The BALCO-Shashoua test that doomed Micromax's Afghan partner.

When a Kabul Deal Meets Dubai Law: The Afghan Distributor Who Asked India’s Top Court to Step In

M/s Arif Azim Co. Ltd., a company based in Afghanistan, had a problem. It had distributed mobile handsets for M/s Micromax Informatics FZE, a UAE subsidiary of the Indian parent Micromax, across Afghanistan for years. By 2022, it claimed a credit balance of roughly $88,425 was stuck. The distribution agreement, signed in Kabul in 2010, said disputes would be resolved by arbitration in Dubai under UAE rules. But when Arif Azim tried to invoke that clause, the other side didn’t respond. So it did something unusual: it filed a petition before the Supreme Court of India under Section 11 of the Arbitration and Conciliation Act, 1996, asking the Court to appoint an arbitrator.

The stakes were simple but sharp. If the Supreme Court said it had no jurisdiction, Arif Azim would have to start from scratch in Dubai—if it could even get there. If the Court said it did, Indian courts would supervise an arbitration between two foreign companies over a contract governed by UAE law. Justice J.B. Pardiwala, sitting as a single judge, had to decide whether India’s arbitration law could reach that far.

The Agreement That Said Dubai—But Not Quite

The story begins with a distribution agreement dated 1 April 2010. Clause 26 of that agreement contained the arbitration clause. It specified that any dispute would be settled by arbitration in Dubai, conducted under the Rules of the Dubai International Arbitration Centre (DIAC). The governing law was UAE law. And the clause added that the courts of Dubai would have “non-exclusive jurisdiction” over the matter.

That last phrase—non-exclusive jurisdiction—became the battlefield. Arif Azim argued that because the jurisdiction was non-exclusive, Indian courts were not ousted. The company pointed to a series of emails and conduct during the business relationship. It said that the Indian parent company, Micromax India, had directly supplied handsets and demanded separate payment, even though the credit balance was with the UAE subsidiary. This, it argued, created a “closest connection” to India.

Micromax FZE, the respondent, did not appear. The Court noted that notices were sent, but no one showed up to argue. That silence, however, did not make the jurisdictional question go away. The Court had to examine the issue on its own merits.

The Doctrine That Changed Everything: BALCO and the Seat Revolution

To understand why this case matters, you have to go back to 2012. That was the year a five-judge bench of the Supreme Court decided Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., commonly called BALCO. Before BALCO, Indian courts routinely exercised supervisory jurisdiction over foreign-seated arbitrations. After BALCO, the law changed: Part I of the Arbitration Act, 1996—which includes Section 11—applies only to arbitrations seated in India. The seat of arbitration determines which country’s courts have exclusive supervisory jurisdiction.

Justice Pardiwala traced this entire shift. He noted that the pre-BALCO regime had a doctrine of “concurrent jurisdiction,” where Indian courts could intervene even if the arbitration was abroad. Post-BALCO, that doctrine was dead. The seat is king.

But what happens when the agreement doesn’t explicitly say “seat”? It says “venue.” It says “place of arbitration.” It says “non-exclusive jurisdiction.” That is where the Shashoua principle comes in—a principle derived from English law and adopted by Indian courts. The principle says: if the parties designate a venue and there are no other significant contrary indicia, that venue should be treated as the seat.

The respondent would have relied on this. But Arif Azim argued that there were contrary indicia—the non-exclusive jurisdiction clause, the fact that the Indian parent was directly involved, the closest connection to India.

The Closest Connection Test: What Enercon and Indus Mobile Teach

The petitioner cited Enercon (India) Ltd. v. Enercon GMBH (2014) 5 SCC 1, where the Supreme Court held that various connecting factors—place of performance, location of assets, nationality of parties—can help determine the seat. In that case, even though the agreement specified a foreign venue, the Court found that the closest connection was to India and appointed an arbitrator under Section 11.

