Case Title: Amway India v. Ravindranath Rao and another
Although the proprietor is conducting business in India, the Supreme Court has ruled that a sole proprietorship will be subject to international commercial arbitration if the proprietor is a habitual resident of a foreign nation.
In light of this, a court panel made up of Justices RF Nariman and BR Gavai overturned a Delhi High Court order appointing an arbitrator in the case Amway India v. Ravindranath Rao and others.
As per Section 2(1)(f) of the Arbitration and Conciliation Act, the dispute was an international commercial arbitration, so the top court ruled that the Delhi High Court lacked jurisdiction.
A distributorship agreement between Amway and the respondents, Ravindranath Rao Scindia and Indumati Scindia, gave rise to the issue. The respondents had submitted one application under the name "Scindia Enterprises" to become an Amway distributor.
The respondents requested arbitration to resolve some disagreements that resulted from the agreement, and they petitioned the Delhi High Court to appoint an arbitrator under Section 11(6) of the Arbitration Act. Amway argued against the petition's maintainability by arguing that since the respondents were U.S. citizens who had lived there for a significant amount of time, the case should be decided by international commercial arbitration.
According to Section 2(1)(f)(iii), the High Court determined that the dispute is not subject to international commercial arbitration because the central management and control of this association or group of people are only exercised in India.
The Supreme Court ruled that it was not necessary to refer the matter to Section 2(1)(f)(i) if it was addressed by Section 2(1)(f)(i) of the Act (iii). In other words, regardless of whether Section 2(1)(f)(iii) applies, it will be an international commercial arbitration if "at least one of the parties" was a habitual resident of a foreign country. The court noted,
"…an analysis of Section 2(1)(f) would show that whatever be the transaction between the parties, if it happens to be entered into between persons, at least one of whom is either a foreign national, or habitually resident in, any country other than India; or by a body corporate which is incorporated in any country other than India; or by the Government of a foreign country, the arbitration becomes an international commercial arbitration notwithstanding the fact that the individual, body corporate, or the government of a foreign country referred to in Section 2(1)(f) carry on business in India through a business office in India."
Given that this case involved an international commercial arbitration, the court determined that Delhi High Court lacked the authority to name an arbitrator.
The counsel for the respondents asked the court to name an arbitrator in the case by invoking special powers under Article 142 of the Constitution, but the court declined, stating that the "drill" under Section 11(6) read with 11(9) needs to be followed.