Indian Railways Catering And Tourism Corp. Ltd vs M/S Brandavan Food Products

2025 INSC 1294 Reportable

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOs. ................ OF 2025 (@ Special Leave Petition (C) Nos. 15507-15509 of 2025)

Indian Railways Catering and Tourism Corp. Ltd. … Appellant

versus

M/s. Brandavan Food Products … Respondent WITH CIVIL APPEAL NOs. .................... OF 2025 (@ Special Leave Petition (C) Nos. 17132-17136 of 2025) CIVIL APPEAL NOs. .................... OF 2025 (@ Special Leave Petition (C) Nos. 18076-18084 of 2025) CIVIL APPEAL NOs. .................... OF 2025 (@ Special Leave Petition (C) Nos. 17041-17042 of 2025) CIVIL APPEAL NOs. .................... OF 2025 (@ Special Leave Petition (C) Nos. 17299-17300 of 2025) CIVIL APPEAL NOs. .................... OF 2025 (@ Special Leave Petition (C) Nos. 16487-16488 of 2025) CIVIL APPEAL NOs. .................... OF 2025 (@ Special Leave Petition (C) Nos. 16831-16833 of 2025) CIVIL APPEAL NOs. .................... OF 2025 Signature Not Verified

Digitally signed by Deepak Guglani (@ Special Leave Petition (C) Nos. 16184-16186 of 2025) Date: 2025.11.07 17:25:27 IST

CIVIL APPEAL NOs. .................... OF 2025 Reason:

(@ Special Leave Petition (C) Nos. 16742-16743 of 2025) 1 CIVIL APPEAL NOs. .................... OF 2025 (@ Special Leave Petition (C) Nos. 15800-15801 of 2025) CIVIL APPEAL NOs. .................... OF 2025 (@ Special Leave Petition (C) Nos. 17438-17439 of 2025) CIVIL APPEAL NOs. .................... OF 2025 (@ Special Leave Petition (C) Nos. 17641-17642 of 2025) CIVIL APPEAL NOs. .................... OF 2025 (@ Special Leave Petition (C) Nos. 17037-17038 of 2025) CIVIL APPEAL NOs. .................... OF 2025 (@ Special Leave Petition (C) Nos. 18771-18773 of 2025) CIVIL APPEAL NOs. .................... OF 2025 (@ Special Leave Petition (C) Nos. 17550-17552 of 2025) CIVIL APPEAL NOs. .................... OF 2025 (@ Special Leave Petition (C) Nos. 16888-16889 of 2025) CIVIL APPEAL NOs. .................... OF 2025 (@ Special Leave Petition (C) Nos. 15650-15651 of 2025)

JUDGMENT

SANJAY KUMAR, J

1. Leave granted.

2. The scope and ambit of interference with an arbitral award under

Sections 34 and 37 of the Arbitration and Conciliation Act, 1996 1, arise for

consideration once again.

1 For short, ‘The Act of 1996’.

2

3. These seventeen sets of appeals arise out of the common judgment

dated 10.02.2025 passed by a Division Bench of the Delhi High Court in

a batch of eighteen appeals filed under Section 37 of the Act of 1996.

Indian Railways Catering and Tourism Corporation Limited2 is the

appellant in twelve sets of appeals while M/s. Brandavan Food Products 3,

a partnership firm, filed two sets of appeals. The remaining two sets of

appeals were filed by R.K. Associates and Hoteliers Pvt. Ltd. and Satyam

Caterers Pvt. Ltd respectively.

4. IRCTC had filed thirteen of the eighteen appeals before the High

Court while BFP had filed the remaining five appeals. All those appeals,

in turn, arose out of the order dated 13.08.2024 passed by a learned

Judge of the Delhi High Court in a batch of petitions filed under Section

34 of the Act of 1996 assailing the Award dated 27.04.2022 passed by a

sole Arbitrator in relation to thirteen claim petitions. The claim petitions

were filed by three caterers, viz., BFP, R.K. Associates and Hoteliers Pvt.

Ltd. and Satyam Caterers Pvt. Ltd. Out of the thirteen claim petitions, nine

were filed by BFP in relation to its contracts for the Rajdhani, Shatabdi

and Duronto Express Trains, while two claim petitions each were filed by

R.K. Associates and Hoteliers Pvt. Ltd. and Satyam Caterers Pvt. Ltd

respectively, in relation to their contracts for Shatabdi Express Trains. As

2 For short, ‘IRCTC’.

3 For short, ‘BFP’.

3 all the claimants shared a common grievance, BFP’s petition relating to

its contract for the New Delhi-Dibrugarh-New Delhi Rajdhani Express was

treated as the lead case. We, accordingly, deal with the factual aspects in

the context of that case.

5. In terms of the Catering Policy of 2010 issued by the Railway Board,

Ministry of Railways, Government of India, the Northern Railway

published Tender Notice dated 27.05.2013 inviting bids for providing

catering services on the train referred to above. The contract period was

for 5+5 years from the date of commencement of the catering services.

