How to determine that an order is appealable in Arbitration proceeding?

  I think the learned counsel for the appellants is right in

saying   so.     Although,   the   argument   of   learned   counsel   for   the

respondents looks impressive at  first  blush, on a deeper examination

one can say it has no force.  The immediate impact of the  impugned

order  may  be  innocuous  as  it  neither  grants nor  refuses  to grant

interim measure under Section 9 and it merely returns the application

to the appellants for being presented to an appropriate forum.   But

the impact also has its ripple effect which hits   the appellants   and

even the respondents in an adverse manner.  The ripple effect in this

case  is quite like a seismic wave which causes more damage at farther

distance than at the origin or at the epicentre as far as the party

seeking the interim measure under Section 9 of the Arbitration Act is

concerned.   A preliminary objection taken on the ground of lack of

jurisdiction  when wrongly decided, would defeat the valuable right of

the party to get immediate protection.  The purpose of Section 9 is to

swing   law   into   motion   without   any   loss   of   time   to   preserve   the

property, secure the amount in question,  maintain status quo  and the

like.     This   right   of   the   party   to   approach   the   Court   for   getting

immediate   interim   relief     under   Section   9   would   be   seriously

prejudiced, when the preliminary objection is upheld wrongly.  This is

because if later on it is found that the Court upholding the preliminary

objection did have the jurisdiction and the other Court to whom that

party was directed did not have the jurisdiction, the position will be

back to square one.  Similarly, if the preliminary objection is wrongly

rejected   and   the   proceedings   of   the   application   are   continued,

although ought not to have been continued, a valuable right of the

defendant, who is otherwise entitled to get the application dismissed

on   a   preliminary   ground,   would   also   be   seriously   imperilled.

Therefore, appelability of an order has to  be guaged by not only its

immediate effect but also  its ripple effect.  If the ripple effect  brings

the order within the circumference of  Section 9,  it would be an order

appealable under Section 37(1)(b) of the Arbitration Act, which is

what the order impugned herein is. 

IN THE HIGH COURT OF  BOMBAY AT GOA

GOA­ PANAJI

APPEAL UNDER ARBITRATION ACT No.2 OF 2015

    M/s. Nivaran Solutions  V   M/s. Aura Thia Spa Services

       Pvt. Ltd.

CORAM  :   S.B. SHUKRE, J.         

    

    DATED :    4th MAY    , 201  6.

Citation:2016(5) MHLJ234

1. This appeal filed under Section 37 of the Arbitration and

Conciliation Act, 1996 (in short, “Arbitration Act”) arises from an

order   dated   29.10.2014   passed   on   Section   9     Arbitration   Act

application   by   the   Principal   District   Judge,   Panji,   Goa   refusing   to

exercise his authority under Section 9 on the ground that the Court

has no territorial jurisdiction in the matter.

2. The appellant No.1 is a partnership firm and appellant

Nos.2 and 3 are its partners.   The respondent No.1 is a company

incorporated under the Indian Companies Act and engaged in the

business of offering various Spa and Saloon services.  The  respondent

No.2 is the director of the respondent no. 1­company.  The appellant

No.1 being interested in marketing Spa and Saloon services in the

State of Goa, executed two agreements with the respondent No.1,

both dated 31st October, 2012.  By these agreements, the respondent

No.1 was appointed as Master Franchisee and was given exclusive

right in the entire State of Goa to market the products and services of

M/s. Aura Thia Spa Services Private Limited   also known as “M/s.

Aura   Wellness   and   Healing   Services   Private   Limited”   in   lieu   of

payment of Master Franchisee fee of Rs.30/­ lakhs. This fee was paid

by appellant No.1 to respondent No.1 Company, the receipt of which

has been acknowledged in one of the agreements having the title as

“Memorandum of Understanding­cum­ Unit Franchisee Agreement”.

