that it is effectively a party in substance; or
the conduct and surrounding circumstances show that the agreement was intended to bind the group, not merely the signatory.

The Court here quotes Cox & Kings (para 93) to emphasise that:

“the mere fact that the two companies have common shareholders or a common Board of Directors will not constitute a sufficient ground to conclude that they are a single economic entity…”

Thus, the Court finds that:

mere TGI Group shareholding links (100% in R1, 51% in R2, 99.73% in R3) are insufficient; and
no material suggests that R2 and R3 intended to be bound by BSA’s arbitration clause or vice versa.

(f) Hope Plantations and Anil v. Rajendra: issue estoppel

The Court invokes Hope Plantations Ltd. v. Taluk Land Board, Peermade¹⁵ to explain the doctrine of issue estoppel: once an issue of fact or law that is essential to a decision has been finally decided between parties, it cannot be re-litigated, even if the cause of action or the statutory provision invoked is different.

It then cites Anil v. Rajendra¹⁶, where refusal to refer parties to arbitration under Section 8 was held to create an estoppel against a later Section 11 application:

“once the judicial authority takes a decision not to refer the parties to arbitration, and the said decision having become final, thereafter Section 11(6) route… is not available to either party.”

Drawing on these authorities, the Court holds that the Delhi High Court’s findings in the anti-arbitration injunction suit – on what the operative contract is, what the seat is, and how the various arbitration clauses interrelate – are jurisdictional findings that now bind the parties. The petitioner cannot seek a different answer on the same issues via Section 11.

(g) Other authorities

The Court also references recent authorities to frame the Section 11 inquiry:

SBI GENERAL INSURANCE CO. LTD. v. KRISH SPINNING⁹ and Interplay between Arbitration Agreements under Arbitration and Conciliation Act, 1996 and Stamp Act, 1899, In Re¹⁰: these underscore the limited, threshold nature of the Section 11 scrutiny – confined to the existence and prima facie validity of an arbitration agreement.

In this case, however, the threshold inquiry itself fails because the relevant arbitration agreement for the dispute (BSA arbitration clause) leads to a foreign seat, taking the case outside Section 11.

3.2 Legal Reasoning: How the Court Reached Its Decision

(a) Step 1: Characterising the arbitration as “international commercial”

The Court first notes that respondent no. 1 is incorporated in Benin. Under Section 2(1)(f), this suffices to make the arbitration an “international commercial arbitration”. Once that characterisation is made, Section 2(2) becomes central:

“Part I shall apply where the place of arbitration is in India…”

If the place/seat is outside India, Part I (and with it, Section 11) is inapplicable. Thus, the identification of the seat is dispositive of the Court’s jurisdiction.

(b) Step 2: Determining the seat and governing law under the BSA

The Court then examines the BSA and the Addendum:

BSA Article 11: arbitration “will take place in Benin”.
Addendum Article 5: BSA “shall be construed, governed and interpreted in accordance with the laws of Benin.”

Reading these together, and applying Mankastu and BGS SGS SOMA, the Court finds:

Benin is the juridical seat of arbitration; and
Benin law is both the substantive governing law and the curial (procedural) law.

Thus, by the parties’ own deliberate choice, they have opted out of Part I of the 1996 Act and Indian supervisory jurisdiction.

(c) Step 3: Identifying the “mother agreement” and rejecting novation

Next, the Court separates the contractual matrix into:

Principal contracts: the BSA (2019) and its Addendum (2021) between petitioner and respondent no. 1.
Ancillary/implementing contracts:
- Sales Contracts between petitioner and respondent no. 2 (Dubai entity), with arbitration in India under the 1996 Act, and
- HSSAs between petitioner and respondent no. 3 (Indian entity), with arbitration clauses referring to the Indian Arbitration Act, 1940.