The tender document prescribed the food items/beverages which were to

be supplied to the passengers travelling on these trains. The

tariff/apportionment charges4 for each service were also prescribed. We

may note, at this stage, that the tariffs are fixed on the basis of the

commercial circulars issued by the Railway Board. At the time of issuance

of the tender notice, the tariffs set out therein were reflective of the tariffs

fixed in the year 1999, under Commercial Circular dated 27.05.1999.

6. While so, before the opening of the bids pursuant to Tender Notice

dated 27.05.2013, the Railway Board issued Commercial Circular No. 63

of 2013 dated 09.10.2013 whereby, while increasing the tariffs, the

concept of ‘combo meal’ was introduced as a measure to reduce wastage

4 For short, ‘tariff(s)’.

4 of food. It was proposed that, instead of providing a second regular/full

meal during the course of the journey, a combo meal could be served, i.e.,

a smaller meal consisting of lesser number of items and quantities. The

price of this combo meal for 1AC/2AC/3AC was fixed at ₹66.50/- (₹75/-

with service tax) as against a regular meal, which was enhanced to

₹129.50/- (₹145/- with service tax) for 1AC/EC, and ₹112.50/- (₹125/- with

service tax) for 2AC/3AC/CC. However, upon receiving feedback of the

dissatisfaction of passengers with combo meals, the Railway Board

issued Commercial Circular No. 67 of 2013 dated 23.10.2013,

discontinuing combo meals, by deleting Para 1.4 of the earlier

Commercial Circular dated 09.10.2013, and substituting it with a regular

meal, but at the price fixed for a combo meal. Therefore, at the time of

opening of the tender bids and the awarding of contracts thereafter,

Commercial Circular dated 23.10.2013 was holding the field.

7. BFP’s bid dated 27.06.2013 emerged successful in relation to Train

Nos. 12423-24, viz., New Delhi-Dibrugarh-New Delhi Rajdhani Express,

and the Northern Railway issued Letter of Award dated 17.01.2014 to it.

Pursuant thereto, BFP started providing catering services with effect from

21.01.2014. Thereafter, BFP and the Northern Railway entered into

Master Licence Agreement dated 21.04.2014. While so, by Commercial

Circular No. 32 of 2014 dated 06.08.2014, caterers were directed by the

Railway Board to provide a welcome drink to all passengers in AC classes 5 at the time of commencement of the journey. Thereafter, the Railway

Board announced a new Catering Policy on 27.02.2017 providing for

management of catering services by the IRCTC in the place of the Zonal

Railways. In consequence, Tripartite Agreement dated 10.08.2017 was

executed by the Northern Railway, the IRCTC and BFP and the

management of catering services stood transferred to the IRCTC.

8. The principal contention urged by the IRCTC before us is that the

Arbitrator had no jurisdiction to re-write the terms of the contract contrary

to the agreement entered into by and between the parties with their

volition and their eyes wide open. It would, therefore, be necessary to

examine the genesis and the nature of the contract underlying the claims

put forth by the caterers. Hitherto, as stated earlier, Commercial Circular

dated 27.05.1999 issued by the Railway Board, dealing with catering

services in the Rajdhani and Shatabdi Express trains, set out the tariffs to

be paid to the caterers for the meals that they would serve on those trains,

viz., morning tea/welcome drink/light refreshment; breakfast; lunch; high

tea/evening tea; and dinner. Separate charges were framed for

2AC/3AC/CC, on the one hand, and 1AC/EC, on the other. This circular

held the field for nearly a decade and a half.

9. The tender document for provision of catering services on Train Nos.

12423-24, New Delhi-Dibrugarh-New Delhi Rajdhani Express, was issued

by the Northern Railway on 27.05.2013. Chapter I therein dealt with the 6 scope of work. Clause 1.3 stated that the bidder, once selected, shall

become the licensee and shall be liable to pay licence fee as per the terms

and conditions determined by the Northern Railway. Clause 1.2.1 stated

that the licensee shall provide catering services on Train Nos. 12423-24

and provide meals from the kitchens at the originating/enroute stations of

the train. Clause 1.3, titled ‘Scope of work of catering services on train’

indicated the major components. Clause 1.3.1 reads as follows:

‘1.3.1 The Licensee shall be responsible for all catering services from pantry car on Train No. 12423/24 as per Policy, guidelines, instructions issued by Railway and other statutory regulations. This will include supply and service of fully cooked meals/food to passengers on demand viz. breakfast, lunch, dinner, snacks, tea, coffee etc. These meals/food shall be prepared, packed and transported from the Kitchens set-up and located at or around the originating/terminating /en-route station(s) on Railway premises/non railway area authorized by railway administration to be set up by the licensee.’

Clause 1.3.3 is also relevant and it reads as follows:

‘The menus and rates for each service are enclosed at Section C. Railway reserves the right to modify/alter the catering tariff and menu and such changes in catering charges and menu shall be informed to the Licensee in advance for which the License Fee shall be varied based on the reassessment of sales. In the event of such changes, the Licensee shall maintain the same quality and hygiene standards for preparation, supply and service of food/meals to passengers as it were prior to such change.’

