Jurisdictional Issue: Delhi HC lacks authority in international commercial arbitration appointment

The Supreme Court held that the Delhi High Court lacked jurisdiction to appoint an arbitrator as the dispute constituted an international commercial arbitration. The appeal was successful, overturning the previous judgment. The respondents were instructed to adhere to the procedure outlined in Section 11(6) in conjunction with Section 11(9) of the Arbitration Act for the appointment of an arbitrator.

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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.

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