The Court finds that:

The BSA is the “mother agreement”, setting out:
- the long-term supply framework,
- pricing and obligations, and
- a self-contained dispute resolution clause for arbitration in Benin.
The Sales Contracts and HSSAs:
- are transaction-specific, covering discrete consignments;
- have different parties (petitioner with R2 and R3 respectively, not with R1);
- contain their own confined arbitration clauses, limited to disputes “arising out of or relating to this agreement”; and
- do not refer to or incorporate the BSA or purport to replace it.

Under Section 62 of the Contract Act, novation requires:

a clear agreement to substitute a new contract for the old one, or
to rescind or alter it.

The Court finds no such intention. The BSA continues to govern the overarching relationship, including aggregate supply obligations. Any shortfall or breach at that level is a BSA dispute, not a Sales Contract/HSSA dispute. Thus, the petitioner cannot rely on the India-seated arbitration clauses of the later contracts to override the foreign-seated arbitration clause of the BSA.

(d) Step 4: Effect of the Benin arbitration and the doctrine of kompetenz-kompetenz

The Court notes that:

Respondent no. 1 invoked arbitration in Benin under the BSA.
The Benin Commercial Court, under the Benin Arbitration Act (OHADA Uniform Act), appointed a sole arbitrator on 26.07.2023.
The arbitrator asserted jurisdiction (kompetenz-kompetenz) and rendered a final award on 21.05.2024.

Once the arbitral tribunal at the seat has exercised its jurisdiction and produced a final award:

the parties’ agreed arbitral process has already been exhausted for those disputes; and
starting a parallel arbitral process in India on the same subject-matter would contravene:
- the finality of arbitral awards, and
- the territoriality principle, under which supervisory control belongs to Benin courts alone.

The petitioner’s arguments about Benin not being a “reciprocating territory” under Section 44(b) (for New York Convention enforcement) do not affect this jurisdictional analysis under Section 11. Enforceability questions arise later, under Part II; they do not justify recreating the merits dispute via a fresh arbitration with a different seat.

(e) Step 5: Delhi High Court’s anti-arbitration injunction decision and issue estoppel

The Court then attaches significant weight to the Delhi High Court’s decision in CS (Comm) No. 544 of 2023 (anti-arbitration injunction suit), which:

rejected the petitioner’s plea to restrain the Benin arbitration;
allowed respondent no. 1’s application under Section 45; and
made detailed findings that:
- the BSA and Addendum are the central contracts between petitioner and respondent no. 1;
- the arbitration under Article 11 of the BSA and Article 5 of the Addendum is valid and binding;
- the Sales Contracts and HSSAs are separate and do not alter the BSA’s dispute resolution regime; and
- any disputes “rooted in the BSA and the Addendum” must be resolved via arbitration in Benin.

These findings are summarised in the High Court’s para 60 and quoted by the Supreme Court.

The Supreme Court classifies these as findings of jurisdictional facts, and applies the doctrine of issue estoppel (as clarified in Hope Plantations and Anil v. Rajendra): once issues such as “what is the operative arbitration agreement?” or “what is the seat?” have been decided between the same parties, those issues cannot be reopened in another proceeding merely because the statutory provision invoked (Section 45 vs. Section 11) is different.

(f) Step 6: Rejection of the group of companies argument

Lastly, the Court addresses the submission that all respondents belong to the TGI Group, and that there was a composite transaction justifying a single, composite arbitration in India.

Applying Cox & Kings, the Court holds:

Respondents 2 and 3 are not signatories to the BSA and its arbitration clause.
There is no evidence that they:
- participated in the negotiation of the BSA’s arbitration clause, or
- assumed obligations explicitly under the BSA in a manner suggesting an intent to be bound by its arbitration agreement.
Each of the Sales Contracts and HSSAs has its own, confined arbitration clause, limited to disputes under that specific agreement.

Therefore, the group of companies doctrine cannot be invoked to:

bind R2 and R3 to the BSA arbitration clause; or
supersede the express choice of Benin as the seat under the BSA.

(g) Step 7: Synthesis and dismissal

Putting all these strands together, the Court concludes that:

The relevant arbitration agreement for the dispute is that in the BSA, with seat in Benin and Benin law.
As a consequence:
- Part I of the 1996 Act, including Section 11, does not apply.
- Indian courts are jurisdictionally incompetent to appoint an arbitrator for this dispute.
The completed Benin arbitration and the Delhi High Court decision further foreclose any attempt to re-open the matter through a Section 11 petition.

