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Sole proprietorship will fall under s.2(1)(f) if proprietor is a foreign resident: Supreme court

Indeed, 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 government of a foreign country referred to in Section 2(1)(f) carry on business in India through a business office in India. (Para 16)



AMWAY INDIA ENTERPRISES PVT. LTD v. RAVINDRANATH RAO SINDHIA & ANR

Civil Appeal No. 810 OF 2021 (ARISING OUT OF SLP(CIVIL) NO.15982 OF

Decided on March 4th, 2021

The present case was decided by a division bench of the Supreme Court consisting of Justice R.F. Nariman and Justice B.R. Gavai

The appeal was allowed, and the judgment under appeal was set aside by the Supreme Court and in the present case, the Appellant Amway India were appointed as Distributor for respondent for undertaking sale, distribution and marketing of its products in India and were registered as Amway Business Owner (ABO)/ Amway Direct Seller (ADS), in the name of thesole proprietorship ‘Sindhia Enterprises’ with ABO No. 141935. According to the petitioners, they have set up a vast Line of Sponsorship in the respondent Company, and nurtured and supported close to 1500 ADSs, who have now set up their own networks, and are in the category of Silver/ Gold/ Platinum/ Sapphire/ Emerald.

The respondent issued a Code of Ethics and Rules of Conduct in 2015 to govern the terms of the relationship between the respondent and the ADSs. However, in April, 2019, upon logging into the respondent’s website, the petitioners noted that they could not access their ABO account, or view their LoS. They could only access their account as a PC. The respondent’s Major Accounts Manager, who informed them that their account had been reclassified as a ‘PC’ account, since they have not complied with the criteria of are corded re-sale related purchase in the last 12 months.

According to the petitioner, this requirement was never communicated to the petitioners in the past, nor was any notice of termination issued by the respondent. This criterion is also in violation of the Direct Selling Guidelines dated September 09, 2016. The petitioners made repeated requests to restore their ABO account. The petitioners attempted to resolve the aforesaid disputes and differences amicably by mutual discussions with the representatives of the respondent from April till December, 2019. However, the respondent has failed to consider the petitioners’ request for restoration of their ADS account

The main plea taken by the learned counsel appearing on behalf of the appellant, Amway India Enterprises Pvt. Ltd., in the Delhi High Court was that a petition before the High Court is not maintainable as the dispute relates to an international commercial arbitration, being covered by Section 2(1)(f)(i) of the Arbitration Act inasmuch as the respondents are husband and wife who are both nationals of and habitually resident in the United States of America. (Para-3)

The contention of the learned counsel appearing on behalf of the respondents, has supported the judgment under appeal, and has referred to various documents which, according to her, make it clear that the respondents, husband and wife, would have to be pigeonholed under “association or body of individuals” under Section 2(1)(f)(iii) and not under Section 2(1)(f)(i).


The counsel for the respondents also strongly relied upon the judgment of this Court in Larsen & Toubro Ltd.–SCOMI Engineering Bhd v. MMRDA, (2019) 2 SCC 271. This Court was concerned with an agreement between the MMRDA, an Indian company, and a consortium of Larsen and Toubro, an Indian company together with Scomi Engineering Bhd, a Malaysian company. The argument that was pressed in the appeal before this Court was that since a Malaysian company was involved, it would be a body corporate which is incorporated in a country other than India, which would attract the provisions of Section 2(1)(f)(ii) of the Arbitration Act. (Para 13)


Indeed, 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 government of a foreign country referred to in Section 2(1)(f) carry on business in India through a business office in India. (Para 16)


The Counsel for the Respondents made an impassioned plea to this Court to use its power under Article 142 of the Constitution to straightaway appoint an arbitrator, now that the matter is before this Court. We are afraid we cannot countenance such a suggestion as the respondents would have to now follow the drill of Section 11(6) read with Section 11(9) of the Arbitration Act. (Para 17).


Further, the Court held that the Delhi High Court had no jurisdiction to appoint an arbitrator in the present case as per Section 2(1)(f) of the Arbitration and Conciliation Act because if at least one of the parties is a foreign national or habitually resides abroad, arbitrators cannot be appointed.



Keerthana R

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