A US couple ran an Indian business. The Supreme Court just decided where they can fight

Two US citizens, one Indian sole proprietorship, and a contract that said 'arbitration'—but which court gets to pick the arbitrator? A husband and wife, both American nationals living in the United States, had built a business selling Amway products in India through a small firm called Sindhia Enterprises. Then, in 2019, their distributor account was downgraded without warning. They wanted to fight back—but first, they had to figure out which court in India could even hear their case.

When the account went silent

The couple had become distributors for Amway India Enterprises Pvt. Ltd., a direct-selling giant. They operated through a sole proprietorship—a one-person business where the owner and the business are legally the same entity. For years, they bought and resold products. Then Amway allegedly downgraded their account to a 'Preferred Customer' status without giving them notice, claiming they hadn't met a re-sale purchase target. The downgrade notice letter arrived without explanation, a thin sheet that quietly stripped their distributor status.

The couple tried to get their old account restored. When that failed, they did what any business partner would do: they looked at their contract. It had an arbitration clause—a promise that any dispute would be settled by a private arbitrator instead of going to court. The clause sat there in the fine print, a dense paragraph promising a neutral forum. So they invoked that clause and filed a petition before the Delhi High Court asking it to appoint a sole arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 (the provision that lets a court step in when parties cannot agree on an arbitrator).

Amway's objection: wrong court

Amway pushed back hard. Its argument was simple but devastating: the couple were US nationals living in the USA. Under the Arbitration Act, when one party to a dispute is a foreign national, the arbitration becomes an 'international commercial arbitration'—and only the Supreme Court of India, not a High Court, has the power to appoint an arbitrator in such cases. The Delhi High Court, Amway said, had no jurisdiction at all.

The couple's lawyers countered that they ran their business through a sole proprietorship based in India. The real party to the arbitration, they argued, was not the two individuals but the business entity—Sindhia Enterprises—which had its central management and control in India. That would make it a domestic arbitration, not an international one, and the High Court would be the right forum.

The High Court's ruling—and the puzzle it created

The Delhi High Court agreed with the couple. It held that Sindhia Enterprises fell under Section 2(1)(f)(iii) of the Arbitration Act—the definition that covers 'an association or body of individuals' whose central management and control is in India. Since the business was run from India, the High Court said it had the power to appoint an arbitrator. It appointed one, and the case moved forward. The courtroom had the quiet hum of a working day, the judge's order read out with the weight of a settled question.

But Amway wasn't done. It appealed directly to the Supreme Court, arguing that the High Court had fundamentally misunderstood how the law classifies parties in arbitration. The question now before the country's highest court was deceptively narrow: when a US national runs a business in India through a sole proprietorship, is the arbitration international or domestic?

Why a sole proprietorship is not a separate person

The Supreme Court bench—Justice R.F. Nariman and Justice B.R. Gavai—took up the appeal in March 2021. The courtroom fell silent as the arguments unfolded, the bench listening with the focused stillness that precedes a significant ruling. The answer, they found, turned on a basic principle of Indian law: a sole proprietorship has no separate legal identity from its owner. Under the precedent set in Ashok Transport Agency v. Awadhesh Kumar (1998), the proprietor and the business are one and the same. You cannot treat a sole proprietorship as a separate 'association' or 'body of individuals' just because it has a business name and an office.

Once that principle was applied, the case became straightforward. The two respondents were individuals—US nationals habitually resident in the United States. They fell squarely under Section 2(1)(f)(i) of the Arbitration Act, which defines an international commercial arbitration as one where at least one party is 'an individual who is a national of, or habitually resident in, any country other than India.' The file before the bench was thin—a single petition, a single appeal—but the legal principle it carried was thick with consequence.

The court's reasoning: one clause, one answer

The Supreme Court observed that the definition in Section 2(1)(f) lists several categories of parties—individuals, companies, associations, and governments. But these categories are not interchangeable. If a party is clearly an individual who is a foreign national, you stop at clause (i). You do not move to clause (iii) and try to reclassify that individual as part of an 'association' just because they run a business through a proprietorship.