Although the appellant No.1 was given exclusive right and licence to

market the products and services of respondent No.1 company in the

entire State of Goa, the appellants   learnt that the respondent No.1

company had already granted such franchisee right  to one person by

name Muktar Sheikh.  According to the appellants, this was the breach

of the essential term and essence of the agreements.  Therefore, the

appellants   immediately   demanded   refund   of   their   amount   Rs.30/­

lakhs from the respondents.  A notice was also sent to the respondents

under Section 11 of the Arbitration Act.   The appellants, however,

received   an   e­mail   from   the   respondents   thereby   unilaterally

terminating   both   the   agreements,   one   titled   as   “Memorandum   of

Understanding­cum­Unit   Franchisee   Agreement”   and   the   other     as

“Master Franchisee Agreement”.  As the agreements were unilaterally

terminated,   the   appellants   sent   a   letter   dated   7.3.2013   to   the

respondents claiming refund of amount of Rs.30/­ lakhs, but there

was   no   response   from   the   respondents.     Another   notice   dated

19.9.2013 demanding said amount of Rs.30/­ lakhs was also sent to

the respondents and alternatively it was intimated to them that the

appellants would be invoking arbitration clause No.17.1 of Master

Franchisee   Agreement   for   resolution   of   the   dispute   between   the

parties.

3. The   appellants,   thereafter,   filed   an   application   under 

Section   9   of   the   Arbitration   Act,   contending   that   the   amount   of

Rs.30/­ lakhs was required to be secured and accordingly they sought

measure   of   interim   protection   under   Section   9(1)(ii)(b)   of   the

Arbitration Act.     The respondents appeared and filed preliminary

objection to the maintainability of the application on the ground that

the Court of Principal District Judge, Panaji, did not have territorial

jurisdiction.   By an order dated 29.10.2014, the learned Principal

District Judge upheld the objection and returned the application to the

appellants   for   being   presented   to   an   appropriate   forum.     Being

aggrieved by this order, the appellants have approached this Court in

the present appeal.

4. Learned counsel for the appellants submits that the cause

of action in this case arose not just at Margao, as wrongly held by the

learned Principal District Judge, but in the entire State of Goa, as the

breach of the agreements alleged by the appellants was a breach in

relation to and in respect of entire State of Goa and, therefore, he

further submits that the Courts of  Principal District Judge, at Panaji

and   Margao had the territorial jurisdiction.  He submits that in any

case,   the   nature   of   jurisdiction   exercised   under   the   provisions   of

Arbitration Act by the Principal Civil Court of original jurisdiction like

the Court of the Principal District Judge is supervisory in nature and,

therefore, the aspect of jurisdiction is required to be determined with

reference to such supervisory jurisdiction and from this perspective, he

further submits,  the Court of Principal District Judge at Panaji would

have jurisdiction to entertain and try Section 9 Application, as the

arbitration proceedings are going to be held not at Margao but at

Panaji.  He submits that it cannot be that an application under Section

34 or the appeal against an order passed under Section 16(2) or 16(3)

should be filed before the Court of Principal District Judge at Panaji

and an application under Section 9 should be filed before the Court of

Principal  District Judge at Margao.

5. Learned counsel for the appellants further submits that by

holding   that   the   Court   of   District   Judge   at   Panaji   did   not   have

territorial jurisdiction to entertain Section 9 application, the learned

Principal District Judge has effectively refused to grant relief under

Section 9 of the Arbitration Act and, therefore, this appeal filed under

Section 37 of the said Act is maintainable.

6. Learned   counsel   for   the   respondents   has   taken   a

preliminary objection to the maintainability of this appeal.  He submits

that an order holding that a Court does not have territorial jurisdiction

and returning the application for being presented to a proper forum is

not   an   order   granting   or   refusing   relief   under   Section   9   of   the

Arbitration Act.   He further submits that the order passed by the

learned Principal District Judge is legal and proper and requires no

interference as the learned Principal District Judge has rightly found

that the cause of action has arisen within the territorial limits of the

District Court at Margao and not at Panaji.   He submits that the

agreements were  entered into between the parties at Margao and the

e­mail terminating the agreements  was also received at Margao.  He

further submits that nothing in respect of the agreements in question

had taken place within the territorial limits of the Court at Panaji.

