LAW FOR ALL : 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.

Thursday, March 4, 2021

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.

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.

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 810 OF 2021

(ARISING OUT OF SLP(CIVIL) NO.15982 OF 2020

AMWAY INDIA ENTERPRISES PVT. LTD. … APPELLANT

VERSUS

RAVINDRANATH RAO SINDHIA & ANR. … RESPONDENTS

J U D G M E N T

R.F. Nariman, J.

1. Leave granted.

2. 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.

The brief facts of the case are noted in the impugned order dated

03.12.2020 thus:

“2. The facts of the case, as noted from the petition are, in the

year 1998, the petitioners 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 the

sole 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. From 2015, the renewal process for existing

ADSs became automatic, each year, without payment of any

fee. 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. The respondent also

started promoting 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 and conditions of the

distributorship, and to inter alia confirm the Code of Ethics and

Rules of Conduct, Legal Entity Authorisation Form (LEAF) etc.

Since then, the contract of the petitioners has been renewed

from time to time. The petitioners recorded client volume/sales

from their ABO account. The petitioners have also received

income on the sales generated by them for the months of

January to March, 2019 by the respondent. 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. Accordingly, between April, 2019 and December, 2019, the

petitioners raised a query with their 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. 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 mandatorily required to be accepted by all ADSs, by

clicking on the ‘By clicking here you agree to abide by the new

Terms & Conditions’ button, immediately upon logging in on the

respondent’s website, to proceed further to their account.

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.

4. 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. On

June 26, 2020, the petitioners referred the matter for redressal

and review to Mr. Jon Sherk, Vice President and Deputy

General Counsel of Amway Global in January, 2020. The

petitioners were communicated about the rejection of their

request for restoration of their ADS account on June 26, 2020.

According to the petitioners, the respondent has now, with

effect from July, 2020 notified a new Code of Ethics & Rules of

Conduct wherein the respondent has now been given benefit of

a 2 year period for establishing sales, in accordance with the

DSG, and carved a provision for restoration of the ADS

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 with the Amway Direct Seller Application

Form (Form-SA-88-ID), which is reproduced as under:

“12. Dispute Settlement. The parties shall

endeavour to settle any dispute or difference arising

out of or in connection with the Direct Seller

Contract through mutual discussions within 30 days

of such dispute arising. The Direct Seller agrees

that in the event it is not satisfied by any decision of

Amway, or in the event that any issue raised by the

Direct Seller has remained unresolved for a period

of more than two months, and / or during the

subsistence of this agreement or upon or after its

termination, any issue or dispute that the Direct

Seller may have regarding the interpretation or

operation of the clauses of this arrangement or any

issues arising there from shall be referred to

Grievance Redressal Committee set up by the

company. Any dispute, difference or claim

remaining unresolved post reference to the

Grievance Redressal committee discussions shall

be submitted to binding arbitration under the

provisions of the Indian Arbitration and Conciliation

Act, 1996. The venue of such arbitration shall be at

New Delhi and the award of the Arbitrator shall be

final and binding on all Parties. Subject to the

above, courts at New Delhi shall alone have

jurisdiction in relation to the Direct Seller Contract

and matters connected here to.”

5. The respondent replied vide letter dated August 20, 2020

wherein the respondent communicated that the name of the

Arbitrator as recommended by the petitioners was not

acceptable by it 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.”

3. 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. This plea was turned down by the impugned judgment

stating:

“23. Even the judgment of the Supreme Court in the case of

TDM Infrastructure (P) Ltd. v. UE Development India (P)

Ltd., (2008) 14 SCC 271 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 & Toubro Ltd. – SCOMI

Engineering Bhd v. MMRDA, (2019) 2 SCC 271, 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.

the consortium, being in Mumbai, as one of the factors for

arriving at the conclusion that the arbitration proceedings would

not be international commercial arbitration. No doubt a sole

proprietorship has no separate legal identity but in 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 of Conduct issued by the respondent under

Clause 3.17.1 contemplates and recognises 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.”

