Delhi High Court Upholds Arbitral Award Against IRCTC In Dispute Over Reimbursement For Catering Services, Sets Aside Interest As 'Patently Illegal'

The Delhi High Court bench comprising Justice Navin Chawla and Justice Shalinder Kaur has reiterated the limited scope of interference under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996 (“A&C Act”). The court upheld the arbitral award granted in favour of M/s Brandavan Food Products Ltd. (“Claimant”) in a dispute regarding the reimbursement of differential costs for meals and beverages supplied under a catering contract with the Indian Railways Catering and Tourism Corporation Ltd. (IRCTC) (“Respondent”). The court set aside the interest award as 'patently illegal' as interest could not be granted on amounts not due as of a particular date. Brief Facts: The Respondent and the Claimant filed cross-appeals under section 37 of the Arbitration and Conciliation Act, 1996 challenging the order dated 13.08.2024 passed by the Single Judge of the Court, which partly allowed the section 34 petition filed by the IRCTC, by partially setting aside the Arbitral Award dated 27.04.2022. The Respondent is a public listed Central Public Sector Enterprise working under the aegis of the Ministry of Railways, Government of India, whereas the Claimant is a private contractor providing catering services on the trains run by the Indian Railways. The Northern Railways published a tender on 27.05.2013, inviting bids for the provision of Catering Services on the New Delhi-Dibrugarh Rajdhani Express Trains for 5+5 years. On 27.06.2013, the claimant submitted its Bid qua the Subject Tender. Prior to opening the bids for the Subject Tender, the Ministry of Railways issued Commercial Circular No. 63/2013, dated 09.10.2013. The Railway Board introduced the new concept of a 'Combo Meal'. However, the Railway Board, vide Commercial Circular No. 67/2013 dated 23.10.2013, discontinued the Combo Meal service, and decided to serve Regular Meal as the Second Meal of the day. The Northern Railways issued a Letter of Award dated 17.01.2014 (LOA). The claimant started providing the catering services on the train w.e.f. 21.01.2014. The claimant and the Northern Railways entered into a Master License Agreement (“MLA”) dated 21.04.2014 By Commercial Circular No. 32/2014 dated 06.08.2014, it was stipulated that a Welcome Drink will be served to all passengers of the AC classes. A Tripartite Agreement dated 10.08.2017 was executed between the Northern Railways, the respondent and the claimant, whereby, the management of catering services stood transferred to the respondent. In December 2017, the claimant filed a Writ Petition inter alia seeking quashing of the Circular dated 06.08.2014. The Court, vide its Judgment dated 23.09.2019, dismissed the petition. However, it granted liberty to the claimant to initiate arbitration proceedings. Subsequently, the claimant invoked arbitration proceedings inter alia claiming from the respondent a sum of Rs.27.82 crore for providing Regular Meals at the price of Combo Meals from October 2013 to March 2020, and Rs.5.34 crore for providing Welcome Drinks from August 2014 to March 2020. Arbitral Award: The Sole Arbitrator, in the Arbitral Award dated 27.04.2022, allowed the claims of the claimant and awarded the claimant sums towards the differential costs for the supply of Second Regular Meals instead of Combo Meals and for the supply of Welcome Drinks, along with simple interest at the rate of 6% p.a. payable from January 2018 till the date of the Award and interest @ 9% p.a. in case the payment is not made within 4 months. The Arbitrator held that: The Claimant could seek claims from January 2015 under Section 14 of the Limitation Act.Raising bills without claiming additional amounts did not amount to waiver/ abandonment of rights.The respondent held a superior and dominant position over the claimant.The Tender Document did not clothe the respondent with unilateral powers to issue any directions whatsoever which would then automatically deem to bind the claimant.Clause 8 of the MLA authorised the respondent to make revisions in the catering menu and tariff. The respondent cannot contend that they would not pay for the services rendered.The respondent did not reimburse the lower Combo Meal rate for the Second Regular Meal when both rates were fixed in the 09.10.2013 Circular.The claimant was entitled to recover dues for the Second Regular Meal and Welcome Drink.The claimant's Occupancy Certificate and bills were valid evidence. Impugned Order: The respondent challenged the Arbitral Award under Section 34 of the A&C Act. The Single Judge, in the order dated 13.08.2024 (impugned order), upheld the Award on certain aspects but set it aside regarding waiver/estoppel and recovery related to the Second Regular Meal. The Single Judge in the impugned Order held as follows: The Sole Arbitrator's ruling on limitation was correct.Under Clauses 8.1 and 1.4 of the ...

Delhi High Court Upholds Arbitral Award Against IRCTC In Dispute Over Reimbursement For Catering Services, Sets Aside Interest As 'Patently Illegal'

Tazeen Ahmed

Tags