10. The Special Conditions of Contract-I, contained in Section C,

specified the menu for morning tea/coffee, the menu for welcome drink,

the menu for breakfast, the menu for lunch/dinner and the menu for

evening tea. These were the meals that were to be supplied on the train

by the caterer. Section C contained a tabular statement, specifying the

7 tariffs for Train Nos. 12423-24. Notably, the rates specified in the tabular

statement were in tandem with those set out in the Commercial Circular

dated 27.05.1999 that was then holding the field. There was obviously no

mention of a combo meal as that concept had not been introduced by the

time this bid document was issued in May, 2013.

11. It was only on 09.10.2013 that the Railway Board came up with the

idea of introducing a combo meal, vide Commercial Circular No. 63 of

2013. It dealt with revision of the menu and tariff of catering services in

Rajdhani/Shatabdi/Duronto Express Trains. It was noted therein that the

menu and tariff of catering services were last revised in the year 1999 for

these trains and that they were prestigious premier trains of the Indian

Railways. As the cost of raw materials for catering services had increased

manifold due to inflation, etc., since the year 1999, it was stated that a

review of the menu and tariff had been done through Committees set up

by the Railway Board to determine the norms for apportionment of

catering charges in the fares of these trains. Clause 1.4 is of relevance in

the context of a combo meal and it reads as follows:

‘1.4 The concept of combo meal for Rajdhani/Shatabdi/Duronto express trains has been introduced in place of regular second meal of the day where more than one meal services are provided. The third/following meal shall be the regular meal and the sequence of every alternate meal as combo meal shall be followed for the particular train. At one point of time only one type of meal will be served in the entire train.’

8 The menu for each service was furnished in Annexure A, which was

to be adopted uniformly. The price of lunch/dinner for 1AC/EC was

increased to ₹145/₹129.50 (with and without service tax) and for

2AC/3AC/CC, it was enhanced to ₹125/₹112.50 (with and without service

tax). The newly introduced combo meal for all AC classes was priced at

₹75/₹66.50 (with and without service tax).

12. However, on 23.10.2013, the Railway Board issued Commercial

Circular No. 67 of 2013, again revising the menu and tariffs of catering

services on the three trains. It was stated therein that a review of the

decision on revision of the menu/tariffs of catering services in Rajdhani/

Shatabdi/Duronto Express Trains had been undertaken based on the

feedback received from the Zonal Railways and instructions were issued

to be complied with immediate effect. These instructions are of relevance

and read as under:

‘Accordingly, the following instructions may be complied with immediate effect: -

(i) Regular Meal, in place of Combo Meal, may be restored. Accordingly, Para 1.4 of CC 63/2013 regarding combo meal is deleted.

(ii) Quantity of Paneer dish, Chicken dish and Dal be restored to 150gms. Paneer dish with seasonal veg. (150gms with Paneer 70gms) and Chicken dish with thick gravy (150gms with Chicken 80-100gms) should be served (Neck and wing portion of chicken should not be served).

(iii)Kathi Roll/Samosa/Patties/Kachori/Sandwiches be served in Evening Tea.

(iv) Flavoured Milk/Milk Shake be served to the passengers in food grade per bottles/tetra pack.

(v) Sale of beverages on board is pending. Accordingly, Para 13 of CC 63/2013 may be kept pending.

The above changes will be done without any increase in charges.’

9

13. The Northern Railway issued Letter of Award dated 17.01.2014 to

BFP for ‘Provision of Catering Services in Train Nos. 12423-24, New

Delhi-Dibrugarh-New Delhi Rajdhani Express Train’. The term of the

contract was for a period of five years @ ₹35,63,00,000/- and BFP was

required to deposit the various amounts stipulated therein within a time

frame. A copy of the revised catering charges was stated to have been

enclosed with this letter. Pursuant thereto, Master License Agreement

(MLA) dated 21.04.2014 was executed by the Northern Railway with BFP.

Article 1 in the MLA dealt with ‘Scope of the Arrangement’. Clause 1.1

therein stated that the scope of services shall be principally to operate,

manage and supply catering services on the train from the

nominated/approved base kitchens at originating/enroute stations. Clause

1.2 provided that the scope of arrangement between the parties shall be

governed by the provisions of Annexure I (scope of services to be

rendered by the licensee). Clause 1.4 is relevant and reads as under:

‘1.4 It is agreed by the Licensee that the norms with regards catering changes payable to Licensee for providing catering services to the passengers on the Train are also subject to the predetermined prices as set forth in Annexure II of this Agreement. The Licensee also hereby confirms and acknowledges that Railway shall have the absolute right and discretion to change and modify the prices set forth in Annexure II without any need for prior discussion with the Licensee and the decision of Railway shall be strictly enforced by the Licensee during the Term of this Agreement.’

14. The tenure of the Agreement was to commence on 21.01.2014 and

was for a period of five years. On the completion of five years, one renewal

10 for another five years could be given subject to satisfactory performance.