4. It was held that since the central management and control of this

association or body of individuals is exercised only in India under Section

2(1)(f)(iii), the dispute is not an international commercial arbitration, as a

result of which the High Court has jurisdiction under Section 11(6) to

appoint an arbitrator. Justice Brijesh Sethi, a retired Judge of the Delhi High

Court was, therefore, appointed as sole arbitrator.

5. Shri Parag Tripathi, learned Senior Advocate appearing on behalf of

the appellant, has argued that his predecessor’s plea in the High Court was

incorrectly turned down in that this case is really governed by Section 2(1)

(f)(i) and not by Section 2(1)(f)(iii). Once it is found that a party to an

arbitration agreement is an individual who is a national of, or habitually

resident in, any country other than India, it is not necessary to go to any

other sub-clauses of Section 2(1)(f), and as it is clear that the respondents,

who applied to the High Court under Section 11(6), are individuals who are

nationals of and habitually resident in the USA, would fall under Section

2(1)(f)(i), the High Court would have no jurisdiction, such petition having to

be filed only under Section 11(6) read with Section 11(9) to the Supreme

Court.

6. Ms. Manmeet Arora, 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).

7. The question lies in a very narrow compass. As rightly contended by

Ms. Arora, the documentary evidence in this case would be decisive of

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).

8. In a document entitled “Code of Ethics of Amway Direct Sellers”,

under “Rules of Conduct”, it is stipulated as follows:

“2.1.17 Legal Entity Authorisation Form” (LEAF) means the

document that must, in addition to the Direct Seller Contract, be

completed by a Direct Seller required to or electing to operate

an Amway Business in the name of an applicable legal entity.”

xxx xxx xxx

“3.1 Application and Starter Guide: In order to be considered

for an Amway distributorship, an individual(s) must, in

his/her/their own name(s) or on behalf of a legal entity, submit a

signed, completed Direct Seller Application(in Form SA-88-ID),

together with all required supporting documentation.

A distributorship may be taken up in individual capacity or as a

sole proprietorship concern, partnership firm or company.

Amway reserves the right to require that Applicants having NonResident Indian (NRI), Person of Indian Origin (PIO) or

Overseas Citizen of India (OCI) status operate distributorships

via certain types of legal entities.”

xxx xxx xxx

“3.14 Legal Entity Distributorships: A Direct Seller may own

and operate his or her Distributorship as a sole proprietary

concern or registered partnership firm or limited liability

company (LLC), provided it complies with certain requirements

and conditions. …”

xxx xxx xxx

“3.14.5 The sole business of the legal entity must be the

operation of an Amway Distributorship. No other business may

be conducted by such an entity.”

xxx xxx xxx

“3.17 Husband and Wife Distributorships: If both husband

and wife wish to become Direct Sellers, they must be

sponsored together for a single Distributorship. Husbands and

wives may not be sponsored in different Lines of Sponsorship.

Husbands and wives may not sponsor each other. If one

spouse is already a Direct Seller, the other spouse, upon

electing to become a Direct Seller, must join the same

Distributorship as his or her spouse.

3.17.1 A husband and wife shall operate their Distributorship as

a single entity. Therefore, each is held accountable for the

actions of the other so far as the Rules of Conduct are

concerned regardless of whether a husband or wife is active in

the distributorship or not.”

xxx xxx xxx

“4.13 Franchises and Territories: No Direct Seller shall

represent to anyone that there are exclusive franchises or

territories available under the Amway Sales and Marketing

Plan.

No Direct Seller shall represent that he or she, or anyone else

has the authority to grant, sell, assign, or transfer such

franchises or to assign or designate territories. No Direct Seller

or Sponsor may state or imply that he or she has a given

territory, nor that any other Direct Seller is operating outside his

territory.

Amway Direct Sellers have no territorial limits. They can

operate anywhere within India.”

xxx xxx xxx

“4.16 Exporting Amway Products: Amway Direct Sellers must

sell Amway products and/or sponsor prospective Amway Direct

Sellers within India only. No Direct Seller may export, or

knowingly sell to others who exports, Amway Products from

India, or from any other country in which Amway has

established operations, into any country regardless of whether

or not Amway is doing business in that country.

