Faith Constructions vs Mrs. Augustina Ekka
2025 Latest Caselaw 4245 Del

Delhi High Court

Faith Constructions vs Mrs. Augustina Ekka on 22 April, 2025

Author: Jyoti Singh

Bench: Jyoti Singh

                          $~73
                          *    IN THE HIGH COURT OF DELHI AT NEW DELHI
                          %                                       Date of Decision: 22nd April, 2025
                          +      ARB.P. 1346/2024
                                 FAITH CONSTRUCTIONS                        .....Petitioner
                                              Through: Mr. Mani Karan Sharma and Mr. P.
                                              Srinivasan, Advocates.

                                                    versus

                                 MRS. AUGUSTINA EKKA                             .....Respondent
                                               Through: Mr. Harpreet Singh Nagpal and
                                               Mr. Pritpal Singh Chawla, Advocates.
                                 CORAM:
                                 HON'BLE MS. JUSTICE JYOTI SINGH
                                                        JUDGEMENT

JYOTI SINGH, J. (ORAL)

1. This petition is preferred on behalf of the Petitioner under Section 11(6) of Arbitration and Conciliation Act, 1996 ('1996 Act') seeking appointment of a Sole Arbitrator to adjudicate the disputes between the parties.

2. Petitioner and Respondent entered into a Memorandum of Agreement dated 19.05.2023 for construction of work at Respondent's residence at the ground floor at Ranchi, Jharkhand for a sum of Rs.28 lac. Disputes arose between the parties when according to the Petitioner husband of the Respondent breached the Agreement causing financial loss to the Petitioner. As per the Petitioner, Respondent owes a balance payment of Rs.11,68,960/- which the Respondent failed to pay despite several letters sent to her. As the Memorandum of Agreement contains arbitration clause 9, Petitioner invoked

the arbitration agreement vide notice dated 30.07.2024, but in response Respondent denied the claims and hence, Petitioner has filed this petition.

3. Reply is filed on behalf of the Respondent taking a preliminary objection to territorial jurisdiction of this Court to entertain this petition. It is urged that the arbitration clause is silent on the seat/venue of arbitration and in the absence of the same, the jurisdiction shall be decided in accordance with Section 2(1)(e) of 1996 Act read with Sections 16 to 20 of CPC, 1908. Learned counsel for the Respondent argues that only the Court within whose jurisdiction Respondent actually or voluntarily resides or works for gain or where cause of action has arisen, wholly or in part, will have the territorial jurisdiction to entertain the petition under Section 11(6) of 1996 Act. Elaborating the argument, it is submitted that the Memorandum of Agreement was executed and notarised at Ranchi, Jharkhand; the immovable property in respect of which construction work was to be carried out is situated in Ranchi; and Respondent permanently resides at Ranchi. Thus, no cause of action has arisen within the jurisdiction of this Court and the petition deserves to be dismissed. In support, learned counsel for the Respondent places reliance on the judgment of the Co-ordinate Bench of this Court in Faith Constructions v. N.W.G.E.L Church, 2025 SCC OnLine Del 1746, where in similar facts, the petition was dismissed for want of territorial jurisdiction.

4. Responding to the preliminary objection, learned counsel for the Petitioner submits that part payments with respect to the construction were received by the Petitioner in his bank account in Delhi, which is evident from the bank statement appended as Document No. 8 to the petition albeit it is candidly admitted that this is not pleaded in the petition. Learned

counsel places reliance on the judgment of this Court in Auto Movers v. Luminous Power Technologies Pvt. Ltd., 2021 SCC OnLine Del 4387, to support the plea that if payments are received at a particular place, part of the cause of action arises in that place giving territorial jurisdiction to the Court.

5. Heard.

6. In view of the preliminary objection raised by the Respondent, I may first decide the same. Indisputably, the Memorandum of Agreement dated 19.05.2023 was executed, signed and notarized at Ranchi, Jharkhand. By way of this Agreement, Petitioner had undertaken to carry out construction work at the residence of the Respondent which is also situated in Ranchi. Respondent permanently resides at Ranchi. It is settled that where the arbitration agreement is silent on the seat/venue/place of arbitration, jurisdiction of the Court to entertain petition under Section 11(6) of 1996 Act will be determined in consonance with Section 2(1)(e) of 1996 Act read with Sections 16 to 20 of CPC, which means that the determining factor would be where the Respondent actually or voluntarily resides or carries on business and/or where cause of action, in whole or in part, arises. It is equally settled that while determining the accrual of cause of action, material and substantial facts have to be taken into consideration and not insignificant or a trivial part of cause of action. A substantial connection must be seen between the cause of action and the jurisdiction of the Courts which would help prevent forum shopping by the parties and ensure that cases are heard by Courts with genuine connections with the dispute.

