Case: Seth Thawardas Pherumal Vs. Union of India

and concluded all their terms; then, at the last minute, one side raised a point about rationing but without waiting for a reply and without having the term entered in the contract, he signed the contract as it stood before the point was raised even during the negotiation.It is an error in law to hold that any contractual obligation can be inferred or implied from these circumstances.45. Then there is still another error. If this implied agreement about rations and cloth does not spring out of the written contract but is to be inferred collaterally as a distinct and subsidiary contract, and we gather that that is the finding, especially as, reference was made to section 9 of the Contract Act, then that is not a contract to which the arbitration clause can apply. Wide though it is, clause 14 is confined to any matter relating to the written contract and if ration and cloth are not covered by the written contract, they are not matters that relate to it.If parties choose to add a fresh contract in addition to or in substitution for the old, then the arbitration clause cannot cover the new contract.See Lord Macmillan in 1942 AC 356 at p.371 (H).46. The last item in dispute in this appeal is claim No. 17 about interest. The statement of claim sets out-"Item 17 - Interest on the amount of money involved in this claim at the rate of Rs. 6 per cent.-Rs. 27,665.This work was finished in May 1946 and it was proper for the department to have decided all our claims at least by 31st December 1947..................But this was not done. Due to this a heavy amount remained blocked up and we were compelled to take money from our bankers on interest. We therefore pray for interest for 16 months from 1-1-48 to 31-4-49".The arbitrator held :"The contractors contention that his claims should have been settled by January 1948 is, in my opinion, reasonable. I therefore award interest at 6 per cent. for 16 months on the total amount of the awards given i.e., Rs, 17,363."Then the arbitrator sets out the amounts awarded under each head of claim. A persual at them shows that each head relates to a claim for an unliquidated sum. The Interest Act, 1939 applies, as interest is not otherwise payable by law in this kind of case (see B. N. Ry. Co., v. Ruttanji Ramji, AIR 1938 PC 67 (J) but even if it be assumed that an arbitrator is a "Court" within the meaning of that Act (a fact that by no means appears to be the case),the following among other conditions must be fulfilled before interest can be awarded under the Act:(1) there must be a debt or a sum certain ;(2) it must be payable at a certain time or otherwise;(3) these debts or sums must be payable by virtue of some written contract at a certain time;(4) There must have been a demand in writing stating that interest will be demanded from the date of the demand.Not one of these elements is present, so the arbitrator erred in law in thinking that he had the power to allow interest simply because he thought the demand was reasonable.47. It was suggested that at least interest from the date of "suit" could be awarded on the analogy of Section 34 of the Civil Procedure Code, 1908.But section 34 does not apply because an arbitrator is not a "court" within the meaning of the Code nor does the Code apply to arbitrators, and but for S. 34, even a Court would not have the power to give interest after the suit.This was, therefore, also rightly struck out from the award.48. We pause to note that there was only a delay of five days at the outside in the overall picture. The last date for removal of the last installment of bricks was 25-5-46 and the contractor says under this head that the whole contract was completed by the end of May, 1946.It is difficult to see how 88 lacs of bricks could have been damaged by rain in the last five days of May, and if the damage occurred before it would have occurred anyway, for on the contractors case he had to have a large stack of unbaked bricks on hand ready to enter the kilns in order to keep pace with his time table. However, that was a matter within the jurisdiction of the arbitrator and is not a matter in which the Courts can interfere.49. That concludes Civil Appeal No. 260 of 1953 and we now turn to the other appeal, Civil Appeal No. 12 of 1954. Only two items are in dispute here. Heads 4 and 17 of the claim.50. The over-all pattern of the claim is the same as in the other case. There was a contractor and he entered into an agreement containing the some terms and conditions, except about the details of supply. It was signed on the same day as the other and by the same authority on behalf of the Dominion Government, and the matter went before the same arbitrator and the award in this case was given on 1-5-1949, one week before the other award. Here also, no specific question of law of was referred and we need not cover the same ground. Our decision is the same here as, there.51. The fourth head of claim of about cloth and rations. The claim here, and the Dominion Governments reply, is the same as in the other case, but the award in this case is not based on an implied contractual obligation but on "a moral and implied obligation". The error here is even greater then before. The sum claimed was Rs. 51,495 and the amount awarded was Rs. 30,000.52. The seventeenth head of claim was about interest. The contractor claimed Rs.27,665 and the arbitrator awarded Rs. 9,954. There is the same error of law apparent on the face of the award.53.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]An arbitrator is not a conciliator and cannot ignore the law or misapply it in order to do what be thinks is just and reasonable. He is a tribunal selected by the parties to decide their disputes according to law and so is bound to follow and. apply the law, and if he does not, he can be set right by the Courts provided his error appears on the face of the award. The single exception to this is when the parties choose specifically to refer a question of law as a separate and distinctis undeniable but it is not enough that the dispute should fall within the clause. It is also necessary that the parties should define what the dispute is and agree to refer the dispute so set out and defined to arbitration, or, if they do not, that the Court should compel them to dostress the word "specifically" because parties who make a reference to arbitration have the right to insist that the tribunal of their choice shall decide their dispute according to law, so before the right can be denied to them in any particular matter, the Court must be very sure that both sides wanted the decision of the arbitrator on a point of law rather than that of the Courts and that they wanted his decision on that point to be final.The dispute sprang out of a series of claims made in a number of letters written by the contractor to the Additional Chief Engineer, C. P. W. D. and culminated in a petition, Ex. B(1), in which the contractor summarised his claims. The document is not dated. On receipt of this, someone on behalf of the C. P. W. D. invoked the jurisdiction of the arbitrator. That letter has not been filed. The arbitrator then wrote to the contractor and asked him to submit