Disortho v. Meril Life Sciences: Has the Supreme Court Muddled India's Law Governing Arbitration Agreements?

-Aditya Pandey^[1]

Introduction

For a decade Indian courts borrowed English conflicts methodology to answer a question the Arbitration and Conciliation Act, 1996 never addresses: which law governs the arbitration agreement when the contract is silent. Disortho SAS v Meril Life Sciences Pvt Ltd was billed as the moment the Supreme Court settled that question by applying the Sulamérica three stage test and Enka as correctly stating the governing principle, subject to the areas where Indian law has since diverged. The reality is less tidy. The Court blurred distinctions between the law of the arbitration agreement and the law of the seat, between governing-law reasoning and seat-finding that the English authorities it relied upon work hard to preserve, and did so without confronting an inconvenient sequel: weeks later, England replaced the very framework it had imported with a statutory default rule pointing the opposite way.

This article argues Disortho is a partial clarification bought at the price of new ambiguity. It correctly entrenches lex contractus as the default governing law of a silent arbitration agreement, displacing the looser reasoning of Mankastu, but collapses seat-finding into governing-law reasoning, extends Arif Azim v Micromax's dual gateway to Part I without explaining the hierarchy between the gateways, and treats Enka as though it remains current English law.

Background of the Dispute

Disortho SAS, a Colombian distributor, and Meril Life Sciences, a Gujarat manufacturer, signed an International Exclusive Distributor Agreement in 2016. Clause 16.5 stated the agreement “shall be governed by and construed in accordance with the laws of India,” with disputes “subject to the jurisdiction of courts in Gujarat.” Clause 18 referred disputes to arbitration under the Bogotá Chamber of Commerce's Arbitration and Conciliation Centre, proceedings to take place in Bogotá and the award governed by Colombian law.

Disortho invoked clause 18 and, facing non-cooperation, filed a Section 11(6) petition for appointment of an arbitrator; Meril resisted, arguing clause 18 committed the parties to a Colombian-seated arbitration outside the 1996 Act's reach. The petition came before a three-judge bench of the supreme court, sitting at the intersection of the seat-venue jurisprudence and the territorial limits on Indian jurisdiction under Section 2 (2).  The three-judge bench, namely Khanna CJI, Sanjay Kumar and Viswanathan JJ, held that Indian law governed the arbitration agreement, that this grounded Section 11 jurisdiction, and that Bogotá was venue, not seat. The parties then consented to conducting the arbitration in India, resolving the dispute but leaving the reasoning, not the result, for future litigants.

Existing Indian Jurisprudence before Disortho

Section 20 of the 1996 Act, which substantially reflects Article 20 of the UNCITRAL Model Law, does not use the term “seat” but only the word “place.” At first instance, in Bhatia International, the applicability of Part I was understood as extending to foreign-seated arbitration save in exclusionary cases; but BALCO v Kaiser Aluminium rectified this, with a five-judge bench ruling that Section 2(2) follows the territoriality principle that Part I is only applicable when the seat is located in India, and that “place” means seat once determined.

Enercon v Enercon GmbH made matters more complicated. London was designated as “venue”, but the relevant contract law, the arbitration agreement law, and the rules of arbitration all indicated India. The Court treated contract law, arbitration-agreement law, and institutional rules as cumulative indicators of the seat itself, rather than as discrete inquiry into the law governing the arbitration agreement separate from seat-determination.

Mankastu Impex v Airvisual unsettled this. Despite Indian governing law and New Delhi jurisdiction in the MoU, the Court held Hong Kong the place where arbitration was “administered” was the seat, reasoning that mere “place of arbitration” language requires something more before yielding to governing-law indicia. The Court examined the arbitration clause as a whole, including the reference to disputes being “administered” in Hong Kong against the broader contractual structure, rather than treating the administration language alone as decisive. This reached the opposite outcome from Enercon on materially similar facts without distinguishing it, a tension commentators have rightly flagged.