Accordingly, the petition is dismissed, with each party bearing its own costs.

3.3 Impact on Future Cases and the Law of Arbitration

(a) Reinforcing the primacy of the chosen seat

This decision strongly reinforces the core principle of territoriality: once parties have chosen a foreign seat and foreign curial law for their disputes, Indian courts cannot exercise Section 11 powers, even if:

some later ancillary contracts provide for Indian-seated arbitration, or
enforcement of the foreign award in India may be procedurally complex (e.g., non-reciprocating territory).

International contracting parties should expect that a clearly articulated foreign seat will be respected, even when later arrangements with other group entities adopt different arbitral seats for other, narrower disputes.

(b) Clear hierarchy between “mother” and ancillary contracts

The judgment significantly shapes how multi-tier contractual structures will be approached:

Where a long-term framework or “mother agreement” exists with a particular arbitration clause and seat, and
subsequent consignment-based or implementing contracts have different arbitration clauses,

courts will look closely at:

whether there was clear novation or substitution of the mother agreement’s dispute resolution clause; and
whether each arbitration clause is confined to a distinct contractual sphere.

Absent clear novation, disputes rooted in the mother agreement will be referred to arbitration in the seat specified in that agreement, irrespective of later contracts with different arbitration clauses.

(c) Limiting forum shopping through issue estoppel

The application of issue estoppel between the anti-arbitration injunction suit (Section 45 context) and the Section 11 petition sends a clear message:

Parties cannot repeatedly ask different courts or different benches to re-answer the same foundational questions (seat of arbitration, operative arbitration clause, novation, etc.) under different procedural labels.
Once a court of competent jurisdiction has decided these jurisdictional facts, and the decision has attained finality, litigants must accept it and cannot reframe the same grievance as a different kind of arbitration application.

This significantly curbs forum shopping and repetitive litigation in arbitration matters.

(d) Narrowing the practical scope of the group of companies doctrine

Although the group of companies doctrine survives after Cox & Kings, this decision illustrates that:

it will be applied only where there is robust evidence of common intention to arbitrate across group entities;
mere common ownership, management, or intra-group assignments is insufficient; and
courts are reluctant to use the doctrine to defeat an express seat selection in a principal contract.

Corporate groups must accordingly structure their contracts carefully if they genuinely intend a single, composite arbitral forum for all entities and transactions.

(e) Drafting and risk management lessons

For contracting parties and transactional lawyers, the case offers several practical lessons:

Consistency of arbitration clauses: If the commercial intention is a single arbitration forum across a chain of contracts, ensure uniform seat, governing law, and consolidation language.
Express novation or hierarchy clauses: To alter the dispute resolution regime of an earlier agreement, state explicitly that the later contract supersedes or modifies the earlier arbitration clause.
Be conscious of enforcement implications: If the seat is a non-reciprocating territory for New York Convention purposes, parties must still respect that choice; concerns about enforcement cannot justify re-writing the arbitration agreement ex post.

4. Complex Concepts Simplified

4.1 “Seat” vs. “Venue” of Arbitration

Seat of arbitration:

is the legal home of the arbitration;
determines which country’s arbitration law governs the procedure (curial law); and
determines which country’s courts have supervisory jurisdiction (e.g., to set aside an award).

Venue:

is merely the physical location where hearings may be held;
does not by itself determine the governing procedural law or supervisory courts, unless context shows it was intended as the seat.

In this case, the wording “arbitration… will take place in Benin” read with Benin governing law led the Court to treat Benin as the seat, not just a venue.

4.2 Part I vs. Part II of the Arbitration and Conciliation Act, 1996

Part I (Sections 2–43) applies to India-seated arbitrations and contains:
- Section 9 (interim measures by court),
- Section 11 (appointment of arbitrators),
- Section 34 (setting aside an award), etc.
Part II (Sections 44–60) deals with enforcement of foreign awards under the New York and Geneva Conventions, and related matters.

