V. Kameswar Rao, J
1. This petition has been filed under Section 11(6) of the Arbitration & Conciliation Act, 1996 (‘Act of 1996’, for
short)for the appointment of a Sole Arbitrator.
2. The facts of the case, as noted from the petitionare, in the year 1998, the petitioners were appointed as Distributor for respondent for undertaking
sale, distribution andmarketing of its products in Indiaand were registeredas Amway Business Owner (ABO)/ Amway DirectSeller (ADS), in the
name of the sole proprietorship‘Sindhia Enterprises’with ABO No. 141935. According to the petitioners, they have set up a vastLine of
Sponsorship in the respondentCompany, and nurtured and supported close to 1500ADSs, who have now set up their own networks, andare in the
category of Silver/ Gold/ Platinum/ Sapphire/Emerald. From 2015, the renewal process for existing ADSs becameautomatic, each year, without
payment of any fee.The respondent issued a Code of Ethics and Rules ofConduct in 2015 togovern the terms of the relationship between the
respondent and the ADSs. The respondent also startedpromoting registration of Preferred Customers (PCs)directly through the respondent’s
website, as customers of the concerned ADS.
3. On the requirement of the respondent, necessary documents were executed by the petitioners including contract for distributorship, setting out the
terms andconditions of the distributorship, and to inter-aliaconfirmthe Code of Ethics and Rules of Conduct,Legal Entity Authorization Form (LEAF)
etc.Since then, the contract of the petitioners has beenrenewed from time to time.The petitioners recorded client volume/salesfromtheir ABO
account.The petitioners have also received income on thesalesgenerated by them for the months of January toMarch, 2019 by the
respondent.However,in April, 2019, upon logging into the respondent’s website, the petitioners noted that they could notaccess their ABO account,
or view their LoS. Theycould only access their account as a PC. Accordingly, between April, 2019 and December, 2019, the petitioners raised a query
with their MajorAccounts Manager, who informed them thattheir account had been re-classified as a ‘PC’ account, since they have not
complied with the criteria of arecorded re-sale related purchase in the last 12 months.The petitioners learnt that this was a criteria in the fresh set of
Terms and Conditions issued by the respondent in December, 2016, which was mandatorilyrequired to be accepted by all ADSs, by clicking on the
‘By clicking here you agree to abide by the new Terms & Conditions’ button,immediately uponloggingin on the respondent’s website, to
proceed further totheir account. According to the petitioner, this requirement was never communicated to the petitioners in the past, nor was any
notice oftermination issued by the respondent. This criterion is also in violation of the Direct Selling Guidelines dated September 09, 2016.
4. The petitioners made repeated requests to restore theirABO account. The petitioners attempted to resolve theaforesaid disputes and differences
amicably by mutualdiscussions with the representatives of the respondentfrom April till December, 2019. However, the respondent has failed to
consider the petitioners’request for restoration of their ADS account. On June 26, 2020, the petitioners referred the matter for redressal
andreview to Mr. Jon Sherk, Vice President and Deputy GeneralCounsel of Amway Global in January, 2020. The petitioners were communicated
about the rejection of theirrequest for restoration of their ADS account on June 26, 2020. According to the petitioners, the respondent has now, with
effect from July, 2020notified a new Code of Ethics & Rules of Conductwherein the respondent has now been given benefit of a 2year period for
establishing sales, in accordance withthe DSG, and carved a provision for restoration of theADS account. Accordingly, the petitioners caused issuance
of notice invoking arbitration dated July 28, 2020 to the respondent invoking the arbitration clause, Clause 12 of the Terms and Conditions enclosed
withthe Amway Direct Seller Application Form (Form-SA-88-ID), which is reproduced as under:
“12. Dispute Settlement. The parties shall endeavor tosettle any dispute or difference arising out of or inconnection with the Direct Seller
Contract through mutualdiscussions within 30 days of such dispute arising. TheDirect seller agrees that in the event it is not satisfied byany
decision of Amway, or in the event that any issueraised by the Direct seller has remained unresolved for aperiod of more than two months,
and / or during thesubsistence of thisagreement or upon or after itstermination, any issue or dispute that the Direct seller mayhave
regarding the interpretation or operation of theclauses of this arrangement or any issues arising therefrom shall be referred to Grievance
Redressal Committeeset up by the company. Any dispute, difference or claimremaining unresolved post reference to the GrievanceRedressal
committee discussions shall be submitted tobinding arbitration under the provisions of the IndianArbitration and Conciliation Act, 1996. The
venue of sucharbitration shall be at New Delhi and the award of theArbitrator shall be final and binding on all Parties. Subjectto the
above,courts at New Delhi shall alone havejurisdiction in relation to the Direct Seller Contract andmatters connected here to.â€
5. The respondent replied vide letter dated August 20, 2020 wherein the respondentcommunicated that the name of the Arbitrator asrecommended by
the petitioners was not acceptable byit and sought time to respond with the name of another Arbitrator. However, the respondent has till the filing of
the petition failed to issue any follow up reply further to its reply dated August 20, 2020 even after expiry of 30 days’ time.
