Amway India Enterprises Ltd. v. Ravindranath Rao Sindhia & Anr.
This appeal arises out of a petition filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 [“Arbitration Act”] by the respondents in the Delhi High Court for appointment of a sole arbitrator. As per section 2(1)(f)(i) of the Arbitration Act, a dispute would be an international commercial arbitration under the law in force in India where at least one of the parties is an individual who is a national off or habitually resident in any country other than India.
In Larsen and Toubro Limited- SCOMI Engineering Bhd v. MMRDA, (2019) 2 SCC 271, [“SCOMI”] the Hon’ble Supreme Court was concerned with a consortium consisting of an Indian company and a foreign company. While determining whether the dispute was an International Commercial Arbitration as defined under section 2(1)(f) of the Arbitration Act, the court took note of the fact that the office of the unincorporated entity being in Mumbai as one of the factors for arriving at the conclusion that the arbitration proceedings would not be an international commercial arbitration. Therefore, the Court held that this would not be an International Commercial Arbitration.
SCOMI was cited by the Hon’ble High Court of Delhi and they held that this would not be an International Commercial Arbitration and they appointed an Arbitrator. Aggrieved by this order, this was appealed before the Hon’ble Supreme Court. After considering the evidence put forth, the Court came to an understanding that a reading of the application form along with other documents would show that a distributor ship may be taken up in this case either in individual capacity of sole proprietorship concern, a partnership firm, or a company. In this case, the form that was filled in made it clear that the respondents applied to become a distributor as a sole proprietorship, it being made clear that the husband, Ravindranath Rao Sindhia, was the sole proprietor / “primary applicant.” This fact is the distinguishing factor and hence the decision of the Delhi High Court was overruled.
Another contention raised was that there was no international flavour to this transaction, however, the Court observed that there is no such requirement under section 2(1)(f).
The threshold of determining whether a dispute is an International Commercial Arbitration or not is limited to the definition provided under the Arbitration Act. Further, a sole proprietorship does not enjoy a separate legal entity, and hence the status of residence of the proprietor has a bearing on the status of the dispute. This must be borne in mind while entering into transactions.