For important legal reasons, including trade names and

trademark protections; local laws on product registration,

packaging, labelling ingredient content and formulation, product

liability; customs and tax laws; and literature content or

language requirements. Amway must limit the resale of Amway

Products by Direct Sellers to only other Direct Sellers or retail

customers located within country in which the Direct Seller

legitimately buys the Amway Products and is authorised to do

business. The term “products” includes, without limitation, all

literature, sales aids, and any other items obtained by a Direct

Seller from Amway or from his sponsor or Platinum.

4.16.1 Exporting Rule: Personal Use

Globally, Amway’s Rules and Commercial Principles include

prohibitions on exporting and importing Amway products from

one market to another. Amway Direct Sellers may, however,

take Amway products across borders for personal use, with the

following limitations:

 The Amway Direct Seller is visiting another country and

personally places the product order in that country.

 The Amway Direct Seller physically picks up/receives the

products in one country and personally carries the products

to another country. There may be no couriers, shipping

companies, or freight forwarders involved.

 If the Amway Direct Seller has a Multiple Business in the

country visited, the order cannot be placed as a customer

order for an overseas customer.

 The products are for the Amway Direct Sellers personal use

only.

 The products may not be resold, distributed, or given away

under any circumstances.

 The products ordered must not be available in the Amway

Direct Seller’s home market.

 Durables (e.g. water treatment systems, air treatment

systems) may not be carried from one market to another

under any circumstances.

 The Amway Direct Seller order must not be for more than a

reasonable amount of product: under 300 USD annually.

 The personal use exclusion may not be used as a businessbuilding strategy.”

9. In what is referred to as the “Legal Entity Authorisation Form”, what

was filled up was “Legal Entity Authorisation Form: Sole Proprietor”. The

said form which was filled in by the respondents reads as follows:

“LEGAL ENTITY AUTHORISATION FORM:

SOLE PROPRIETORSHIP

Where an Amway Independent Business (“Amway Business”)

will be operated in India via a Sole Proprietorship (the “Entity”)

held by a Resident Indian, Non-Resident Indian (“NRI”), Person

of Indian Origin (“PIO”) or Overseas Citizen of India (“OCI”), the

Sole Proprietorship must, through the sole proprietor (the “Sole

Proprietor”), complete this Legal Entity Authorisation Form for

Amway Business Owners (the “Entity Agreement”) and submit

it to Amway India Enterprises Pvt. Ltd. (“AIE”). The Sole

Proprietor must agree to remain and ensure that the Entity

remains in full compliance with the Rules of Conduct for Amway

Business Owners. This Entity Agreement shall become effective

if and when AlE signs the completed form. This Entity

Agreement incorporated into and forms an integral part of the

Amway Distributor Agreement, which includes any and all

documents incorporated therein (the “ABO Contract”). In the

event of any conflict, the terms and conditions of this Entity

Agreement shall prevail.

xxx xxx xxx

“5. The Sole Proprietor agrees that :

A. The sole purpose of the Entity is to own and operate the

Amway Business identified above, unless AIE expressly allows

the Entity to own and operate more than one Amway business.

Neither the Entity nor the Sole Proprietor will own or operate

any other business or business interest.

xxx xxx xxx

C. Any NRI, PIO or OCl investment in the Entity, if and as

applicable, has been made on a non-repatriatable basis in

accordance with applicable foreign exchange laws of India.

xxx xxx xxx

G. The Entity shall, in accordance with the laws of India and for

all matters connected to the Amway Business, exclusively use a

duly authorised Indian rupee bank account which, if applicable,

operates on a non-repatriatable basis.

H. The Sole Proprietor shall be responsible for his or her, and

the Entity’s, compliance with the Amway Rules of Conduct and

the applicable laws with respect to the operation of the Amway

Business by the Entity, including foreign exchange laws. Any

violation of the aforesaid entitles AIE to terminate the ABO

Contract and the Entity Agreement.

xxx xxx xxx”

10. Under “authorised signature”, the entity’s name was filled in as

Sindhia Enterprises and the proprietor was filled in as Ravindranath Rao

Sindhia (respondent no. 1 herein). This was done pursuant to an

application again filed in a printed form, given by the appellant to the

respondents, which reads as follows:

11. A reading of the application form as filled in, together with the Code of

Ethics, would show that a distributorship may be taken up either in

individual capacity, a sole proprietorship concern, partnership firm, or

company. When it comes to a husband and wife’s distributorship, they are

entitled not to two, but to a single distributorship, it being made clear under

clause 3.17 of the Code of Ethics that they are to operate only as a single

entity. 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”, the wife, Indumathi Sindhia, being a “co-applicant”.