6. No reply has been filed by the respondent.
7. Ms. Priya Kumar, learned counsel appearing for the respondent states that no reply is required to be filed and she will orally argue the matter. She
has taken an objection on the maintainability of the petition before this Court since the proposed arbitration proceedings would qualify asan
international commercial arbitration as defined under Section 2(1)(f) ofthe Act of 1996.As per her, the power to appoint anarbitrator in an international
commercial arbitration lies with the Supreme Court, more specifically in terms of Section 11(4)(b) of the Act of 1996. In support of her submission,
she has drawn my attention to Section 2(1)(f) of the Act of 1996, which defines international commercial arbitration.
8. It is her submission that the petitioners are individuals and they were appointed as Distributor in 1998. They were registered asan ABO in the name
of sole proprietorship ‘Sindhia Enterprises’ and are proprietors of an enterpriserun in the name and style of ‘Sindhia Enterprises’, which
does not have its own identity in law. The PAN number on the Distributor Application Form is that of petitioner No.1. According to her, even the
Legal Entity Authorisation Formclearly show that the sole proprietor and sole proprietorship are treated as one and it is the soleproprietor who is
responsible for compliances under the Amway Distributor Agreement.
9. In substance, it is her plea that the petitionersare individuals who are nationals of or at least habitual residentsof USA,i.e. a country other than India.
In this regard, she has drawn my attention to various documents. That apart, they are also holders of Overseas Citizen of India(‘OCI’, for
short) cardwhich has been tendered as an Identification Document. The OCI cards ofboththe petitioners state their nationality as USA. As per the
Bureau ofImmigration, Ministry of Home Affairs, Government of India, OCI Schemecovers inter-alia person, who is a citizen of another country but
was a citizenof India at the time of or any time after, the commencement of theConstitution. This further shows that the petitioners are now not
onlyhabitual residents of USA but are no longer Indian citizens. She also stated that the petitioner No.1 in a self-declaration form has declared his
residency status as ‘non-resident’. In an undated letter at page 66 of the document, the address of ‘Sindhia Enterprises’is stated to be in
the USA in addition to an address inBangalore. Therefore, the petitioners before this Court are covered by thedefinition of international commercial
arbitration as defined in Section2(1)(f)(i) being individuals who are nationals of or habitually resident in anycountry other than India.If an applicant
before a Court is habitually a resident outside India, which isestablished from pleadings, documents before the Court as also the addressin the petition,
such a case would constitute an international commercial arbitration and a petition under section 11(6) will not bemaintainable before this Court.To
buttress her submission, she has relied upon a Bombay High Court judgment in the case of Aslam Ismail Khan Deshmukh v. ASAP Fluids Pvt. Ltd.,
2019 SCC OnLine BOM 304.
10. Ms. Kumar, also states that the central management andcontrol is being exercised in a country other than India as the petitioners arein control and
management of ‘Sindhia Enterprises’ and both are residing inthe USA. Thus, even under Section 2(1)(f)(iii) of the Act, the proposedarbitration
would be an international commercial arbitration. In this regard, she has relied upon a Supreme Court judgment in the case of TDM Infrastructure
Pvt. Ltd. v. UE Development India Pvt. Ltd., 2008 14 SCC 271.