Article 20 was titled ‘Dispute Resolution’ and Clause 20.2 therein provided

for settlement of disputes through arbitration, as per the provisions of the

Act of 1996. Clause 21.6, titled ‘Waiver’, stated that unless otherwise

expressly provided in the agreement, a delay or omission by either party

to exercise any of its rights under the agreement would not be construed

to be a waiver thereof. Annexure II to the MLA was a copy of the modified

Section C, setting out Special Conditions of Contract I and Special

Conditions of Contract II. The Special Conditions of Contract I detailed the

cyclic menus for different meals for the AC classes. Cyclic menus for

lunch/dinner for 1AC/EC and 2AC/3AC/CC were provided but no separate

menu was provided for a combo meal, obviously, because a second

regular meal was to be provided instead of a combo meal, as per

Commercial Circular No. 67 of 2013. However, insofar as the revised

tariffs were concerned, the tabulated statement therein referred to the

pricing for different meals and mentioned CM (combo meal) also. This was

owing to the aforestated circular categorically stating that there would be

no increase in charges. Article 8 of the MLA was titled ‘Changes in menu,

tariff and duration of train’. Clause 8.1 therein stated that the Railway

reserved the right to change catering tariff and menu for the train at any

time after the award of the licence and in the event of any such change by

the Railway, the licensee was required to maintain the same quality and 11 hygiene standards for preparation, supply and service of food/meals to

passengers on the train as it was prior to such change.

15. Thereafter, Commercial Circular No. 32 of 2014 was issued by the

Railway Board on 06.08.2014 further revising the menu and tariff of

catering services in the Rajdhani/Shatabdi/Duronto Express Trains. Under

the heading ‘Rationalization of Menu’, it was provided under Para 1.5 that

a welcome drink would be served to all passengers in AC classes on

commencement of the journey but, whenever breakfast followed

immediately after the welcome drink, then Frooti tetra pack, hitherto being

provided along with breakfast, would not be served. It was reiterated in

Para 1.6 that, as per the instructions issued vide Commercial Circular

No.67/2013, a regular meal (lunch/dinner) was to be served in the place

of combo meal (wherever applicable) at the tariff applicable for combo

meal. Para 4 is of relevance and it reads thus:

‘4. Service-wise Tariff 4.1 The catering charges for each pair of station on up and down direction should be calculated and notified for each Rajdhani/ Shatabdi/Duronto Express trains by the concerned zonal railways in consultation with their associate finance. Since the catering charges are to be included on the basis of actual services rendered to the passengers there may be difference in catering charges in some cases on up and down direction between same pair of stations due to variation in catering services. It is advised that the actual charges of catering services as per the requirement of the journey of Rajdhani/ Shatabdi/Duronto Express trains should be added to the basic fare and the amount so arrived will be rounded off to the next higher multiple of Rs.5/-. Payment of appointment charges to the caterers should be made according to the actual services rendered to the passengers as per the following rates given below except in case of combo meal where charges will be as per below but menus shall be as per regular Lunch/Dinner meal as issued vide CC-67/2013:-

12 (in Rs.) 1A/EC Type of service Catering Catering charges to charges to be be included in fare disbursed to the (Inclusive of present licensee without service tax service tax. @8.66%) (1) (2) (3) Morning Tea 12.50 15.00 Breakfast 81.50 90.00 Lunch/Dinner 129.50 145.00 Evening Tea 41.00 45.00 where dinner is served Evening Tea 66.50 75.00 where dinner is not served Combo Meal 66.50 75.00

2AC/3AC/CC Type of service Catering Catering charges to charges to be be included in fare disbursed to the (Inclusive of present licensee without service tax @ service tax 8.66%) (1) (2) (3) Morning Tea 8.00 10.00 Breakfast 66.50 75.00 Lunch/Dinner 112.00 125.00 Evening Tea 40.00 45.00 Combo Meal 66.50 75.00 SL (Duronto Trains) Morning Tea 6.50 10.00 Breakfast 34.00 40.00 Lunch/Dinner 71.00 80.00 Evening Tea 18.00 20.00

13

16. It is an admitted fact that the caterers, including BFP, abided by the

instructions and prices set out in the commercial circulars, replicated in

their MLAs/contracts, for some time without protest. They raised bills for

the second regular meals provided by them on the trains at the price fixed

for a combo meal. However, on 22.06.2015, the Indian Railways Mobile

Caterers Association submitted a representation to the Northern Railway

expressing difficulties due to the revision in the menu and tariff of catering

services, in addition to other grievances. Therein, it was pointed out that

combo meals at the rate of ₹66.50/- (without service tax) with a reduced

menu was introduced but the same was stopped and regular meal service

was reinstated, but the rates were not revised and the caterers were

compelled to serve regular meals in lieu of combo meals at a reduced

price. They also raised the issue of welcome drinks being served as an

additional item without any tariff being paid for the same. The Association

stated that the caterers were facing losses on all fronts, which included

the service of second meals at half the rate and free service of welcome

drinks. This was followed up with several reminders and representations.