12. However, Ms. Arora argued, from a reading of the Code of Ethics and

correspondence between the parties, that there was no international flavour

whatsoever to the transaction as the business that is to be conducted can

be conducted only in India, an exception being made only for personal use

under clause 4.16.1. Most importantly, the address of the so-called sole

proprietorship in all the correspondence between the parties was the

address of the Bangalore office of the sole proprietorship.

13. Ms. Arora 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. This Court

repelled the aforesaid argument, stating:

“9. Under the general conditions of contract, the “contractor”, in

Clause 1.1.2.3 is defined as meaning an individual, firm,

company, corporation, joint venture or Consortium, whether

incorporated or not. “Bidder” is also defined under Clause

1.1.2.10 as meaning an individual, firm, company, corporation,

joint venture or Consortium which could submit a bid. What is

important to notice is that the contract was signed by the

employer viz. MMRDA and by the contractor under the head

sub-clauses (A) and (B) in which L&T India signed as ‘A’ and

Scomi Engineering Bhd has signed as ‘B’. When we come to

the consortium agreement that is entered into between the

Indian company and the Malaysian company as aforestated, we

find in the definition clause that “Consortium” shall mean L&T

and Scomi Engineering Bhd, acting in collaboration, for the

purpose of this agreement and shall be called “the L&T-SEB”

Consortium “unincorporated”. The contract is defined in SubClause 6 as meaning, “the contract to be entered by the

Consortium with the employer for the execution of the Project”.

Under Sub-Clause 7, “the lead Member of the Consortium” or

“Consortium Leader” shall mean L&T, that is, the Indian

Company. Under Sub-Clause 8, the “Supervisory Board”

(hereinafter referred to as “the SB”) shall mean a Board

constituted under Clause 11 of the GCC. When we come to

Clause 11.2, it is clear that the Members of this Supervisory

Board will consist of four members, two appointed by each

Member. One of the Members nominated by the Consortium

leader and agreed to by all members shall then act as the

Chairman of the Supervisory Board, which is, by Clause 11.5,

to decide on various matters relating to the execution of the

contract. Clause 21.1(g) provides that the Consortium leader

shall lead all arbitration proceedings.

xxx xxx xxx

11. It is important, at this juncture, to refer to an order made by

the High Court of Bombay dated 20-10-2016 [L&T

Ltd. v. MMRDA, 2016 SCC OnLine Bom 13348] which, as has

been stated earlier, arises between the self-same parties, under

the same contract. An interim award made by the arbitrators

qua different claims arising under the same contract had made

it clear that the claim could be filed only in the name of the

Consortium and not separately, as was contended by Shri

Jain's client. The preliminary issue framed on this count was

“whether the claimants are entitled to file this claim as Claimant

1 and Claimant 2 or only as the Consortium of L&T and Scomi

Engineering Bhd?” The High Court of Bombay agreed with the

interim award of the arbitrators, and held as follows: (L&T Ltd.

case [L&T Ltd. v. MMRDA, 2016 SCC OnLine Bom 13348] ,

SCC OnLine Bom para 10)

“10. Considering the terms and conditions of the

contract as well as the decision cited by Mr. Ankhad,

in my opinion, in the facts and circumstances of the

present case, it is not open for the petitioners to rely

upon their independent identities while dealing with

the respondent and that they will have to deal with

the respondent as a Consortium only. Therefore,

there is no infirmity in the impugned order. For the

same reason the present petition as filed would also

not been maintainable. Hence, the same is

dismissed.”

12. Shri Gopal Jain did not dispute the fact that this judgment

was final inter-partes as no appeal has been preferred.