Arif Azim Co Ltd v Micromax Informatics FZE distinct from the same-named limitation decision against Aptech Ltd decided weeks earlier addressed a UAE-seated clause referencing UAE law and rules, holding Part I applies only where (a) the seat is in India, or (b) Indian law governs the arbitration agreement. This framed seat and governing law as alternative gateways to Part I, not inputs into one seat-finding exercise as in Enercon, a shift Disortho inherits. By March 2025, then, Indian law held three partly reconcilable strands i.e., BALCO's territorial strand, Enercon's closest-connection strand, and Arif Azim v Micromax's dual-gateway strand. Disortho arrived asking how Sulamérica/Enka maps onto that structure.

The Supreme Court’s Reasoning

The Court applied the three-stage Sulamérica test: express choice, implied choice, closest connection. Finding no express choice for the arbitration agreement, it moved to implied choice, holding, following Enka, that where the arbitration agreement is part of the main contract, “the lex contractus is a strong indicator of the law governing the arbitration agreement unless there are indications to the contrary,” and that “the choice of a seat different from the lex contractus is not, by itself, enough to displace this presumption.” Sulamérica's exceptions invalidity under the contract law, or a neutral seat unconnected to either party were inapplicable: Indian law would not invalidate the clause, and Bogotá was not neutral, since Disortho was incorporated there.

The Court then reasoned that the same Indian-law finding grounded supervisory jurisdiction, citing Melford Capital Partners v Digby for the proposition that law governing the arbitration agreement governs the arbitration's “associated processes,” and that vacancy-filling or removal “should normally be governed by the law applicable to the arbitration agreement itself, rather than... the procedural rules.” Yet Melford Capital itself decided only which national court had jurisdiction to hear a removal application where the arbitration clause was silent on the point, a question of curial jurisdiction, not a general rule equating the law of the arbitration agreement with the aw governing the arbitral process. Invoking the Shashoua principle that mere place of performance does not become the seat, it held Bogotá was venue only, and treated Arif Azim v Micromax's dual-gateway proposition as sufficient without an independent finding on the seat.

The Comparative International Position

Sulamérica established the three-stage test, but its holding actually rebutted the lex contractus presumption: Brazilian law would have rendered part of the arbitration agreement ineffective, and London, the seat, had no other connection to either party, so seat law governed instead. Sulamérica is a case about when the presumption breaks down, not a case for the presumption, a nuance Disortho invokes selectively.

Enka reformulated rather than displaced Sulamérica: an express choice of law for the main contract generally extends by implication to the arbitration agreement unless the seat or other factors indicate otherwise; absent any choice for the main contract, the law of the seat governs as the closest connection. That methodology no longer represents English law. Section 6A of the Arbitration Act 2025, in force from 1 August 2025, provides that absent an express choice of law for the arbitration agreement itself, the governing law is the law of the seat, an express choice for the main contract no longer carries over by implication. The Law Commission's stated reason was that Enka's implied-choice doctrine generated costly satellite litigation and let foreign law govern London-seated arbitration agreements against the seat's own institutional interest in predictability. Royal Assent came on 24 February 2025, weeks before Disortho was decided on 18 March 2025, without reference to the impending change not a fault in the Court, but a fact diminishing Enka's force as “the” comparative position, since the critique behind its reversal applies equally to the position Disortho now entrenches in India. Singapore’s courts likewise treat the law of the seat as the governing law of the arbitration agreement absent an express choice, applying a closest connection analysis that in practice defaults to the seat. France reaches a similar practical result by a different route: French courts do not apply a conflict of laws choice at all, instead recognising the arbitration agreement’s substantive validity directly under a transnational or “anational” rule independent of any national law, seat included. The two are are not the same mechanism, Singapore’s is a genuine seat law default within a choice of law framework, while France’s dispenses with choice of law reasoning altogether but both reject Enka ‘implied choice from the main contract approach. Enka. Even pre-reversal, was accordingly an outlier rather than part of a converging consensus.

