Supreme Court Explains Power of Courts to Appoint the Arbitrator
In an interesting Judgment pronounced in November 2025, Supreme Court has explained legal issues connected with Arbitration and Conciliation Act, 1996.
Restricted Role of Courts
It was held that Court at the stage under S.11(6) read with S.11 (12)(a) of Arbitration and Conciliation Act, 1996 does not engage in a roving enquiry into merits but confines itself to the existence and validity of an arbitration agreement.
Part I of A&C Act, 1996 shall apply only where the place of arbitration is in India, thereby mandating that Part I stands excluded where the parties have chosen a foreign seat.
Part I of the 1996 Act has no application to arbitrations seated outside India. The seat has a juridical significance in arbitration law: it determines the courts that exercise supervisory jurisdiction over the arbitral proceedings.
The seat of arbitration is to be ascertained from the intention of the parties as gathered from the agreement as a whole.
Novation and Effect : It is well settled that novation of a contract must be established by clear and unequivocal intention of the parties to substitute the earlier agreement with a new one. The absence of cross-references or language of substitution makes it impossible to infer novation under Section 62 of the Indian Contract Act, 1872.
Several Contracts : Where several contracts coexist, the arbitration clause of the mother agreement governs the dispute unless a later contract unequivocally replaces it.
Application of Part 1 : Section 2(2) makes the position explicit by providing that Part I applies only where the place of arbitration is in India; consequently, recourse to Section 11, located within Part I, is available solely in respect of India-seated arbitrations.
Nationality or Domicile & Its Effect : Indian Courts have no jurisdiction to appoint an arbitrator for a foreign-seated arbitration, irrespective of the nationality or domicile of the parties.
Challenge After Final Award : Once the tribunal has asserted and exercised its jurisdiction and delivered a final award, the petitioner cannot seek to initiate a parallel arbitral process in India in respect of the same subject matter. Allowing such an endeavor would be wholly antithetical to the principles of finality of arbitral proceedings, undermine the doctrine of kompetenz–kompetenz, and would defeat the territorial principle that the courts of the seat exercise supervisory jurisdiction over the arbitration.
Issue Estoppel : It is settled law that the principles of estoppel and res judicata are based on public policy and justice. Doctrine of res judicata is often treated as a branch of the law of estoppel though these two doctrines differ in some essential particulars. Rule of res judicata prevents the parties to a judicial determination from litigating the same question over again even though the determination may even be demonstratedly wrong. When the proceedings have attained finality, parties are bound by the judgment and are estopped from questioning it. They cannot litigate again on the same cause of action nor can they litigate any issue which was necessary for decision in the earlier litigation. These two aspects are “cause of action estoppel” and “issue estoppel”. These two terms are of common law origin.
Effect of S.8 as Issue Estoppel : Once there is refusal to refer to arbitration under Section 8 of the Act, 1996, parties thereafter cannot seek reference to arbitration under Section 11(6) as the earlier refusal under Section 8 amounts to issue estoppel.
"Group of Companies" Doctrine : The group of companies doctrine, as recognised in Indian law, is not an automatic talisman for impleading every corporate entity of a group into arbitral proceedings. Court in Cox & Kings was at pains to emphasise that the doctrine is applied sparingly and only where there is compelling evidence of mutual intention of all the parties concerned to bind a non-signatory to an arbitration agreement. Such intention may be inferred from direct participation in negotiation, performance of contract, or from the role played in the overall transaction. However, a mere overlap of shareholding, or the fact that entities belong to the same corporate family, is not by itself sufficient.
Case reference is Balaji Steel Trade v. Fludor Benin S.A. [2025] GCtR 1723 (SC).
Full text Copy of decision available free of cost at link given below : -
https://api.sci.gov.in/supremecourt/2023/34759/34759_2023_7_1501_66083_Judgement_21-Nov-2025.pdf
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