2021 (3) TMI 245 - SC - Indian Laws

Seeking appointment of a sole arbitrator - international commercial arbitration or not - Jurisdiction to appoint arbitrator - Section 11(6) of the Arbitration and Conciliation Act, 1996 - association or body of individuals under Section 2(1)(f)(iii) and not under Section 2(1)(f)(i) - whether the requirements of sub-clause (i) to Section 2(1)(f) have been met, in which case it is unnecessary to go to sub-clause (iii), as under Section 2(1)(f), at least one of the parties must fall under sub-clauses (i) to (iv) of Section 2(1)(f)? - HELD THAT - The respondents have themselves applied to become distributors of Amway products in India as a sole proprietorship concern under the relevant forms issued by the appellant, read with the Code of Ethics. In ASHOK TRANSPORT AGENCY VERSUS AWADHESH KUMAR AND ANOTHER 1998 (3) TMI 701 - SUPREME COURT , this Court has clearly held that a sole proprietary concern is equated with the proprietor of the business. The argument that there is no international flavour to the transaction between the parties has no legs to stand on. 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. This being the case, it is clear that the Delhi High Court had no jurisdiction to appoint an arbitrator in the facts of this case. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:

1. Jurisdiction of the Delhi High Court under Section 11(6) of the Arbitration and Conciliation Act, 1996.
2. Classification of the dispute as an international commercial arbitration under Section 2(1)(f) of the Arbitration Act.
3. Interpretation of the term "association or body of individuals" under Section 2(1)(f)(iii) of the Arbitration Act.
4. Applicability of judgments in similar cases.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Delhi High Court under Section 11(6) of the Arbitration and Conciliation Act, 1996:

The respondents filed a petition under Section 11(6) of the Arbitration Act in the Delhi High Court for the appointment of a sole arbitrator. The High Court appointed Justice Brijesh Sethi, a retired Judge of the Delhi High Court, as the sole arbitrator. The main plea by the appellant was that the High Court did not have jurisdiction as the dispute was an international commercial arbitration, which should be governed by Section 2(1)(f)(i) of the Arbitration Act. The High Court rejected this plea, stating that the central management and control of the association or body of individuals was exercised in India, making it a domestic arbitration.

2. Classification of the dispute as an international commercial arbitration under Section 2(1)(f) of the Arbitration Act:

The appellant argued that since the respondents were nationals of and habitually resident in the USA, the dispute should be classified as an international commercial arbitration under Section 2(1)(f)(i). The High Court, however, concluded that the association or body of individuals, being a sole proprietorship operated by a husband and wife, was managed and controlled in India, thus not falling under the category of international commercial arbitration.

3. Interpretation of the term "association or body of individuals" under Section 2(1)(f)(iii) of the Arbitration Act:

The High Court interpreted the term "association or body of individuals" to include the respondents' sole proprietorship, which was managed and controlled in India. The court relied on the Code of Ethics and Rules of Conduct issued by the respondent, which recognized a husband and wife operating their distributorship as a single entity. The High Court concluded that since the central management and control were in India, the arbitration was not international.

4. Applicability of judgments in similar cases:

The High Court relied on the judgment in Larsen & Toubro Ltd. – SCOMI Engineering Bhd v. MMRDA, where the Supreme Court held that the central management and control of a consortium being in India did not make it an international commercial arbitration. The appellant argued that this case was distinguishable and that the respondents' case should be governed by Section 2(1)(f)(i). The Supreme Court agreed with the appellant, stating that the respondents, being foreign nationals and habitually resident in the USA, made the arbitration international under Section 2(1)(f)(i).

Conclusion:

The Supreme Court held that the Delhi High Court had no jurisdiction to appoint an arbitrator as the dispute was indeed an international commercial arbitration. The appeal was allowed, and the judgment under appeal was set aside. The respondents were directed to follow the procedure under Section 11(6) read with Section 11(9) of the Arbitration Act for the appointment of an arbitrator.