Thus, he submits that nothing wrong could be seen in the finding

recorded by the learned Principal District Judge that his Court does

not have territorial jurisdiction to entertain Section 9 application.

7. Since the learned counsel for the respondents has taken a

preliminary   objection regarding maintainability of this appeal filed

under Section 37 of the Arbitration Act, it would be necessary to deal

with it first.

8. The appellants   filed an application under Section 9 of the

Arbitration Act and claimed relief of interim measure  under clause (ii)

(b) of sub­section (1) of Section 9, Arbitration Act,  for securing the

amount in dispute in the arbitration proceedings and   freezing the

bank account to secure the   money claimed from the respondents. 

Learned Principal  District Judge, Panaji, however, instead of refusing

or rejecting the application held that the District Court at Panaji did

not have territorial jurisdiction to entertain the application and thus

returned it to the appellants for being presented to an appropriate

forum.

9. Now, the question arising from the preliminary poser of

the   respondents   is,   whether   an   appeal   against   such   an   order

(impugned order) would lie under Section 37 of the Arbitration Act?

For this purpose, sub­section (1)(b) of Section 37 is relevant.  It reads

as under :

   37.  Appealable orders – (1) An appeal shall lie from the following

orders (and from no others) to the Court authorised by law to hear

appeals from original decrees of the Court passing the order, namely:­

    [(a)  refusing to refer the parties to arbitration under section 8; 

    (b) granting or refusing to grant any measure under S.9

In   the   opinion   of   the   learned   counsel   for   the   respondents,   the

impugned order is not the  one which is appealable under Section 37

of the Arbitration Act, as the order neither grants nor refuses to grant

any   interim   measure   under   Section   9.     Learned   counsel   for   the

appellants submits that ultimate effect of this order is refusal to grant

interim measure under Section 9 and so it is appealable under Section

37. 

10. I think the learned counsel for the appellants is right in

saying   so.     Although,   the   argument   of   learned   counsel   for   the

respondents looks impressive at  first  blush, on a deeper examination

one can say it has no force.  The immediate impact of the  impugned

order  may  be  innocuous  as  it  neither  grants nor  refuses  to grant

interim measure under Section 9 and it merely returns the application

to the appellants for being presented to an appropriate forum.   But

the impact also has its ripple effect which hits   the appellants   and

even the respondents in an adverse manner.  The ripple effect in this

case  is quite like a seismic wave which causes more damage at farther

distance than at the origin or at the epicentre as far as the party

seeking the interim measure under Section 9 of the Arbitration Act is

concerned.   A preliminary objection taken on the ground of lack of

jurisdiction  when wrongly decided, would defeat the valuable right of

the party to get immediate protection.  The purpose of Section 9 is to

swing   law   into   motion   without   any   loss   of   time   to   preserve   the

property, secure the amount in question,  maintain status quo  and the

like.     This   right   of   the   party   to   approach   the   Court   for   getting

immediate   interim   relief     under   Section   9   would   be   seriously

prejudiced, when the preliminary objection is upheld wrongly.  This is

because if later on it is found that the Court upholding the preliminary

objection did have the jurisdiction and the other Court to whom that

party was directed did not have the jurisdiction, the position will be

back to square one.  Similarly, if the preliminary objection is wrongly

rejected   and   the   proceedings   of   the   application   are   continued,

although ought not to have been continued, a valuable right of the

defendant, who is otherwise entitled to get the application dismissed

on   a   preliminary   ground,   would   also   be   seriously   imperilled.

Therefore, appelability of an order has to  be guaged by not only its

immediate effect but also  its ripple effect.  If the ripple effect  brings

the order within the circumference of  Section 9,  it would be an order

appealable under Section 37(1)(b) of the Arbitration Act, which is

what the order impugned herein is.