17. While so, the IRCTC entered into the picture in the year 2017 as per

the new catering policy. It is an admitted fact that upon the

recommendation of the IRCTC, under its letter dated 05.07.2019, the

Railway Board issued Circular dated 03.10.2019, modifying the earlier 14 Commercial Circular No. 32/2014 dated 06.08.2014. Thereby, the Board

advised that reimbursement of catering charges to service providers

should be made at the rate of regular meal tariff in place of combo meal

tariff for service of a regular meal as the second meal of the day. It was

further advised that passenger fares should be corrected accordingly by

levying regular meal tariff for the actual service of the regular meal. These

instructions were directed to be implemented with prospective effect. The

‘Note’ pertaining to this modification indicated that the IRCTC had

highlighted the inadequacy of the tariff of catering services as there was

a special case of the second meal of the day in the case of

Rajdhani/Shatabdi/Duronto Express Trains. The IRCTC pointed out that

after the tenders were allotted and agreements were executed, the menu

of the second meal was changed and made similar to that of a normal

lunch/dinner but instead of charging ₹112/- from the passengers, the

Railway continued to charge ₹66.50/- for this meal. The IRCTC pointed

out that this anomaly needed to be corrected with revision in the rates of

the second meals and advised that either the menu of the meal should be

restored as a combo meal or the tariff should be made similar to a normal

meal. The IRCTC also pointed out that the caterers were continuously

representing about this issue. However, as per the mandate of the Circular

dated 03.10.2019, the parity brought about thereunder was to be with

prospective effect only.

15

18. The grievance of BFP and the other caterers, leading to the thirteen

arbitration claim petitions, was that, despite being told to serve regular

meals twice, after substitution of the combo meal with a regular meal

under Commercial Circular dated 23.10.2013, they were reimbursed for

the second regular meal only at the price of a combo meal, as was fixed

by the earlier Commercial Circular dated 09.10.2013, and the price of a

regular meal was not given to them for the second meal. BFP claimed that

it tried to raise bills for the second regular meals supplied to the

passengers at the same rates as were applicable to the first regular meal

but the Northern Railway, the predecessor of the IRCTC, refused to accept

the bills unless they were raised as per the Commercial Circular No.67 of

2013 dated 23.10.2013. BFP, therefore, asserted that it was forced to

comply with this direction under financial and economic duress as it

needed regular funds for maintaining day-to-day catering services to the

passengers. Another grievance was with regard to supply of welcome

drinks under Commercial Circular No.32 of 2014 dated 06.08.2014. The

complaint was that the caterer was not paid for serving welcome drinks.

19. In the first instance, BFP filed a writ petition before the Delhi High

Court in December, 2017, viz., W.P.(C) No. 11548 of 2017, assailing

Commercial Circular No. 67 of 2013 dated 23.10.2013 and Commercial

Circular No. 32 of 2014 dated 06.08.2014 and for recovery of the monies

allegedly due to it for the second regular meals and welcome drinks. 16 However, the writ petition was dismissed by the Delhi High Court on

23.09.2019, leaving it open to BFP to initiate arbitration proceedings. It is

pursuant to this liberty that the matter went before the sole Arbitrator

resulting in the Award dated 27.04.2022.

20. During the course of the arbitration proceedings, the caterers and

the IRCTC examined one witness each. Documents were marked in

evidence. The Arbitrator first dealt with the preliminary objection raised by

the IRCTC that the claims put forth by the caterers were time-barred. He

noted that the notice under Section 21 of the Act of 1996 was issued on

24.01.2020 and, therefore, claims three years prior thereto could not be

treated as time-barred. He, then, considered whether the claims prior to

January, 2017 would be hit by the bar of limitation. On the exclusion of the

time spent in pursuing the writ petition before the Delhi High Court, i.e.,

from 22.12.2017 till 16.01.2020, when a certified copy of the judgment was

made available, the Arbitrator found in favour of the caterers. Upon such

exclusion, the Arbitrator concluded that the claims by the caterers could

be said to have been instituted in or around January, 2018 and, in

consequence, the claims of the caterers for three years prior to January,

2018, i.e., from January, 2015 would be within the period of limitation. He,

accordingly, held that the claims prior thereto would be barred by time.

The caterers were held disentitled to seek recovery of any amounts in

relation to their catering services rendered prior to January, 2015. 17

21. The next objection of the IRCTC considered by the Arbitrator was

as to whether the caterers could be said to have waived their right of

recovery and reimbursement in relation to the second regular meal and

the welcome drink provided by them, as they continued to raise their bills

in terms of the commercial circulars and received regular payments

against the bills so raised. The IRCTC contended that, as the caterers

were satisfied with the payments made to them for the second regular

meal at the price of a combo meal and with no payment being made for

the welcome drink, they were deemed to have waived and were estopped

from claiming any amount on those counts. The Arbitrator, however,

rejected this contention. He noted that the tender notice had been issued

prior to the Commercial Circular dated 23.10.2013 and the bids were also

submitted prior thereto. The Arbitrator observed that the IRCTC did not

seek consent from the caterers as regards their willingness to supply

regular meals at the price of combo meals. The Arbitrator also noted that

Clause 21.6 of the MLA provided that mere delay or omission by either

party to exercise any rights under the agreement would not be construed

to be a waiver thereof. He further noted that the contracts between the

parties were in the nature of commercial contracts, where the caterers had

to incur costs for providing services and, unless proved otherwise, it could

not be accepted that they had agreed to provide services and incur costs

without being adequately reimbursed therefor. He, accordingly, rejected 18 the argument of the IRCTC that raising of bills and acceptance of

payments under those bills by the caterers would amount, by itself, to an

act of waiver or relinquishment of their right to seek reimbursement, if they

were otherwise entitled to seek the same under law. He also accepted the

plea of the caterers that they were coerced into raising bills in accordance

with the circulars as, if they failed to do so, they would not have been paid,

putting them in a financially precarious situation. The Arbitrator opined that

he had no reason to disbelieve their plea. He noted that representations

had been made by the caterers to the Northern Railway in that regard,

under letters dated 22.06.2015, 03.08.2016, 23.08.2016 and 25.11.2016.