11. That apart, it is her submission that if the arbitration is an international commercial arbitration, the seat or governing law is of no relevance andonly
the nationality / residence of the parties is relevant. She stated the stand of the petitioner relating to the mailing address of the petitioners being in India
and communications having been addressed tosuch postal address, ‘Sindhia Enterprises’ maintaining an account inBangalore and primarily
operating in Bangalore are not relevant for thepurposes of determining whether the arbitration is an international commercial arbitration. Even
international commercial arbitrations can have a seat in India and can relateto business conducted in India. The reliance placed by the petitioner on the
Business Starter Guide to contend that it is permissible for a Distributorship to be taken up as a sole proprietorship concern by NRIs or OCI status
persons is also of noassistance to the petitioner. In fact, it establishes that the sole proprietorship, ‘Sindhia Enterprises’, has no independent
legalidentity in the eyes of law rather is only a vehicle of business for the petitioners whohave an OCI status. This is further established from the
covering letter of thedocument dated January 15, (Page 11 of the document) wherein the Identity cardsissued to the petitioners show the individuals,
i.e. petitioner No. 1 andpetitioner No. 2 as the Distributors.
12. She further states, the reference by the petitioner to Clause 3. 17 requiring husband and wife to hold a single Distributorship is also of norelevance
to the status of arbitration being an international commercial arbitration. On the contrary, she claims, the said clause lends support to her contention
that ‘Sindhia Enterprises’ is only a name and style of business andthe status of petitioner Nos. 1 and 2 is covered by Section 2(1)(f)(i) of theAct
of 1996. She also states that the contention of the petitioner that the business of the Distributor is in Indiaby relying on the Arbitration Clause, bank
accountmaintained at Bangalore and the mailing address at Bangalore is also of norelevance to the issue of international commercial arbitration, which
is to betested against the anvil of the specific definition in the Act of 1996. According to her,none of the factors relied uponby the petitioners would
bestow the jurisdiction to this Court or grant theright to the petitioner to maintain thispetition and as such seeks its dismissal.
13. On the other hand, Ms. Manmeet Arora,learned counsel for the petitioners would submit that the petitioners are proprietors of ‘Sindhia
Enterprises’, which was appointed in1998 as a Distributor for respondent for undertaking sale, distribution andmarketing of its products in the
territory of India. TheDistributorship was registered in the name of the concern ‘Sindhia Enterprises’for carrying on business in India as per the
own Code of Ethics & Rules ofConduct of the respondent. The solebusiness of the concern was the operation of Amway Distributorship and noother
business was permitted to be conducted by the petitioners. According to her, the respondent also recognizes the petitioners, both husband and wife, as
asingle Distributorship in the name of‘Sindhia Enterprises’, registered in India and having its place of business inBangalore, India. In fact, having
an office in India and an Indian rupeedenominatedbank account was the express condition of the respondent, as isevident from the documents. The
paymentof commission from the respondent to petitioners is to their HDFC bankaccount in Bangalore, which is clear from page 10, 57, 60-61, 65, 66,
67, 68 and 221 of the documents. She also heavily relied upon page 87 of the documents, which is a communication dated September 28, 2019 written
by the petitioner No.1 in the name of ‘Sindhia Enterprises’by way of meetings in India andsales made to customers in India has been explained.
14. According to her, the Act of 1996 does notdefine the term ‘domestic arbitration’, whereas the term ‘international commercial
arbitration’ is defined under Section 2(1)(f) of the Act of 1996. Byimplication, if the arbitration is not covered by the definition under Section 2(1)
(f), then it isautomatically a‘domestic arbitration’ wherein this Court would bethe jurisdictional forum for exercising powers under Section 11 of
the Act of 1996. In substance, it is her plea that the respondent in fact permits Proprietorshipwith Indian citizens, NRI/PIO/OCI to be appointed as
Distributor. The business, which forms the substratum of the contract is also situated and based in India.Therefore, the petitioners cannot be said to be
covered by either of the categoriesmentioned under Section 2(1)(f).