11. A three Judge Bench of the Hon'ble apex Court in the case

of Shah Babulal Khimji vs. Jayaben D. Kania & anr. reported in AIR

1981 SC 1786, while deciding the question as to whether an order

passed by a learned Single Judge of the High Court dismissing the

application for appointment of a receiver as also for interim injunction

would be a “judgment” as contemplated by clause 15 of Letters Patent

of the High Court and thus an order appealable  before the Division

Bench, crystalised the law relating to appealability or otherwise of

various judgments and   orders.   Although, the Hon'ble apex Court

examined the issue in the light of the word “judgment” used in clause

15 of the Letters Patent, the guidelines laid down by it serve   as a

beacon  light for examining as to which orders or judgments could be

termed as appealable  and which would be falling beyond the scope of

challenge  by way of an appeal.   The Hon'ble  apex Court for this

purpose categorized a judgment into three kinds :­

   (1)    a final judgment amounting to a decree

   (2)    a preliminary judgment, which is further divided into two

sub­categories ­

     (a)   An order dismissing a suit   on a preliminary objection

without    going into the merits of the suit;

     (b)   An order passed on   a preliminary objection relating to

maintainability of the  suit; such a bar of jurisdiction, res­judicata,

a manifest  defect in the suit, absence of notice under Section 80 of

Code   of   Civil   Procedure   and   the   like     but     not   terminating

the suit;

   (3)  Intermediary or interlocutory judgment, which is further

divided into two sub­categories ­

   (a)  those judgments which are covered by Order 43 Rule

1, CPC.

   (b)  those judgments which are not covered by Order 43

Rule 1, but are possessed of   trappings of finality in the

sense that they adversely affect  valuable rights of parties

or     decide  important aspects of the matter. 

Their Lordships held that a final judgment in category (1) as well as a

preliminary judgment falling in either of the sub­categories (a) or (b)

of   category   (2)   are     judgments   and   appealable   as   such.     Their

Lordships further held that an intermediary or interlocutory judgment

falling in category (3) (a) would be a judgment and hence appealable.

However, their Lordships also held that in case of intermediary or

interlocutory judgment falling in category (3)(b) above, there is a

riddle which is required to be solved by taking into consideration all

the facts and circumstances of the case.   If the order affects some

valuable right of a party adversely, directly and immediately rather

than indirectly or remotely, the order would be a judgment and as

such appelable.  For the purpose of the present appeal,  observations

of   the   Hon'ble   apex   Court   in   respect   of   sub­category   (b)   of   the

preliminary judgment in category (2) are relevant  and they enlighten

us as to how to judge the appealability of an order which upholds or

rejects the objection taken on the maintainability of the suit or an

application filed under Section 9, Arbitration Act, as in the present

case,   on the ground of bar of territorial jurisdiction.   The relevant

observations of the Hon'ble apex Court, as they appear in paragraph

113, are as under :

“113. …...

(1) ….......

        (2)  A preliminary judgment – This kind of a judgment

may take two forms – (a)   where the trial Judge by an

order dismisses the suit without going into the merits of the

suit   but   only   on   a   preliminary   objection   raised   by   the

defendants or the party opposing on the ground that the

suit is not maintainable.   Here also, as the suit is finally

decided one way or the other, the order passed by the trial

Judge would be a judgment finally deciding the cause so

far   as   the   trial   Judge   is   concerned   and,   therefore,

appealable to the larger Bench, (b) Another shape which a

preliminary   judgment may  take  is that where  the trial

Judge   passes   an   order   after   hearing   the   preliminary

objections   raised   by   the   defendant   relating   to

maintainability   of   the   suit,   e.g.,   bar   of   jurisdiction,   res

judicata, a manifest defect in the suit, absence of notice

under   Sec.   80   and   the   like,   and   these   objections   are

decided by the trial Judge against the defendant, the suit is

not terminated but continues and has to be tried on merits

but the order of the trial Judge rejecting the objections

doubtless adversely affects a valuable right of the defendant

who, if his objections are valid, is entitled to get the suit

dismissed on preliminary grounds.   Thus, such an order

even though it keeps the suit alive, undoubtedly decides an

important aspect of the trial which affects a vital right of

the defendant and must, therefore, be construed to be a

judgment so as to be appealable to a larger Bench.”

It  would be thus clear from the above decision of the Hon'ble apex

Court   that   in   the   instant   case   the   impugned   order   upholding   the

objection  raised by the respondents on the maintainability of the suit

for want of territorial jurisdiction is an order which affects vital right

of the appellants, such as right to obtain immediate interim measure

of protection for securing  the amount, as we have seen earlier,   and,

therefore, the order is appelable.

