about the terms of reference, or an order of the Court under section 20(4) compelling a reference, the arbitrator is not vested with the necessary exclusive jurisdiction. Therefore, when a question of law is the point at issue, unless both sides specifically agree to refer it and agree to be bound by the arbitrator’s decision, the jurisdiction of the Courts to set an arbitration right when the error is apparent on the face of the award is not ousted. The mere fact that both parties submit incidental arguments about a point of law in the course of the proceedings is not enough. The language of Lord Wright in F. R. Absalom Ltd. v. Great Western (London ) Garden Village Society(1), a case similar to this so far as this point is concerned, is apposite here- Page 7 of 12 http://JUDIS.NIC.IN SUPREME COURT OF INDIA "There is here no submission of any specific question of law as such and as a specific question of law; no doubt incidentally, and indeed necessarily, the arbitrator will have to decide some questions on the construction of the building contract, but. the two matters submitted are both composite questions of law and fact; there is no express submission of the (1) [1933] A.C. 592, 616. true effect of the contract on the basis of undisputed facts, as in the Kelantan case(1) or as a separate and distinct matter on facts to be separately assumed or found, as in In re King and Duveen(2)..........The arbitrator was not being asked simply and specifically to decide, upon some agreed or assumed basis of fact, the true interpretation of either clause 26 or clause 30 of the conditions or of both together; he was being required to make an award on the two matters submitted on whatever questions of fact and law might emerge". Clause 32 of the contract in the House of Lords case was the equivalent of clause 14 in ours. It ran"Provided always that in case any dispute or difference shall arise ............. as to the construction of the contract or as to any matter or thing arising thereunder............ such dispute shall be and is hereby referred to the arbitration and final decision of etc." The arbitrator relied on that to invest him with jurisdiction to determine,, as a matter of law, the construction of clauses 26-30 of that contract. The House of Lords held that in the absence of a specific reference about the construction of the contract the jurisdiction of the Courts was not taken away. Lord Russell of Killowen put it this way at page 610"No specific question of construction or of law was submitted. The parties had, however, been ordered to deliver pleadings, and by their statement of claim the contractor had claimed that the arbitrator should under his powers revise the last certificate issued etc...... It is at this point that the question of the construction of condition 30 arose as a question of law, not specifically submitted, but material in the decision of the matters which bad been submitted. This question of law the arbitrator has decided; but if upon the face of the award he has decided it wrongly his decision is, in my opinion, open to review by the Court". That is exactly the position here. Simply because the matter was referred to incidentally in the plead(1) [1923] A. C. 395. (2) [1913] 2 K.B. 32, 36. ings and arguments in support of, or against, the general issue about liability for damages, that is not enough to clothe the arbitrator with exclusive jurisdiction on a point of law. The next question is whether the error is apparent on the face of the award. That; in our opinion, is clear from the passages we have quoted from the award. We hold that clause 6 expressly relieves the Union Government of all liability under this head of claim and that the arbitrator was wrong in awarding any sum on that account. The next head in dispute is item No. 8 in the statement of claim: "Cost of additional wages paid to the coolies on account of non-supply of ration and cloth-Rs. 51,495". Here again no specific question of law was referred, so all Page 8 of 12 http://JUDIS.NIC.IN SUPREME COURT OF INDIA we have to see is whether there is an error of law apparent on the face of the award. The contractor put his case as follows in the statement of claim: "At the time when this work was allotted to us there was rationing system in the locality. As per conditions of contract we were bound not to employ local labour and we had to import coolies from far off places. We had in our employ about 1800 coolies and it was an impossibility to arrange their ration from open market. This difficulty was brought to the notice of the authorities concerned, and they promised us to supply ration. It was only after this promise that we signed the agreement..... From a perusal of these letters it is clear that the department promised us to supply ration............... These circumstantial evidences are sufficient enough to show that there was a mutual understanding between the parties that ration will be supplied. In the eyes of law even circumstantial evidence is sufficient to prove that such a promise was made. Any breach of that promise makes the department legally liable to compensate for that loss.......... Apart from the legal responsibility it was also a moral responsibility for the department to supply ration". This claim, therefore, was not grounded on any clause of the contract, nor was it said to be implied in the -contract. What was relied on was a collateral promise evidenced, not