22. The argument of the IRCTC that the caterers actually profited due

to the increase in the tariffs under the Circular dated 09.10.2013 was

rejected by the Arbitrator. He pointed out that the said circular was issued

by the Railway Board on its own to revise the rates so as to set off inflation

and to fix adequate catering rates and, therefore, the IRCTC could not

contend that this led to undue profits being made by the caterers. Lastly,

the Arbitrator observed that the IRCTC enjoyed a superior and dominant

position in the contract, as the caterers had to pay the licence fees as well

as security deposits in advance and their return on this investment was in

the form of payments against regular monthly bills raised towards

providing catering services on the trains. He opined that the caterers

would not be in a position to adopt a cavalier attitude against the IRCTC 19 given their status in the contractual arrangement and they could not, thus,

be non-suited merely because they raised bills and received payments.

23. The IRCTC’s next contention before the Arbitrator was that Clause

1.4 of the MLA would bar the caterers’ demands being accepted. As per

this clause, the Railway had the absolute right and discretion to change

and modify the prices set forth in Annexure II without any need for prior

discussion with the caterer and the same would be enforceable during the

term of the contract. However, the Arbitrator found from a perusal of

Annexure-II that it envisaged supply of a combo meal and not a second

regular meal. He opined that this annexure did not support the case of the

IRCTC as, once the caterer provided a regular meal instead of a combo

meal, the reimbursement would also have to be on par with a regular meal.

24. The Arbitrator noted that Clause 8.1 of the MLA provided that the

Railway had a right to change the menu but observed that, in the letter

dated 05.07.2019 written by it, the IRCTC itself had pointed out the

anomaly with regard to payment being made for a regular meal at the price

of a combo meal and urged the Railways to either restore the menu of a

combo meal or make the tariff similar to that of a normal meal. The

Arbitrator also noted that, acting upon the recommendation of the IRCTC,

the Railway Board had issued Circular dated 03.10.2019 stating that

caterers would henceforth be reimbursed at the rate of a regular meal for

the second regular meal also. The Arbitrator opined that the caterers were 20 well within their right in seeking recovery of the differential amount, being

the difference between the rates of a regular meal and a combo meal for

all the second regular meals supplied by them even in the past.

25. The Arbitrator, then, addressed the issue as to the quantification of

the amounts payable towards these claims. He noted that the Train

Superintendent, who was an officer of the Indian Railways, was required

to issue an Occupancy Certificate after the train reached its destination,

certifying the number of passengers who undertook the journey. This

certificate was required to verify as to how many passengers were actually

provided catering services by the caterers. Their reimbursement was

based on this Occupancy Certificate and not on the basis of the number

of tickets booked. The Arbitrator noted that the factum of raising bills as

well as payments made against the same was not disputed by both parties

and, therefore, the IRCTC could not claim that there were no details

available for computation of the amount to be paid for the second regular

meal, which was already paid for at the price of a combo meal. The

Arbitrator noted that the caterers had set out the details of the regular

meals and the welcome drinks supplied by them, duly certified by Jeetmal

Khandelwal, a Chartered Accountant (CW-I), who spoke of the claims and

the computation thereof in terms of the charts annexed to the claim

petitions. The Arbitrator noted that no contrary figures and numbers had

been provided by the IRCTC as to the second regular meals and the 21 welcome drinks supplied by the caterers and, in the absence of such

contrary evidence, he accepted the amount computed by the caterers.

26. The Joint General Manager (Mobile Catering Services), North Zone,

IRCTC, was examined as DW1. He spoke of the commercial circulars

issued from time to time and the invoices submitted by the caterers based

on the tariffs fixed in the said circulars. He stated that the caterers were

reimbursed for regular meals at significantly higher prices than the prices

fixed in the earlier Commercial Circular dated 27.05.1999 and that

payments were made by the IRCTC for the bills, as submitted. He

asserted that these transactions stood concluded and no further record

was available with the IRCTC. He further stated that the transactions

could not be re-opened as the caterers had received the payments made

on the basis of the bills submitted by them.