Critical Evaluation

Conflation of categories:

This article uses “law governing the arbitration agreement” for question of the agreement’s validity, scope and interpretation, and “curial law” for the law governing the arbitral process and supervisory jurisdiction; the two are kept distinct throughout. Disortho uses “lex arbitri” to mean both the law governing the arbitration agreement's validity and the law governing supervisory jurisdiction over the arbitral process not synonyms even under Enka. Melford Capital, cited for collapsing arbitrator-removal questions into the law of the arbitration agreement, actually concerns which court has jurisdiction where the contractual mechanism is silent, not a general equivalence between the two laws. Holding that supervisory functions should “normally” follow the law of the arbitration agreement rather than seat-procedural rules converts a seat-governed question into a lex-contractus-governed one. The same slippage drives the seat-finding itself: having fixed Indian law as governing the arbitration agreement, the Court pre-empted the seat inquiry by making jurisdiction follow that finding, inverting BALCO's territoriality principle, under which Section 2(2) yields only to an affirmative seat-finding. Enercon avoided this by treating governing-law indicators as evidence for a seat-finding; Disortho instead follows Arif Azim v Micromax's alternative-gateway framing without addressing the conflict between gateways, resolving it with governing-law reasoning rather than the seat/venue indicia BGS SGS Soma identifies, a case whose holding concerned distinguishing "venue" from "seat" and applying the Shashoua presumption, not a general rule that seat-specific inquiry must precede every governing-law analysis. Treating that priority as settled, rather than arguing for it, is itself part of the conflation this article criticises.

Consistency with Mankastu and Arif Azim, and fidelity to Sulamérica/Enka:

Mankastu holds that mere "place of arbitration" or "administered in" language is weak evidence of seat, requiring something more before it yields to governing-law indicia. Disortho holds the opposite on the evidentiary question that actually matters here: the governing-law clause operates as a presumption strong enough to displace venue language absent contrary evidence. The two cases therefore conflict specifically on how much evidentiary weight venue/administration language carries against a governing-law clause and not on the seat/venue distinction as such and it is that narrower conflict, not a general inconsistency, that cannot be reconciled. One cannot be certain if named institutional seat rules (BGS SGS Soma) or the governing law clause (Disortho) would determine the seat if there is a conflict between the two. The case is similar to the decision made in Arif Azim v Micromax although it goes beyond it: lex contractus is used as the default rule rather than an option for gateways whose selection coincides with the chosen governing law of the contract. The court follows the formality of Sulamérica, but not its essence.

Uncertainty created:

Parties who choose to have a foreign institutional seat but include an Indian governing law clause for their contract, often found in distribution contracts, cannot take it for granted that their choice of a foreign seat will be honored. This is because the issue concerning the precedence of lex contractus presumption over the BGS SGS Soma'spresumption of the seat continues to remain unanswered, because the facts in Disortho presented this exact case scenario without providing any solution to it; and the boundary between the law governing the arbitration agreement and the curial law is fluid enough for lower courts to extend Disortho’s reasoning into areas properly governed by the seat. This is compounded by Arif Azim's own statement that the closest-connection test is no longer a viable criterion for seat determination once the Shashoua presumption applies, a proposition Disortho does not engage with, and one that sits uneasily with treating Enercon, Arif Azim, and Disortho as points on a single doctrinal trajectory.

Proposed Doctrinal Framework:

There are three ways that the presumption of Disortho can be refined in order to avoid these conflations. First, courts should apply seat-specific criteria under BGS SGS Soma/Shashoua before turning to Sulamérica/Enka-style governing-law analysis not because BGS SGS Soma itself compels this sequence, but because seat determination is logically prior: Section 2(2) jurisdiction turns on the seat, and governing-law indicators should inform that finding rather than substitute for it, as Enercon correctly treated them. Second, the notion of “lex arbitri” needs to be clarified, meaning procedural law of the seat in distinction from the law of the formation and validity of the arbitration agreement even in case of their coincidence; supervisory powers are expected to follow the curial law of the seat unless there is clear contrary agreement. Third, one should discuss explicitly the new Arbitration Act 2025's rejection of Enka and not implicitly rely on the pre-reform position since BALCO's territoriality approach is closer to English law after 2025.

Conclusion:

Disortho provides a solution to the question it posed about whether lex contractus presumptively applies to a silent arbitration agreement, which is helpful because it provides a rule that India was lacking before. The cost of this is that Disortho makes a series of unwarranted conflations between the law of the arbitration agreement and the curial law of the seat, between governing law analysis and seat analysis, and between Enka as decided in 2020 and current English law. This decision is not a doctrinal catastrophe as some commentators believe, but rather it is not even a straightforward transplant as its conclusion would indicate. Instead, Disortho clears up one question while creating three more for future courts to answer.

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^[1] Aditya Pandey, Fifth year Law student at NLUO.