Therefore, to stress the fact that it pertains only to “this claim”

and would therefore, not apply to a different set of claims under

the arbitration clause is not an argument that appeals to us.

13. It is clear, as has been held by the judgment [L&T Ltd v.

MMRDA, 2016 SCC OnLine Bom 13348] of the High Court of

Bombay, and which is binding inter-partes, that it is not open for

the petitioner to rely upon their status as independent

entities while dealing with the respondent and they will have to

deal with the respondent as a Consortium only.

14. This being the case, it is clear that the unincorporated

“association” referred to in Section 2(1)(f)(iii) would be attracted

on the facts of this case and not Section 2(1)(f)(ii) as the

Malaysian body cannot be referred to as an independent entity

following the judgment [L&T Ltd. v. MMRDA, 2016 SCC OnLine

Bom 13348] of the High Court of Bombay.

xxx xxx xxx

18. This being the case, coupled with the fact, as correctly

argued by Shri Divan, that the Indian company is the lead

partner, and that the Supervisory Board constituted under the

consortium agreement makes it clear that the lead partner really

has the determining voice in that it appoints the Chairman of

the said Board (undoubtedly, with the consent of other

members); and the fact that the Consortium's office is in

Wadala, Mumbai as also that the lead member shall lead the

arbitration proceedings, would all point to the fact that the

central management and control of this Consortium appears to

be exercised in India and not in any foreign nation.”

14. This case is distinguishable on facts, inasmuch as a final judgment

between the parties made it clear that it would not be open for the

consortium to rely upon their status as independent entities while dealing

with MMRDA. This being the case, the consortium was held to be an

association of persons falling under Section 2(1)(f)(iii), and that since the

lead member is to lead arbitral proceedings, the central management and

control of the consortium being exercised by Larsen and Toubro in India, it

was held that Section 2(1)(f)(iii) would not be attracted on the facts of that

case.

15. By way of contrast, we have seen how 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 referred to hereinabove. In Ashok

Transport Agency v. Awadhesh Kumar, (1998) 5 SCC 567, this Court

has clearly held that a sole proprietary concern is equated with the

proprietor of the business as follows:

“6. A partnership firm differs from a proprietary concern owned

by an individual. A partnership is governed by the provisions of

the Indian Partnership Act, 1932. Though a partnership is not a

juristic person but Order XXX Rule 1 CPC enables the partners

of a partnership firm to sue or to be sued in the name of the

firm. A proprietary concern is only the business name in which

the proprietor of the business carries on the business. A suit by

or against a proprietary concern is by or against the proprietor

of the business. In the event of the death of the proprietor of a

proprietary concern, it is the legal representatives of the

proprietor who alone can sue or be sued in respect of the

dealings of the proprietary business. The provisions of Rule 10

of Order XXX which make applicable the provisions of Order

XXX to a proprietary concern, enable the proprietor of a

proprietary business to be sued in the business names of his

proprietary concern. The real party who is being sued is the

proprietor of the said business. The said provision does not

have the effect of converting the proprietary business into a

partnership firm. The provisions of Rule 4 of Order XXX have

no application to such a suit as by virtue of Order XXX Rule 10

the other provisions of Order XXX are applicable to a suit

against the proprietor of proprietary business “insofar as the

nature of such case permits”. This means that only those

provisions of Order XXX can be made applicable to proprietary

concern which can be so made applicable keeping in view the

nature of the case.

7. In the present case A.C. Basu, Proprietor of Ashok Transport

Agency, had died before the date of the institution of the suit

and on the date of the institution of the suit, the proprietary

concern was not in existence. Only the legal representatives of

A.C. Basu could be sued with regard to any cause of action

arising against A.C. Basu in connection with the proprietary

business. We find it difficult to understand how the provisions of

Rule 4 Order XXX CPC, could be extended to such a case.”

16. In this view of the matter, 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.

17. Ms. Arora 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.

18. The appeal is allowed, and the judgment under appeal is set aside.

…………………………J.

(R.F. Nariman)

…………………………J.

(B.R. Gavai)

New Delhi;

March 04, 2021.

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