12. In   the   case   of  U.P.   Co­operative   Sugar   Factories

Federation Ltd., Lucknow & ors. v. M/s P.S. Misra, Gorakpur &

anr. reported in AIR 2003 All. 123, the Division Bench of Allahabad

High Court decided an almost similar question, as is involved in this

case, by holding that the order passed by the learned District Judge,

Lucknow, on 14.3.2002,  rejecting the application filed under Section

34 of the Arbitration Act for the reason that he had no territorial

jurisdiction and the Court at Gorakhpur had the jurisdiction, held that

the order was appealable under Section 37(1) of the Arbitration Act.

The   relevant   observations   of   Allahabad   High   Court,   appearing   in

paragraph 20, are as follows :

“ 20. Sub­section 1(b) of S.37 specifically makes such an

order appealable, which either set aside or refuse to set

aside the arbitration award under S. 34.  The rejection of

the   application   moved   under   S.34   of   the   Act   of   the

appellants would fall within the aforesaid clause and it

would be immaterial as to whether the application under

S.34   has   been   rejected   for   want   of   jurisdiction   or

otherwise on merit.   The said provision does not clarify

anywhere that if an application under S.34 is rejected on

merits alone, only then the appeal would lie.  The ground

of rejection may be multifarious but it is only the rejection

of application, which would give a right to the appellant

to file an appeal.   The argument of the learned counsel

for   respondent   no.   1   attempts   to   create   artificial

classification  with  respect to the orders passed on the

application   under   S.34   which   classification   is   neither

provided in the aforesaid provisions of the Act nor can be

imported   nor   infused   in   the   specific   provisions.     The

application of the appellants having been rejected, the

appellants have rightly filed an appeal under S.37 of the

Act.”

This view completely supports the view taken by me earlier.  Thus, I

find that the order impugned here is appealable under Section 37(1)

(b) of the Arbitration Act.

13. Now, coming to the question of territorial jurisdiction of

Panaji Court, I find that the impugned order proceeds on a wrong

footing that under Section 20 of the Code of Civil Procedure, 1908

place of residence or business or work of the plaintiff and not the

place of residence or business or work of the defendant is relevant.  I

also find that the learned Principal District Judge has not taken into

account the fact that the breach of the agreements alleged in this case

is a breach of exclusive right granted under the agreements to the

appellants to be the exclusive franchisee  of the respondent No.1 for

marketing its products and services in the entire State of Goa.  At the

cost of repetition it must be noted that the franchisee right so granted

under both the agreements executed between the appellants and the

respondents is exclusive and, therefore, according to the appellants,

no competition could be created for them by the respondents   by

granting similar franchisee right to someone else to operate in the

State of Goa during the term of the agreements.   So, this essential

condition   of   the   agreements   has   been   breached,   according   to   the

appellants,  and  the result would be the violation of the  right of the

appellants   to   carry   on   their   activities   as   exclusive   franchisee   for

marketing products of respondent No.1 in the entire State of Goa.   It

would mean, the appellants no longer enjoy the exclusivity to carry on

their   activities under the said agreements either at Margao or at

Panaji or at any other places within the limits of territorial jurisdiction

of the Courts of Principal District Judge at Margao as well as Panaji.

14. In the case of  Bharat Aluminium Company vs. Kaiser

Aluminium Technical Services Inc., reported in (2012) 9 SCC 552

the Hon'ble Apex Court has observed  that the territorial jurisdiction of

the Court as defined under Section 2(e) of the Arbitration Act has to

be understood keeping in view the provisions in Section 20 of the

Code of Civil Procedure  and both of these provisions give recognition

to principle of party autonomy.  Section 2(e) defines the Court as the

Principal   Civil   Court   of   original   jurisdiction   in   a   district   having

jurisdiction to decide the questions forming the subject matter of the

arbitration, if the same had been the subject matter of a suit.   The

Hon'ble Apex Court has held that the   term “subject matter” of the

arbitration cannot be confused with  “subject matter” of the suit and

its purpose is to identify the Courts having supervisory control over

the arbitration proceedings.   Therefore, the Hon'ble Apex Court in

paragraph 96 held that said expression would refer to a Court which

would essentially be a Court within whose local limits the seat of the

arbitration process is situated.

