Contractual exclusion, implied obligations, and arbitral interest limits: challenged award portions were held legally unsustainable.

An express contractual exclusion barred compensation for loss of unburnt bricks, and the arbitrator's contrary construction was a patent legal error, so that part of the award was unsustainable. A claim for ration and cloth could not be implied from negotiations or treated as a collateral contract because it was not incorporated into the written agreement, so that award also failed in law. Interest could not be granted on unliquidated claims where the Interest Act conditions were unmet, and an arbitrator could not invoke section 34 of the Code of Civil Procedure by analogy. The challenged portions of the awards were set aside and the appeals were dismissed with costs.

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Issues: (i) whether the arbitrator could award compensation for loss of unburnt bricks in the face of the express contractual exclusion and whether the error was apparent on the face of the award; (ii) whether an implied obligation to supply ration and cloth could be inferred so as to sustain the award; and (iii) whether interest could be awarded on the claims in the circumstances of the award.

Issue (i): whether the arbitrator could award compensation for loss of unburnt bricks in the face of the express contractual exclusion and whether the error was apparent on the face of the award

Analysis: The clause excluding claims for damage to unburnt bricks was treated as an express term allocating the risk of such loss. The arbitrator's view that the clause did not absolve the department from carrying out its part of the contract was held to be a misconstruction. The reference to clause 6 was not a specific reference of a question of law; it arose only incidentally in support of the general claim. In the absence of a specific submission of the legal question, the court retained power to interfere where the legal error was patent on the award's face.

Conclusion: The award of compensation under this head was not sustainable and was rightly set aside.

Issue (ii): whether an implied obligation to supply ration and cloth could be inferred so as to sustain the award

Analysis: The claim for ration and cloth was not founded on any term of the written contract and was not shown to have been accepted as a contractual condition before execution. A one-sided proposal raised during negotiations, without assent and without incorporation in the written agreement, could not create a binding contractual obligation against the Government. The arbitrator also erred in treating the matter as an implied or collateral contract, because the arbitration clause covered disputes arising out of the written contract and not a fresh independent arrangement.

Conclusion: The award on the ration and cloth claim was erroneous in law and could not stand.

Issue (iii): whether interest could be awarded on the claims in the circumstances of the award

Analysis: The amounts awarded were unliquidated claims, and the conditions for an award of interest under the Interest Act were not satisfied. An arbitrator was not a court for the purpose of section 34 of the Code of Civil Procedure, 1908, and therefore could not award interest on the analogy of that provision.

Conclusion: The award of interest was legally unsupportable and was correctly struck out.

Final Conclusion: The legal result was that the challenged parts of the awards could not be sustained, and the dismissal of the appeals was affirmed with costs.

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