If the seat is outside India, only Part II applies. Indian courts cannot use Part I powers (like Section 11) for such foreign-seated arbitrations.

4.3 International Commercial Arbitration

An arbitration is an “international commercial arbitration” under Section 2(1)(f) if:

the dispute is commercial in nature; and
at least one party is:
- a foreign national, or
- a foreign-incorporated body corporate, etc.

Here, respondent no. 1 is incorporated in Benin, so the arbitration qualifies as international commercial arbitration. This affects:

which part of the Act applies (Part I vs. Part II); and
which courts have jurisdiction for certain functions.

4.4 Issue Estoppel

Issue estoppel is a branch of the larger doctrine of res judicata. It means:

When a particular issue of fact or law necessary to a decision has been finally decided between parties,
the same parties cannot later contest that issue again in a different proceeding, even if the overall claim is based on a different cause of action or statute.

In Balaji Steel Trade, issue estoppel arises because:

The Delhi High Court, in the anti-arbitration suit, already decided that:
- the BSA and Addendum are the operative contracts;
- the seat is Benin; and
- the Sales Contracts and HSSAs are separate and do not supersede the BSA arbitration clause.
Those findings are binding in the later Section 11 proceeding between the same parties.

4.5 Group of Companies Doctrine

The group of companies doctrine is an exception to the rule that only signatories are bound by an arbitration agreement. Under this doctrine, a non-signatory group company may be bound where:

it played an active role in negotiating or performing the contract containing the arbitration clause;
the common intention of the parties was to bind not just the signatory, but the entire group; and
the facts show that the non-signatory is, in substance, a party to the transaction.

However:

mere common shareholding or
the fact that entities are part of the same corporate group

is not enough. In this case, the Court found no sufficient material to extend the BSA arbitration clause to respondents 2 and 3 or to treat all agreements as a single composite arbitration framework.

4.6 Novation under Section 62 of the Contract Act, 1872

Novation occurs when:

the parties agree to substitute a new contract for the old one, or
to rescind or alter the original contract in such a way that the original need not be performed.

To show novation, parties must demonstrate a clear and unequivocal intention to:

replace the earlier contract with a new one, including its dispute resolution clause; or
alter the earlier clause in a manner that is obviously inconsistent with the original arrangement.

Here, nothing in the Sales Contracts or HSSAs explicitly states that the arbitration clause in the BSA is replaced or superseded. They are treated as additional, consignment-specific arrangements, not as a new framework overriding the BSA.

5. Conclusion

The Supreme Court’s decision in Balaji Steel Trade v. Fludor Benin S.A. reaffirms and sharpens several important principles of Indian arbitration law:

The chosen seat of arbitration – here, Benin – is determinative of which country’s courts hold supervisory jurisdiction and whether Part I of the 1996 Act applies.
Where there is a clear “mother agreement” with a specific arbitration clause and seat, later ancillary contracts with different arbitration clauses will not, in the absence of explicit language, novate or override that regime.
Issue estoppel prevents parties from re-litigating fundamental jurisdictional issues (such as seat and operative arbitration agreement) after a competent court has already ruled on them, even if the subsequent application is framed under a different section of the 1996 Act.
The group of companies doctrine remains a narrow, fact-intensive exception that cannot be used simply to rope in group entities or to neutralise a clear contractual choice of a foreign seat.

In the broader legal context, the judgment strengthens party autonomy, contractual certainty, and the territorial structure of the 1996 Act. It warns against creative but unsustainable attempts to recharacterise foreign-seated arbitrations as India-seated by leaning on ancillary contracts or by relitigating issues already decided in earlier proceedings. For commercial actors and counsel, it underscores the necessity of coherent arbitral design across complex contract structures and of respecting the forum that parties chose at the outset.

Primacy of the Mother Agreement and Issue Estoppel in Foreign-Seated Arbitrations: Commentary on Balaji Steel Trade v. Fludor Benin S.A.