15. The   above   referred   case   lays   before   us   a   broader

perspective for developing an insight into what is considered to be

territorial   jurisdiction   of   the   Court   under   Section   2(e)   read   with

Section 20 of the Code of Civil Procedure in arbitration proceedings.

Firstly, it explains that the issue of jurisdiction has to be resolved by

referring to Section 2(e) as well as Section 20 of the Code of Civil

Procedure,   or   any   other   relevant   provision   of   the   Code   of   Civil

Procedure,   depending   upon   the   subject   matter   of   the   arbitration

process.  Secondly, it indicates that the expression “subject matter”  of

the arbitration has to be understood by keeping in view its purpose

which is to identify the Courts having supervisory control over the

arbitration proceedings and it would mean the Court within whose

local limits the seat of the arbitration process is situated. 

16. The above exposition of law  would necessitate a reference

to  the provision of Section 20 of the Code of Civil Procedure.  In fact,

in this case, learned Principal District Judge has also considered this

provision holding that out of the provisions   of Sections 15 to 20

governing the jurisdiction of the Civil court, Section 20 is relevant

from the nature of the claim made and relief sought by the appellants.

Section   20   lays   down   that   a   Court   within   the     limits     of   whose

jurisdiction the defendant resides or carries on business or personally

works for    gain shall have the jurisdiction to try the suit.  It further

lays down that the Court will also have the jurisdiction when the

whole or part of the  cause of action arises within its territorial limits.

In this case, we are concerned with that part of Section 20 which

confers jurisdiction on the Court on the basis of cause of action, as it is

the contention of the appellants that the cause of action has arisen in

the whole of State of Goa.   The expression 'cause of action' has not

been defined anywhere in the Code of Civil Procedure.   It is well

settled that it means a set of facts necessary to justify a right to sue.  In

the case of Bloom Dekor Limited vs. Subhash Himatlal Desai and

others, reported in  (1994) 6 SCC 322, the Hon'ble Apex Court has

held that by 'cause of action' it means a cluster of facts which it is

necessary for the plaintiff to prove, in order to succeed in the suit.

The   relevant   observations   of   the   Hon'ble   Supreme   Court   as   they

appear in paragraph 28 read as under :

   “28. By “cause of action” it is meant every fact, which, if

traversed, it would be necessary for the plaintiff to prove in

order to support  his  right  to  a judgment  of  the  Court

(Cooke vs. Gill).  In other words, a bundle of facts which is

necessary for the plaintiff to prove in order to succeed in

the suit.  This Court had occasion to refer to the case of

Cooke in A.K. Gupta and Sons Ltd. vs. Damodar Valley

Corpn.  At Page 98 it is stated thus :

“The expression  'cause of  action' in

the   present   context   does   not   mean   'every   fact

which it is material to be proved to entitle the

plaintiff to succeed' as was said in Cooke v. gill in

a different context, for if it were so, no material

fact  could   ever  be  amended   or   added   and,  of

course, no one would want to change or add an

immaterial   allegation   by     amendment.     That

expression for the present purpose only means, a

new claim made on a new basis constituted by

new facts.  Such a view was  taken in Robinson v.

Unicos Property Corporation Ltd. and it seems to

us to be the only possible view to take.  Any other

view would make the  rule futile.  The words 'new

case' have understood to mean 'new set of ideas',:

Dornan v. J. W. Ellis and Co. Ltd.   This also

seems to us to be a reasonable view to take.  No

amendment will be allowed to introduce a new

set of ideas to the prejudice of any right acquired

by any party by lapse of time.”