27. However, holding that the documents produced by the caterers were

sufficient evidence under Section 65(g) of the Indian Evidence Act, 1872,

the Arbitrator noted that the IRCTC had all along maintained the stand that

it was for the caterers to prove their computations but failed to point out

any errors either in such computation or on account of insufficiency of

supporting documents. The Arbitrator, accordingly, held that BFP was

entitled to claim reimbursement of ₹20,97,85,202/- for the second regular

meal which it had provided at the price of a combo meal and also

₹5,04,99,122/- for the welcome drinks supplied by it, post January, 2015. 22

28. As regards the claim of BFP for interest on the amounts recoverable

by it, the Arbitrator refused to accept the computation of interest offered

by BFP at the rate suggested by it. He noted that Section 31(7) of the Act

of 1996 provided that the Arbitrator could grant interest at a reasonable

rate and, accordingly, awarded simple interest at the rate of 6% from

January, 2018 onwards. Further, if the IRCTC failed to make the payment

due under the Award within four months, the Arbitrator directed simple

interest to be paid to BFP at the rate of 9% per annum from the date of

the Award till the date of payment. Parties were to bear their own costs.

29. The Arbitral Award dated 27.04.2022 was corrected and modified by

the Arbitrator, under order dated 26.07.2022 passed in exercise of power

under Section 33 of the Act of 1996. The corrections were at the behest

of BFP, which pointed out an error in recording its name and that the

numbering of the paragraphs was incorrect.

30. Aggrieved by the Award dated 27.04.2022, corrected on

26.07.2022, the caterers and the IRCTC filed petitions under Section 34

of the Act of 1996. These petitions were disposed of by a learned Judge

of the Delhi High Court, vide judgment dated 13.08.2024. On the issue of

limitation, the learned Judge opined that there was no infirmity in the

reasoning adopted by the Arbitrator on the issue and concurred with the

view taken on the exclusion of time under Section 14(2) of the Limitation

Act, 1963, in relation to the period of time spent by BFP in pursuing the 23 writ petition before the High Court. As regards the contention of the IRCTC

with regard to waiver and estoppel applying to the caterers, the learned

Judge disagreed with the view taken by the Arbitrator. According to him,

the two aspects, i.e., the second meal and the welcome drink, had to be

dealt with separately. On the issue of the second meal, the learned Judge

noted that, at the time the bids were invited by the Northern Railway, the

catering tariff was as per the Circular of 1999, as per which the caterer

was to receive only ₹150/- for both regular meals @ ₹75/- each. He noted

that Circular No. 63 of 2013 dated 09.10.2013 came to be issued which

entitled the caterer to a combined tariff of ₹178.50/- for the supply of a first

regular meal @ ₹112/- and a combo meal @ ₹66.50/- to the passengers

in 2AC/3AC/CC. However, the combo meal came to be substituted by the

later Circular No.67 of 2013 dated 23.10.2013 with a second regular meal.

The learned Judge noted that it was only thereafter, i.e., on 17.01.2014

that the Letter of Award was issued to BFP and catering services

commenced on 21.01.2014. The MLA was then executed on 21.04.2014

and, thereafter, Circular No.32 of 2014 dated 06.08.2014 was issued,

directing the provision of welcome drinks at the beginning of the journey.

31. The learned Judge observed that the caterers had entered into their

contracts with open eyes, knowing the rates of the meals to be supplied

by them. He also noted that Clauses 8.1 and 1.4 of the MLA empowered

the IRCTC to modify/alter the menu and the catering tariff without 24 consulting the caterers. He, therefore, opined that Clause 21.6 of the MLA

had no applicability and it was erroneously relied upon by the Arbitrator.

He, accordingly, concluded that the finding of the Arbitrator with regard to

waiver was perverse, having been passed in blatant ignorance of the

binding contractual terms between the parties. The learned Judge further

noted that the caterers, having commenced services on 21.01.2014,

continued to supply meals till 22.06.2015 without protest, as it was only

on 22.06.2015 that they chose to make their first representation to the

Railway. As they had continued to raise bills and receive payments without

demur, the learned Judge rejected the plea of the caterers that they were

coerced into raising bills and receiving payment, owing to financial

constraints. The learned Judge summed up that these were bald

assumptions without any evidence to support the same.

32. The learned Judge was of the opinion that the caterers could not

claim the benefit of higher tariff under Circular No.63 of 2013 dated

09.10.2013 while seeking to resile from the later Circular No. 67 of 2013

dated 23.10.2013. He was not inclined to place any reliance upon the

letter dated 05.07.2019 addressed by the IRCTC to the Railway Board,

resulting in the Circular dated 03.10.2019 establishing prospective parity

between the tariffs for the first and second regular meal. The letter was

brushed aside as an internal communication which did not confer any right

upon the caterers. The learned Judge opined that the reasoning of the 25 Arbitrator, while seeking to achieve an equitable outcome, completely

ignored the contractual terms which permitted the IRCTC to change the

menu and tariff. He, accordingly, concluded that the doctrine of waiver was

irrelevant in this case, as BFP did not have the right to seek

reimbursement for providing the second meal, having entered into the

contract that allowed IRCTC to change the menu and tariff unilaterally.

33. As regards the issue of welcome drinks, the learned Judge found no

infirmity in the approach of the Arbitrator, on the strength of what he

termed was a distinguishing factor. He noted that Circular No.32 of 2014

dated 06.08.2014 provided for supply of welcome drinks to all passengers

boarding the trains but no payments were to be made for the same.

