Amway India Enterprises Pvt. Ltd. v. Ravindranath Rao Sindhia & Anr.

Civil Appeal · 2021 INSC 152Decided 4 Mar 2021
Civil Appeal No. 810 of 2021
Justice Rohinton Fali Nariman · Justice B.R. Gavai

Background

The respondents, a husband and wife who were Amway distributors ("Amway Business Owners") and both US nationals habitually resident in the USA, had a dispute with Amway India after their distributor account was reclassified, cutting off their commission income. When settlement talks with Amway failed, they invoked the arbitration clause in their distributorship agreement and, when Amway did not nominate an arbitrator, approached the Delhi High Court under Section 11(6) of the Arbitration and Conciliation Act, 1996 to have an arbitrator appointed. Amway argued the Delhi High Court had no jurisdiction because, since the respondents were foreign nationals resident abroad, this was an "international commercial arbitration" under Section 2(1)(f) of the Act, which only the Supreme Court (not a High Court) can handle; the High Court rejected this argument and appointed an arbitrator itself.

Decision Breakdown

The Supreme Court held that the definition of "international commercial arbitration" under Section 2(1)(f) turns on the nationality/residence of the parties to the dispute, not on whether the dispute itself has any other "international flavour" or on where the foreign party's business is conducted. Since the respondents were US nationals habitually resident in the USA, the arbitration qualified as an international commercial arbitration regardless of the fact that their distributorship business was carried on in India, meaning only the Supreme Court, not the Delhi High Court, had jurisdiction under Section 11 to appoint the arbitrator. The Court therefore allowed the appeal and set aside the High Court's order, declining the respondents' request to use Article 142 to appoint an arbitrator directly and instead leaving them to approach the Supreme Court afresh under the correct provision.

Lesson Learnt

Whether a High Court or the Supreme Court has the power to appoint an arbitrator depends strictly on the nationality and habitual residence of the parties involved in the dispute: if even one party is a foreign national or non-resident, the matter becomes an "international commercial arbitration" that only the Supreme Court can handle, no matter where the underlying business activity actually takes place.

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