17. Thus, the expression 'cause of action' includes within its

fold every fact and every set of facts which must be proved when

controverted by the defendant, if he wishes to succeed in the suit.  In

this case, the claim of refund of amount of Rs.30/­ lakhs is grounded

on   the   fact,   as   alleged   by   the   appellant   and   traversed   by   the

respondents,    that the appellants are entitled to claim such a relief

because  their exclusive right as franchisee  of the respondent No.1 has

been breached by the respondents  as a result of which, the appellants

are not in a position to carry on their activities as franchisee  to the

exclusion of all other competitors   not only at any place situated

within the local limits of Margao Court but also at such other  places

as are situated within the local limits of Panaji Court.  No doubt, the

agreements   in   this   case   could     be   said   to   be   terminated   by   the

respondents at Margao as the e­mail sent by the respondents was

received by the appellants at Margao.  Termination of agreements  at

Margao is one of the facts constituting cause of action; but it is not the

only fact which gives rise to the  cause of action.  As stated earlier, the

'cause of action' means every fact and every set of facts necessary for

the plaintiff to prove in order to succeed in the suit.  In order to lay

their   claim   to   secure   the     amount   of   Rs.30/­   lakhs,   it   would   be

essential for the appellants to prove not only the termination of the

agreements, but also the fact that such termination is illegal owing to

breach   of   the   essence   of   the     agreements   committed   by   the

respondents.   If the appellants cannot prove this fact, the clause of

non­refundability of the amount of Rs.30/­ lakhs contained in the

memorandum   of   understanding   cum   unit   franchisee   agreement

(clause 2) would come in their way and then they would fail in the

suit or arbitration proceeding.   Therefore, it would be necessary for

the   appellants   to   prove   the   fact   that     the   termination   of   the

agreements,   apart   from   being   unilateral,   was   illegal,   entitling   the

appellants to receive the refund of said amount together with interest,

if any.  Therefore, the cause of action in the instant case has arisen at

every place in the State of Goa where breach of the right of the

appellants   to market products  and services of the respondent No.1 to

the exclusion of all others during the subsistence of the agreements

has occurred  and some of such places  are situated within the local

limits of territorial jurisdiction of the Panaji Court.

18. There is another way of looking at the aspect of cause of

action.  The expression “cause of action” includes not only the wrong

done, but also its effect.   Learned Single Judge of this Court in the

case of State of Maharashtra vs. Sarvodaya Industrial, reported in AIR

1975 Bombay 197  held, while interpreting the phraseology used by

Section 19 of the Civil Procedure Code about “wrong done”,   that

when a wrongful act is done at one place and its resultant damage is

caused at another place, the place where the wrongful act is actually

done and the place where the loss is actually suffered as a result of

the wrongful act,  both,  would qualify to be called proper places of

action.  Similar is the view taken by the Division Bench of the High

Court of Delhi in the Judgment rendered on 13.3.2013 in FAO 0S

293/2011, Captain Cursy Driver vs.   (200)(2013) (DLT 173).   The

Division Bench of the Delhi High Court has referred with approval to

the view taken by the learned Single Judge of this Court in Sarvodaya

Industries.  So, if a wrongful act constitutes a cause of action, so does

the resultant damage or effect leading to suffering of loss.   In the

instant case, wrongful act is illegal termination of the agreements at

Margao, but the suffering of the resultant damage by the appellants,

i.e. unjustifiable denial of appellants right as an exclusive franchisee

for the entire State of Goa,  is at several places across the State of Goa

and   some   of   those   places   are   situated   within   the   local   limits   of

territorial   jurisdiction   of   Court   of   Principal   District   Judge,   Panaji.

From this perspective also, the Court of Principal District Judge, Panaji

would have the jurisdiction to try and decide in accordance with law

the   application   filed   under   Section   9,   Arbitration   Act,     by   the

appellants.