7. Seen in this backdrop, the material part of the cause of action has arisen in Ranchi, Jharkhand where the Agreement was executed and signed

and where not only is the property in question located but also where the work was executed by the Petitioner in respect of which disputes are raised claiming balance amount. Respondent is right in her contention that this Court lacks the territorial jurisdiction to entertain the present petition. The main plank of the argument of the Petitioner albeit not pleaded is that payments were received by the Petitioner in his bank at Delhi. To my mind, mere receipt of payments in the bank account at Delhi, especially in the absence of any payment clause specifying where the payment is to be made and received in the Agreement itself, will not give rise to a material cause of action at Delhi. This very issue came up before the Co-ordinate Bench of this Court in Faith Constructions (supra) and the Court held that mere deposit of cheques in the account in Delhi will not give rise to a cause of action as this factum was not a material consideration. Relevant passages from the judgment are as follows:-

"7. As regards the primary objection taken by the respondent vis-à-vis territorial jurisdiction of this Court to entertain the present petition, the same warrants a factual and legal analysis. It is a settled position in law that when the arbitration agreement is silent on the aspect of 'seat', 'venue' or 'place' of arbitration, the determining factor will be where the cause of action arises as well as where the defendant/respondent actually or voluntarily resides or carries on their business. In other words, Section 2(1)(e) of the A&C Act has to be read in light with Sections 16 to 20 of CPC to determine the territorial jurisdiction of the Court at the stage of considering referral to arbitration in a Section 11 A&C Act petition.

A gainful reference may be made to the decisions of the Supreme Court in BBR (India) (P) Ltd. v. S.P. Singla Constructions (P) Ltd., (2023) 1 SCC 693, and Ravi Ranjan Developers (P) Ltd. v. Aditya Kumar Chatterjee, 2022 SCC OnLine SC 568. In the latter, it was held, as under:

"27. At the same time, an application under Section 11(6) of the A&C Act for appointment of an Arbitrator/Arbitral Tribunal cannot be moved in any High Court in India, irrespective of its territorial jurisdiction. Section 11(6) of the A&C Act has to be harmoniously read with Section 2(1)(e) of the A&C Act and construed to mean, a

High Court which exercises superintendence/supervisory jurisdiction over a Court within the meaning of Section 2(1)(e) of the A&C Act.

28. It could never have been the intention of Section 11(6) of the A&C Act that arbitration proceedings should be initiated in any High Court in India, irrespective of whether the Respondent resided or carried on business within the jurisdiction of that High Court, and irrespective of whether any part of the cause of action arose within the jurisdiction of that Court, to put an opponent at a disadvantage and steal a march over the opponent."

(Emphasis supplied)

8. A perusal of the aforenoted legal position makes it amply clear that at the stage of determining the jurisdiction of the Court to entertain a petition under Section 11 A&C Act, in case of lack of consent between the parties as to the seat/venue of arbitration, which is reflected from the arbitration clause of the subject agreement, the Court must determine jurisdiction by taking the aid of Sections 16 to 20 of the CPC. In such a case, two factors are of relevance- (i) where the respondent actually or voluntarily resides or carries on their business, and (ii) where the cause of action, wholly or in part, arises. As regards the first factor, it is undisputed that the respondent resides and carries on its business in the state of Odisha. Therefore, the discussion becomes predominantly centred around examining the second factor, i.e., where the cause of action arises.

9. A catena of Supreme Court decisions have clarified that while determining territorial jurisdiction of a Court, what is decisive is the accrual of cause of action. In other words, cause of action is a bundle of facts which create rights and obligations and gives rise to the right to sue to a party. Moreover, cause of action is made up of material and integral facts. This implies that not every insignificant or inconsequential fact becomes a part of cause of action. In fact, for a fact to be considered material enough to lead to the conclusion as to accrual of cause of action, it must be proved that the said fact has a nexus with lis between the parties and that it is integral to the dispute at hand. Reference may be made to the decision of the Apex Court in Alchemist Ltd. v. State Bank of Sikkim, (2007) 11 SCC 335. Relevant part of it is reproduced herein:

"25. The learned counsel for the respondents referred to several decisions of this Court and submitted that whether a particular fact constitutes a cause of action or not must be decided on the basis of the facts and circumstances of each case. In our judgment, the test is whether a particular fact(s) is (are) of substance and can be said to be material, integral or essential part of the lis between the parties. If it is, it forms a part of cause of action. If it is not, it does not form a

part of cause of action. It is also well settled that in determining the question, the substance of the matter and not the form thereof has to be considered."