by the contract, but by two letters written by "the department" and a promise by "the authorities concerned"; and later this promise is turned into a "mutual understanding" and to a "moral responsibility" in addition to a legal one. The arbitrator dealt with this as follows. He began by saying"The contractor stated that when he submitted his tender on 25-9-45 he did so in the bona fide belief that the department would make the necessary arrangements, etc." Then he sets out the following dates. On 1-11-45 the contractor was told that his tender had been accepted. On 9-11-45 the contractor "warned" the Executive Engineer about his "immediate requirements in respect of rations". The contract was finally accepted and signed on 22-11-45. Now 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 a reply. It is 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 Executive Engineer. A letter 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. Be62 fore the agreement is signed, one party wants to include a further condition in the contract. We will assume that the Page 9 of 12 http://JUDIS.NIC.IN SUPREME COURT OF INDIA request was made to the other contracting party. But without waiting for the assent of the other side, both sides accept and sign the contract as it existed before the fresh suggestion was made. It 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. In 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 of negotiation. The arbitrator continues that the contractor stated that"it was a well known and established fact that Sindri was a rationed area; that the C.P.W.D. were giving rations at controlled rates to their employees and contractors through arrangements with the local Civil Supply Authorities; that nobody working under the C.P.W.D. was allowed to make independent arrangements or approach the Civil Supply Authorities direct" and the contractor contended that the very fact that he tendered such low rates showed that he expected to supply his labourers with rations at controlled rates. The arbitrator then sets out some more of the contractor’s contentions and from them concludes that "there was an implied contractual obligation for the C.P.W.D. to make available controlled rations to the contractor and that this obligation was not fulfilled with due diligence and care". He accordingly awarded Rs. 40,000 as compensation under this head. The error is apparent. -Facts must be based either on evidence or on admissions; 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 contract. 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 arbitrator’s opening sentence under this head where he sets out the contractor’s contention that "commodities such as rations and cloth which were absolutely essential for the maintenance of his labourers and which were under Government control". As the arbitrator bases solely on the contractor’s contentions it is evident that he failed to appreciate the fact that the Dominion Government and the Provincial rationing authorities were separate entities distinct from one another. The position accordingly reduces itself to this: two persons, neither of which is a part of the Provincial Government or has any Page 10 of 12 http://JUDIS.NIC.IN SUPREME COURT OF INDIA control over rationing, chose to enter into an agreement for work in a rationed area. They insisted that their contract should be reduced to writing, and that indeed was essential, this being a contract with the Dominion Government which was incapable of contracting in any other way; they agreed upon 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. 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 Heyman v. Darwins Ltd.(1). The last item in dispute in this appeal is claim No. 17 about interest. The statement of claims sets out "Item 17-Interest on the amount of money involved in this claim at the rate of Rs. 6 percent.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 contractor’s contention that his claims should have been settled by January 1948 is, in my opinion, reasonable. I therefore award interest at 6% 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 perusal of them shows that each bead relates to a claim for an unliquidated sum. The Interest Act, 1839 applies, as interest is (1) [1942] A.C. 356 at 371. not otherwise payable by law in this kind of case (see Bengal Nagpur Ry. Co. v. Ruttanji Ramji(1)), 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 Page 11 of 12 http://JUDIS.NIC.IN SUPREME COURT OF INDIA reasonable. 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 section 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 over-all picture. The last date for removal of the last instalment 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 contractor’s 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 (1) 65 I.A. 66. 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 same 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 was referred and we need not cover the same ground. Our decision is the same here as there. The fourth head of claim is about cloth and rations. The claim here., and the Dominion Government’s 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 than 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. The High Court was right in dismissing the claims made under the heads in dispute here. The two appeals fail and each is dismissed with costs in this Court. Appeals dismissed. Page 12 of 12