19. There is yet another dimension to the whole issue.   The

arbitrator appointed in this case, as informed by learned counsel for

appellants,   is   having   his   office   at   Panaji   and   would   be   holding

arbitration proceeding at Panaji.  This would mean, for the purpose of

S.34   application,   the   supervisory   jurisdiction   over   the   arbitration

tribunal shall be with the Court at Panaji.  It would then be a Court of

Principal District Judge at Panaji and therefore, following the law laid

down by the Hon'ble Apex Court in Bharat Aluminium Co. Ltd., supra,

the Court for the purpose of S.9 application  would also be the same

which is having supervisory control over the arbitral tribunal, which  is

of the Court of Principal District Judge, Panaji.  If this were not so, an

anomalous situation would arise.  For Section 9 relief a party would

go to Margaon and for challenging the award under Section 34, it

would come to Panaji.  That is neither the purpose  nor the object of

the Arbitration Act.

20. Learned counsel for the appellants has referred to me the

cases of Jindal Vijayanagar Steel (JSW Steel Ltd.) vs. Jindal Praxair

Oxygen   Co.   Ltd.,   reported   in   (2006)   11   SCC   521,   McDermott

International Inc. vs. Burn Standard Co. Ltd. and others, reported in

(2006)   11   SCC   181   and   Centrotrade   Minerals   &   Metals   Inc.   vs.

Hindustan Copper Ltd., reported in (2006) 11 SCC 245.

21. So far as the case of   Jindal Vijayanagar Steel  (supra) is

concerned, I must say that the facts of that case are quite different as

in that case, the parties themselves had chosen Mumbai to be situs for

the arbitration proceedings and the pipeline supply agreement was

approved   by   the   Board   of   Directors   of   the   appellant   Company   in

Bombay and in this background of facts, it was held that if a Court has

no   territorial   jurisdiction   (but   is   otherwise   competent   to   hear   a

matter), the judgment would be valid  and not void or non est.  In the

second case,  McDermott International Inc.,    the Hon'ble Apex Court

was considering the scope of Section 16 of the Arbitration Act and

held that when a question of jurisdiction is raised by a party, it should

be determined as  a preliminary ground by the Tribunal itself.  In the

instant case, the question of  competence of the Arbitral Tribunal to be

decided  under Section 16 is not  involved.  Thus, facts of both these

cases   of  Jindal   Vijayanagar   Steel  and  McDermott   Internationl   Inc.

(supra) being different from the facts of the instant case, they  would

have no application to the present case.

22. As regards third case of Centrotrade Minerals & Metals Inc.

(supra) relied upon by learned counsel for the appellants, what has

been held by Hon'ble Apex Court as a proposition of law is that when

a jurisdictional issue is raised, it goes without saying that it would

have to be determined as a jurisdictional fact by the same Court before

which it is raised.  In the present case, the jurisdictional question was

indeed raised before the learned Principal District Judge and following

the said principle of law, same issue has been decided by him as well,

and rightly so.  

23. Shri P.A. Kholkar, learned counsel for the respondent has

referred   to   me   the   cases   of   C.   Beepathuma   and   others   vs.

Shankaranarayana,  reported in  AIR 1965 SC 241  and  Uttaranchal

Road Transport Corpn. and others vs. Mansaram Nainwal, reported in

(2006) 6 SCC 366.  In the first case, the issue was of application of

doctrine   of   election   to   a   mortgage   transaction   which   issue   is   not

involved   in   the   present   case.     So,   with   due   respect,   I   must   say,

assistance from that case cannot be taken here.  In the second case of

Uttaranchal Road Transport Corpn.  the Hon'ble Apex Court has held

that   a   decision   is   an   authority   for   what   it   actually   decides   and

enunciation of the  reason or principle on which a question before a

Court has been decided is alone binding as a precedent.  By following

this principle of law only that I have made my conclusions in the

earlier paragraphs.

24. In view of above, I find that the Court of Principal District

Judge, Panaji, has the jurisdiction in this case to decide the application

filed under Section 9 of the Arbitration Act.  The material aspects of

the whole issue, as discussed earlier, having not been considered by

the learned Judge, I further find that  the impugned order cannot be

sustained  in  law   and  it deserves to  be  quashed  and  set  aside  by

allowing the appeal.

25. The appeal stands allowed.

26. The impugned order is hereby quashed and set aside.

27. The matter is sent back to the Court of learned Principal

District   Judge,   Panaji   for   being   decided   on   its   own   merits   in

accordance with law. No costs.

                         

       JUDGE

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