Monday, 10 October 2016

When appealability of an order in arbitration proceeding can be ascertained from its ripple effect?

  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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