TaxTMI 
TaxTMI 
2001 (4) TMI 833
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.... of Rs. 25 lakhs together with a covering letter dated 28-4-1995 to the 2nd respondent herein towards the value of the 50,000 equity shares, but, contrary to the terms and conditions of the subscription agreement, it did not take any steps to bring out the public issue of equity shares nor did it get the share of the company listed on OTCEI. In the aforementioned situation, clause 7.1(a) of the Subscription Agreement was sought to be invoked. It stated that although the 2nd respondent agreed to refund the amount to the 1st respondent, in terms of clause 7.1(a), but such assurances had not been implemented. 3. The said agreement contains an arbitration agreement, being Article IX therein, which reads thus : "Article IX : Disputes.-9.1 Any dispute or question arising under these presents (including existence or validity hereof) shall be referred to arbitration. The Sponsor/Co-investors and the Company shall appoint their own arbitrators and those two arbitrators so appointed shall appoint an umpire. The two arbitrators shall enter upon any reference unless the umpire has been so appointed. Such arbitrator proceedings will be held at Hyderabad. 9.2 The cost of arbitration sha....
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.... and (d) of the Arbitration & Conciliation Act, 1996 ('the Act') define the aforementioned words, which read thus : "2. Definitions.-(1) In this Part, unless the context otherwise requires,- (a )'arbitration' means any arbitration whether or not administered by permanent arbitral institution; (b)'arbitration agreement' means an agreement referred to in section 7; (c)****** (d)'arbitral tribunal' means a sole arbitrator or a panel of arbitrators;" 9. Section 7 of the Act reads : "7. Arbitration Agreement.-1. In this part, 'arbitration agreement' means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. 2. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. 3. An arbitration agreement shall be in writing. 4. An arbitration agreement is in writing if it is contained in- (a )a document signed by the parties; (b)an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or (c ....
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....11(6) of the Act, which reads : "Appointment of arbitrators.-(1) to (5)** **** (6) Where, under an appointment procedure agreed upon by the parties,- (a )a party fails to act as required under that procedure; or (b)the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or (c )a person, including an institution, fails to perform any function entrusted to him or it under that procedure, a party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment." 17. The provisions of section 11(6) can be taken recourse to only in the event the conditions precedent therefor exist. 18. Section 11 pre-supposes existence of an agreement which may be valid or invalid, but unless such agreement subsists, the question of referring any dispute involving the petitioners would not arise. We are, therefore, of the opinion that the learned single Judge committed a jurisdictional error in passing the impugned order. 19. A Division Bench of the Calcutta High Court in Santinik....
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.... a prima facie conclusion could be arrived at that the petitioners were guilty of actual misappropriation." 21. In Secretary of State v. Tameside 1976 (3) All ER 665 Lord Diplock held : ". . . Had there been factual foundation on the basis of which reasonable conclusion could be arrived at that the petitioners were guilty of actual misappropriation it would have been a different matter. Here it appears that the authority passing the impugned order did not ask itself the right question and take reasonable step to acquaint itself with the relevant information to enable it to answer it correctly. This amounts to misdirection in law." 22. An error of jurisdiction can be committed not only when there exists an inherent lack thereof but also while acting within jurisdiction. Reference in this connection can be made to a decision in Anisminic Ltd. v. Foreign Compensation Commission [1969] 2 Appeal Cases 147 by Lords Pearce and Wilberforce and by Browne J. If such jurisdictional error is committed, the doctrine of ultra vires would be attracted. 23. In Dias on Jurisprudence, Fifth edn. at page 143, it is stated : "Pronouncements of law, which are not part of the ratio decide....