Arif Azim also relied on Indus Mobile Distribution Pvt. Ltd. v. Datawind Innovations Pvt. Ltd. (2017) 7 SCC 678, which held that the seat in arbitration is akin to an exclusive jurisdiction clause. But the petitioner twisted that logic: if the seat is like an exclusive jurisdiction clause, and the agreement here gave only non-exclusive jurisdiction to Dubai courts, then the seat was not Dubai. The parties had not surrendered their right to approach other courts.

The respondent, had it appeared, would have cited Mankatsu Impex Pvt. Ltd. v. Airvisual Ltd. (2020) 5 SCC 399, where the Supreme Court held that “seat” and “venue” cannot be used interchangeably. But Justice Pardiwala distinguished that case. In Mankatsu Impex, the clause gave exclusive jurisdiction to Hong Kong courts. Here, the clause was non-exclusive. That made all the difference.

The Venue-Seat Distinction: What BGS SGS Soma JV Says

The Court also examined BGS SGS Soma JV v. NHPC Ltd. (2020) 4 SCC 234, which held that if the agreement designates a venue and there are no contrary indicia, the venue should be treated as the seat. But the key phrase is “no contrary indicia.” The non-exclusive jurisdiction clause, the Court noted, was a significant contrary indicium. It meant the parties had not agreed to submit exclusively to Dubai’s supervisory jurisdiction.

Justice Pardiwala also referred to PASL Wind Solutions Pvt. Ltd. v. GE Power Conversion India Pvt. Ltd. (2021 SCC Online SC 226), which reaffirmed that party autonomy is central to seat determination. Two Indian parties can choose a foreign seat. But here, the parties were not both Indian. One was Afghan, one was UAE-based. The question was whether they had, by their agreement, chosen Dubai as the seat or merely as a venue.

The Syllogism: How the Court Reached Its Decision

The Court’s reasoning can be broken into three logical steps:

First, the agreement specified Dubai as the venue, UAE law as the governing law, and non-exclusive jurisdiction of Dubai courts. These three factors together pointed to Dubai as the seat. The non-exclusive jurisdiction clause did not negate the seat; it merely preserved the possibility of other courts having concurrent jurisdiction, but that did not change the seat.

Second, because the seat was Dubai, Part I of the Arbitration Act, 1996—including Section 11—did not apply. The Supreme Court of India could not appoint an arbitrator for an arbitration seated outside India.

Third, the closest connection test did not override the parties’ express choice. The emails and conduct cited by the petitioner did not amount to a supplementary agreement altering the seat. The Court found that the parties had, by their contract, chosen Dubai as the seat, and that choice was binding.

The petition was dismissed. The Supreme Court held it had no jurisdiction to appoint an arbitrator.

What This Means for Practitioners: The Play

THE PLAY: When drafting an arbitration clause for a cross-border contract, never rely on “non-exclusive jurisdiction” to preserve Indian court access if you also specify a foreign venue and foreign governing law. The combination of those three factors will almost certainly fix the seat abroad, and Indian courts will have no supervisory power under Section 11.

For advocates, this judgment is a masterclass in the venue-seat distinction. The key takeaway: if you want Indian courts to have jurisdiction, you must either (a) specify India as the seat, or (b) ensure the agreement contains no contrary indicia pointing to a foreign seat. A non-exclusive jurisdiction clause, standing alone, is not enough to overcome a clear designation of venue and governing law.

For CFOs and founders, the lesson is simpler. When you sign a distribution agreement with a foreign entity, the arbitration clause is not boilerplate. If it says “arbitration in Dubai under UAE law,” you are effectively choosing Dubai as the seat. That means if a dispute arises, you cannot run to Indian courts for help—even if your business has deep roots in India. The seat determines the supervisory court, and that court will apply its own procedural law.

The judgment also serves as a warning: silence from the other side does not mean you win. The Court examined the issue on its own, without the respondent’s arguments, and still found against the petitioner. That is because jurisdiction is a threshold question that the Court must decide regardless of whether the other party appears.

The Bottom Line

If your arbitration agreement says “venue: Dubai, governing law: UAE, jurisdiction: non-exclusive Dubai courts,” do not expect the Supreme Court of India to appoint your arbitrator—the seat is Dubai, and Indian courts have no role to play.