"Whatever be the transaction between the parties," the court held, "if at least one party is a foreign national or habitually resident in a country other than India, the arbitration becomes an international commercial arbitration, notwithstanding that the individual carries on business in India through a business office in India." The bench's words hung in the air, a crisp resolution to a question that had divided the parties for months.

The bench also noted that the couple's habitual residence in the USA was undisputed. They lived there, worked from there, and were citizens there. The fact that their distributorship was in India did not change their personal status under the Arbitration Act.

The precedents that shaped the answer

The Supreme Court relied on two key precedents to reach its conclusion. In TDM Infrastructure (P) Ltd. v. UE Development India (P) Ltd. (2008), the court had examined how the nationality of a party determines the character of an arbitration. In Larsen & Toubro Ltd.–SCOMI Engineering Bhd v. MMRDA (2019), the court had further clarified the distinction between domestic and international arbitration. Together, these cases established that the classification under Section 2(1)(f) depends on the party's legal status, not the location of the business.

The court also invoked Ashok Transport Agency v. Awadhesh Kumar (1998), the foundational precedent that a sole proprietorship is legally indistinguishable from its proprietor. This principle, the court held, was dispositive: since the proprietorship and the proprietor are one, the nationality of the proprietor determines the character of the arbitration. There was no room to treat Sindhia Enterprises as a separate 'association' under Section 2(1)(f)(iii).

The procedural journey: from High Court to Supreme Court

The case had travelled a short but significant distance. On 3 December 2020, the Delhi High Court allowed the couple's Section 11(6) petition and appointed a sole arbitrator. Amway immediately challenged this order through a Special Leave Petition before the Supreme Court, which was converted into Civil Appeal No. 810 of 2021. On 4 March 2021, the Supreme Court allowed the appeal and set aside the High Court's order. The entire procedural journey—from the downgrade notice to the Supreme Court's final word—had taken less than two years.

The Supreme Court's operative order was brief: "The appeal is allowed, and the judgment under appeal is set aside." But the reasoning behind that order was detailed and deliberate. The court had to untangle a knot that had tied together questions of nationality, business structure, and jurisdictional competence.

What this means for cross-border business

The Supreme Court allowed Amway's appeal and set aside the Delhi High Court's order. The petition for appointment of an arbitrator should have been filed before the Supreme Court under Section 11(9) of the Arbitration Act (the provision that gives the Supreme Court exclusive power to appoint arbitrators in international commercial arbitrations), not before the High Court. The single sheet of the Supreme Court order carried the finality of a corrected course.

For practitioners, the ruling clarifies a recurring ambiguity. When a foreign national operates in India through a sole proprietorship, the arbitration is international—not domestic—and only the Supreme Court can appoint the arbitrator. The business structure does not change the nationality of the party. The ruling also serves as a cautionary tale: filing a Section 11(6) petition before the wrong court can result in the entire proceeding being set aside, wasting time and resources.

The case also highlights the importance of careful drafting. When foreign nationals enter into commercial relationships in India, their arbitration clauses should anticipate the jurisdictional question. A well-drafted clause can specify the forum for arbitrator appointment, avoiding the uncertainty that plagued the couple in this case.

THE PLAY: When drafting arbitration clauses for foreign nationals doing business in India through sole proprietorships, specify that any arbitrator appointment petition must be filed before the Supreme Court, not the High Court—or risk having the entire proceeding set aside.

The two US citizens got their arbitrator—but only after learning that in Indian arbitration law, a business name is not a shield from your nationality. The Supreme Court's ruling in Amway India Enterprises Pvt. Ltd. v. Ravindranath Rao Sindhia & Anr. now stands as a clear guide: when the party is a foreign individual, the arbitration is international, and the Supreme Court alone holds the power to appoint the arbitrator.