15. Ms. Arora states, moreover the definitionunder Section 2(1)(f) is a restrictive and limited definition and not aninclusionary definition. The said
provision is applicable only where there is aforeign element involved in the agreement. It is therefore submitted by her that thisCourt may interpret the
same in a strict fashion and provide definitemeaning to the phrases mentioned there under. It is submitted that further adecision as to whether a
particular entity/ person falls under categoriesmentioned under Section 2(1)(f), is to be decided on a totality of factors in theparticular facts and not just
the presence or absence of one of the indicators.
16. According to her, the judgment relied upon by Ms. Kumar in the case of Aslam Ismail Khan Deshmukh (supra) is distinguishable on facts,
inasmuch as in that case, oneparty to the agreement was an individual, who wascarrying out the services under the agreement in Dubai. Further, the
saidindividual received remuneration in USD in his bank account in Dubai.Therefore, there was a clear foreign element involved in the agreement in
thesaid case. Further, the respondent has failed to disclose that the said judgmenthas been impugned in a petition filed in the Supreme Court
whereinnotice has been issued and the matter is pending for hearing.
17. Even the judgment in the case of TDM Infrastructure Pvt. Ltd. (supra), relied upon by Ms. Kumar is concerned, the test adopted by the Court
washolistic in nature relying upon all the factors prevailing in the particularcontractual dispute so as to determine the nature of the arbitration. In
support of her submission, she has relied upon the following factors to contend that this petition is maintainable; (i) petitioners conduct the Amway
business via a concern registered in India with address in Bangalore; (ii) the scope of the agreement between the parties, for the distributorship,was in
respect of the territory of India; (iii) the entire factum of the dispute is entirely in India; (iv) the business dealings between the parties were in India (v)
the financial situs of the petitioner, i.e. the bank account through whichthe transactions of purchase, sale and commissions took place was in India.The
respondent being aware of the overwhelming domestic indicia in thepresent distributorship agreement designedly chose not to file a reply to thepresent
petition as the same would have evinced the obvious admissions on thepart of the respondent. Ms. Arora has relied upon the judgment of the Supreme
Court in the case of Larsen and Toubro Limited Scomi Engineering BHD v. MMRDA’, (2019) 2 SCC 27 1w,herein one of the parties was
aconsortium of an Indian company and a Malaysiancompany. TheCourt took note of the fact that the office of the unincorporated entity, i.e.
theconsortium was in Mumbai, as one of the factors for arriving at the conclusionthat there was no international commercial arbitration. In the end,
she states that the present dispute being not an international commercial arbitration but a domestic arbitration, the present petition is maintainable in
this Court.
18. Having heard the learned counsel for the parties, the issue which arises for consideration is whether the present petition is not maintainable before
this Court being an international commercial arbitration, as contended by the learned counsel for the respondent. Suffice would it be to state that
Section 2(1)(f) of the Act of 1996 defines international commercial arbitration. The relevant provision is reproduced as qunder: -
“2(1)(f) - International Commercial Arbitration means an arbitration relating to disputes arising out of legal relationships whether
contractual or not, considered as commercial under the law in force in India and where at least one of the parties is â€
i. an individual who is a national of, or habitually resident in, any country other than India; or
ii. a body corporate which is incorporated in any country otherthan India; or
iii. an association or a body of individuals whose central management and control is exercised in any country other thanIndia; or
iv. the Government of a foreign country.â€
19. Insofar as the facts are concerned, there is no dispute that the petitioners had applied by filling up the Distributor Application (at page 66 of the
document) giving the address details as that of Bangalore, in the name of ‘Sindhia Enterprises’. The details of the bank account are also of
HDFC bank situated in Bangalore. The PAN number has also been given of the first applicant. It may be pointed out here that under Code of Ethics
and Rules ofConduct issued by the respondent, Clause 3.1 stipulates that a Distributorship can be taken up in an individual capacity or as a sole
proprietorship concern and the applicant can be a Non-Resident Indian, Person of Indian origin or overseas citizen of India. Clause 3.17 also stipulates
that a husband and wife can operate distributorship as a single entity. It is an undisputed fact that the respondent had recognized ‘Sindhia
Enterprises’ as their Distributor, as is clear from the letter dated October 15, 1999 annexed at page 10 of the documents; naturally so, because the
Code of Ethics and Rules ofConduct, as noted above contemplates, a husband and wife together can operate a single Distributorship and a
proprietorship can also be a Distributor. It is also a conceded fact that all the remittance pursuant to the distributorship was being credited in the
HDFC account maintained in Bangalore.