a statement ofletter has not been filed either but reference is made to it in Ex. C (l), the statement of claim which the contractor filed in response to that letter. As the material documents setting out the terms of reference are not here, we were asked by both sides to infer what the terms were from this statement of claims and the recitals in the award.We are of opinion that this is not the kind of specific reference on a point of law that the law of arbitration requires. In the first place, what was shown to us is no reference at all. It is only an incidental matter introduced by the Dominion Government to repel the claim made by the contractor in general terms under claim No. 3. In the next place this was the submission of the contractorreference requires the assent of both sides. If one side is not prepared to submit a given matter to arbitration when there is an agreement between them that it should be referred,then recourse must be had to the Court under Section 20 of the Act and the recalcitrant party can then be compelled to submit the matter under sub-sectionthe absence of either, agreement by both sides about the norms of reference, or an order of the Court under Section 20(4) compelling a reference, the arbitrator is not vested with the necessary exclusivein our opinion, is clear from the passages we have quoted from the award.We hold that clause 6 expressly releves the union Government of all liability under this head of claim and that the arbitrator was wrong in awarding any sum on thatNow it is admitted that the contract contains no clause about rations and it is also evident that the question was not raised when the tender was accepted on behalf of the Dominion Government. The question was raised in a letter to the Executive Engineer, and the contractor signed the contract without waiting for ais well settled that governments can only be bound by contracts that are entered into in a particular way and which are signed by the proper authority.A reference to the agreement, Ex. A(1), will show that it was accepted on behalf of the Dominion Government by the Additional Chief Engineer and not by an Executiveletter written to the Executive Engineer would therefore have no effect and even if it be assumed that the letter was forwarded to the Additional Chief Engineer for consideration, what does it amount to? A tender embodying certain terms is submitted and is accepted on 1-11-45. Both sides are agreed on all matters contained in it and their conduct shows that both sides indicated that the contract should be reduced to writing. Before the agreement is signed, one party wants to include a further condition in the contract.We will assume that the request was made to the other contracting party. But without waiting for the assent of the other side, both sides accept and sign the contractit existed before the fresh suggestion wasIt is an error in law to deduce from this that there was acceptance of the fresh proposal. On the contrary, the legal conclusion is that the new suggestion was dropped and that the contractor was content to accept the contract as it was without this condition.any case, a person cannot be bound by a one-sided offer which is never accepted, particularly when the parties intend that the contract should be reduced to writing. That is the whole point of insisting on a document. It excludes speculation as to what was and what was not agreed to however much the matter might have been raised by one of the parties during the stage oferror is apparent. Facts must be based either on evidence or on admission; they cannot be found to exist from a mere contention by one side especially when they are expressly denied by the other.The inference from the facts stated above is that the contractor entered into the agreement with his eyes open and whatever his one-sided hopes may have been he was content to enter into the agreement as it stood without binding the other side to the new conditions and without even waiting to ascertain the reaction of the other side to his further proposals.It has to be remembered that rationing was not a matter that was under the direction and control of the Dominion Government. It was a local matter handled by the then Provincial authorities and under their direction and control. The C.P.W.D., as a department of the Dominion Government, was not concerned with rationing except that its employees had to submit to rationing like everybody else in the Sindri area. This confusion between the Dominion Government and the Provincial Government occurs in the arbitrators opening sentence under this head where he sets out the contractors contention that "commodities such as rations and cloth which were absolutely essential for the maintenance of his labourers and which were under Government control.It was suggested that at least interest from the date of "suit" could be awarded on the analogy of Section 34 of the Civil Procedure Code, 1908.But section 34 does not apply because an arbitrator is not a "court" within the meaning of the Code nor does the Code apply to arbitrators, and but for S. 34, even a Court would not have the power to give interest after the suit.This was, therefore, also rightly struck out from the award.We pause to note that there was only a delay of five days at the outside in the overall picture. The last date for removal of the last installment of bricks was 25-5-46 and the contractor says under this head that the whole contract was completed by the end of May,is difficult to see how 88 lacs of bricks could have been damaged by rain in the last five days of May, and if the damage occurred before it would have occurred anyway, for on the contractors case he had to have a large stack of unbaked bricks on hand ready to enter the kilns in order to keep pace with his time table. However, that was a matter within the jurisdiction of the arbitrator and is not a matter in which the Courts can interfere.That concludes Civil Appeal No. 260 of 1953 and we now turn to the other appeal, Civil Appeal No. 12 of 1954. Only two items are in dispute here. Heads 4 and 17 of the claim.The over-all pattern of the claim is the same as in the other case. There was a contractor and he entered into an agreement containing the some terms and conditions, except about the details of supply. It was signed on the same day as the other and by the same authority on behalf of the Dominion Government, and the matter went before the same arbitrator and the award in this case was given on 1-5-1949, one week before the other award. Here also, no specific question of law of was referred and we need not cover the same ground. Our decision is the same here as, there.The fourth head of claim of about cloth and rations. The claim here, and the Dominion Governments reply, is the same as in the other case, but the award in this case is not based on an implied contractual obligation but on "a moral and implied obligation". The error here is even greater then before. The sum claimed was Rs. 51,495 and the amount awarded was Rs. 30,000.The seventeenth head of claim was about interest. The contractor claimed Rs.27,665 and the arbitrator awarded Rs. 9,954. There is the same error of law apparent on the face of the award.