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 and 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 and 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 and 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." ;