20. The plea of Ms. Priya Kumar that the petition is not maintainable being an international commercial arbitrationis only on the basis of the fact that
(i) a proprietorship concern does not have a separate identity from its proprietor(s);(ii) the petitioners are individuals, currently residing in United States
of America, a country other than India and; (iii) the petitioners are stated to be having NRI/PIO/OCI as residency status, which gets them covered
under the definition of Section 2(1)(f)(i) being individuals who are nationals or habitually resident in any country other than India.
21. She has relied upon the judgment in the case ofÂA shok Transport Agency v. Awadhesh Kumar and Another, (1998) 5 SCC
567, in support of her plea that proprietorship does not have a separate legal identity distinct from the sole proprietor. There is no dispute on the said
proposition but the fact remains that their own Code of Ethics and Rules ofConduct clearly contemplate a husband and wife can hold one
Distributorship and even a sole proprietorship can also apply for the Distributorship. It is pursuant to the said stipulation that the petitioners have
applied for grant of Distributorship and in fact, the application was in the name of ‘Sindhia Enterprises’, which is admittedly registered with the
address in Bangalore, Karnataka. It is also a fact that the Distributorship is with regard to business to be operated in India, vide‘Sindhia
Enterprises’, whose principal office is situated in Bangalore, Karnataka.The bank account details are of HDFC situated in Bangalore, Karnataka
and the petitioners have conducted their business in the name of ‘Sindhia Enterprises’ in India and made customers in India as is clear from the
email dated September 28, 2019 of the petitioner No.1.
22. The reference made by Ms. Priya Kumar on the judgment of Aslam Ismail Khan Deshmukh (supra) is concerned, the same is clearly
distinguishable inasmuch as the party to the agreement was an individual, who was carrying services under the Agreement in Dubai. The individual
has received remuneration in US dollars in his bank account in Dubai and therefore, it was held by the Bombay High Court that there is a clear foreign
element involved in the agreement and hence, it was held to be an international commercial arbitration.
23. Even the judgment of the Supreme Court in the case of TDM Infrastructure Pvt. Ltd. (supra) is not applicable in the facts of this case,
which have been noted above. Rather, the learned counsel for the petitioners is justified in relying upon the judgment in the case of Larsen and Toubro
Limited Scomi Engineering BHD (supra),wherein the Supreme Court was concerned with a consortium consisting of an Indian company and a foreign
company and the Court took note of the fact that the office of an unincorporated entity, i.e. theconsortium,being in Mumbai, as one of the factors for
arriving at the conclusionthat the arbitration proceedings would not beinternational commercial arbitration.No doubt a sole proprietorship has no
separate legal identity butin the case in hand, two individuals, husband and wife,by joining together as a proprietorship have taken a single
Distributorship.The Code of Ethics and Rules ofConduct issued by the respondent under Clause 3.17.1 contemplates and recognizes that a husband
and wife shall operate their Distributorship as single entity. The proprietorship is an association or body of individuals with central management in
India.
24. The plea of Ms. Kumar that the petitioners being individuals and habitual residents of USA, the case shall be covered by Section 2 (1)(f)(i) of the
Act of 1996 is not appealing in view of my conclusion in the above paragraph.
25. The reliance placed by Ms. Kumar on the address given by the petitioners of USA would not mean that they are operating the proprietorship from
USA when for all purposes the respondent had recognized the proprietorship as being one registered in Bangalore, Karnataka in terms of their own
Code of Ethics and Rules ofConduct. I am of the view that the present petition is maintainable.
26. That apart, it is not the case of the respondent that the disputes between the parties are not arbitrable. That be so, I accordingly appoint Justice
Brijesh Sethi, a retired Judge of this Court as the sole Arbitrator, who shall adjudicate the disputes and differences between the parties. The fee of the
Arbitrator shall be governed by the Fourth Schedule to the Act of 1996.
27. The petition is disposed of.
28. Let a copy of this order be sent to Justice Brijesh Sethi (Retd.).