(Emphasis supplied)

10. Territorial jurisdiction of a Court is ascertained having regard to the place of accrual of cause of action. Some of the relevant principles that have developed in this area of jurisprudence are, including but not limited to, that making and signing of a contract constitutes cause of action; that facts which are necessary to decide the lis between the parties must have wholly or at least in part, arisen within the territorial jurisdiction of the Court; that each fact pleaded in the petition would not ipso facto be considered relevant while determining cause of action and that they must have a nexus with the issues involved in the matter; and importantly, that an insignificant or trivial part of cause of action would not be sufficient to confer territorial jurisdiction, even if incidentally forming a part of cause of action.

11. Having discussed the prevalent legal position as to determination of accrual of cause of action, it is evident that for a fact to form part of the cause of action, it must be material and substantial in nature, in such a way that it effects the rights or obligations of the parties, and not incidental or remote thereto. Keeping in view the above, the factual position of the present case may be analysed.

12. In the present case, the subject agreement was indisputably executed and notarized in Odisha. The construction work under the said agreement also took place in Odisha. In fact, as noted before, even the respondent's principal place of business is in Odisha. Considering the aforesaid, this Court is of the considered opinion that the material part of cause of action has arisen outside the territorial jurisdiction of this Court.

Insofar as the petitioner's contention as to the part payment being received in Delhi is concerned, it is noted that merely having its bank account branch in Delhi wherein part payment might be received, is not sufficient cause of action to give rise to this Court's jurisdiction. In fact, the payments so received are through cheques issued by the respondent from its bank account having its branch in Rajgangpur, Odisha. Mere depositing of said cheques in an account in Delhi cannot amount to payment being made in Delhi, especially in the absence of any 'payment clause' specifying where the payment is to be made and received, within the subject agreement. Notably, even though the bill may have been generated from the petitioner's address in Delhi, neither does it expressly or implicitly provide for place of payment, nor does it subject the disputes arising out of lack of payments regarding the said bills to the jurisdiction of Delhi. There is nothing to indicate, nor is it averred by the petitioner,

that payment had to necessarily be made/received in Delhi. In such a case, having a bank account in Delhi where the petitioner may deposit the cheque issued to make payments, is a factum of no material consideration so as to justify accrual of cause of action. Therefore, it is wholly misconceived to rest the argument of accrual of cause of action on the strength of this singular fact, when the entire bundle of facts constituting the substantial and integral cause of action rests in Odisha.

13. In light of the aforesaid facts and considering the aforenoted legal position, it is held that no part of cause of action can be said to have arisen within Delhi, ousting this Court's territorial jurisdiction to entertain the present petition. Accordingly, the same is dismissed."

8. Learned counsel for the Petitioner had emphatically relied on the judgment in Auto Movers (supra) to highlight that the Debtor must seek the Creditor and therefore, the place of payment of the outstanding dues will be a determinative factor to decide the jurisdiction of the Court. The judgment is distinguishable for multiple reasons. Firstly, the Court was not dealing with a petition under Section 11(6) of 1996 Act but was considering a petition under Article 227 of the Constitution of India against an order of the Trial Court holding that the payments made at New Delhi will give jurisdiction to the Court to try the suit. Importantly in the said case, as noted in the judgment itself, Plaintiff had averred in the plaint that the invoices raised by it were subject to jurisdiction of Court of Delhi only and payments were also to be made in Delhi and the cheque issued by the Defendant which on presentation was dishonoured was also received and realised in New Delhi. Legally, it was the case of the Plaintiff that in case of goods sold and delivered, the suit for its price will lie where the same is paid. It was on this basis that Plaintiff had claimed that the Courts at Delhi would have jurisdiction and the Trial Court decided the preliminary issue in its favour and this Court upheld the order of the Trial Court. In the present case, none

of these factors exist and the material cause of action, as noted above, has arisen outside the territorial boundaries of this Court.

9. Accordingly, the preliminary objection of the Respondent is upheld holding that this Court has no territorial jurisdiction to entertain the present petition and the petition is dismissed with liberty to the Petitioner to approach the Court of competent jurisdiction. It is made clear that this Court has not expressed any opinion on the merits of the case.

JYOTI SINGH, J APRIL 22, 2025 S.Sharma/shivam