According to the learned Judge, this could not fall within the ambit of

Clauses 1.4 or 8.1 of the MLA. The learned Judge observed that, though

the IRCTC had the power to modify/alter the menu/tariff, it could not have

asked the caterers to provide an additional item without intending to

reimburse them for the same. He, accordingly, concurred with the

Arbitrator’s finding that, given a contract of commercial nature for supply

of services, a party could legitimately expect reimbursement for actual

services rendered. The learned Judge observed that this was not a case

of inadequate reimbursement, as it was with the second regular meal, but

a case of no reimbursement, which was a point of difference. The learned

Judge, accordingly, upheld the view of the Arbitrator on this count. 26

34. The learned Judge concluded that the Award insofar as it pertained

to recovery of differential costs for supplying the second regular meal was

against public policy as it was in violation of the provisions of the Indian

Contract Act, 1872, and was liable to be set aside. On the issue of

welcome drinks, the learned Judge affirmed the reasoning of the

Arbitrator, both on the liability aspect as well as on the computation

aspect. He confirmed that there was no infirmity in the findings of the

Arbitrator and upheld the Award to that extent. Lastly, on the issue of

interest, the learned Judge observed that the same was solely within the

domain of the Arbitrator under Section 31(7) of the Act of 1996 and

observed that he found no infirmity with the reasoning of the Arbitrator.

The Award dated 27.04.2022, corrected on 26.07.2022, was set aside

insofar as it pertained to recovery of differential costs for supply of the

second regular meals but was confirmed in relation to recoveries for

supply of welcome drinks along with the interest payable thereon.

35. Both parties were dissatisfied with this order of the learned Judge.

They, accordingly, filed appeals under Section 37 of the Act of 1996. Their

appeals were disposed of by a Division Bench of the Delhi High Court,

vide the impugned judgment dated 10.02.2025. It was contended on

behalf of the IRCTC that it had charged pre-fixed meal prices from the

passengers and had passed it on to the caterers, without retaining any

amount and, therefore, the claims for past supplies of meals to the 27 passengers, which could no longer be passed on to the passengers

concerned, would be a burden upon the IRCTC. It was further contended

that once the learned Judge rejected the claim of the caterers for

reimbursement for supply of the second regular meals on par with the first

regular meal, the same logic should have applied to the supply of welcome

drinks also. According to the IRCTC, the Arbitrator could not have allowed

the claim on the ground of equity, as Section 28(2) of the Act of 1996

empowered the arbitral tribunal to decide ex aequo et bono only if the

parties expressly authorised it to do so and, in the case on hand, no such

authorization was given by the IRCTC. The quantification of the claim

towards welcome drinks was also challenged along with the grant of

interest thereon. It was pointed out that the Award granted interest to the

caterers from 01.01.2018 on a lumpsum amount, which would mean that

even on the amount that became due past 01.01.2018, interest would be

granted from the date. Per contra, it was contended on behalf of the

caterers that the learned Judge had erred in setting aside the Award

insofar as it pertained to the second regular meal. It was further contended

that the claims of the caterers qua the supply of the second regular meal

and the welcome drink were not barred by waiver/estoppel, as the issues

were raised time and again by the caterers under their various letters,

commencing with the letter dated 22.06.2015. They, accordingly, sought

to justify the Award in that regard.

28

36. Reviewing the precedential law on the scope of interference with an

arbitral award under Sections 34 and 37 of the Act of 1996, the Division

Bench opined that interference under Section 34 could be on very limited

grounds. It observed that the Court exercising jurisdiction under Section

34 could only see whether the arbitral tribunal’s view was perverse or

manifestly arbitrary. However, the Bench misread the finding of the

learned Judge on the issue of waiver, as it observed that he had invoked

the doctrine of waiver against the caterers in respect of their claim for the

second regular meal. In this regard, we find that the learned Judge did not

apply the doctrine of waiver at all. On the other hand, he held that the

principle of waiver had no applicability to that claim as the contractual

terms specifically empowered the IRCTC to unilaterally change the menu

and the tariff. The Bench also noted the fact that the Arbitrator had placed

reliance on Annexure-II appended to the MLA, which spoke of a combo

meal instead of a second regular meal, and observed that the Circular

dated 09.10.2013 seems to have been relied upon in the MLA, not

realising that the concept of combo meal was no longer in vogue. It was

observed that the caterers could not have served a combo meal in

violation of the Circular dated 23.10.2013 but, at the same time, the

IRCTC could not pay the caterers, as if they had served a combo meal.

37. The Bench opined that the Arbitrator was right in holding that Clause

1.4 of the MLA and Annexure II attached to the MLA could not come to the 29 aid of the IRCTC to deny the claim of the caterers for reimbursement of

the second regular meal. Referring to Clause 1.3.1 of the Tender

Document, the Bench observed that the IRCTC had the right to issue

policy guidelines, instructions and regulations, including for supply and

service of fully cooked meals/food to the passengers on demand, and the

caterers were bound to follow such instructions but the clause could not

be read to mean that even when the IRCTC insisted upon the caterers

serving a second regular meal instead of a combo meal, the IRCTC would

pay the caterers at the rate specified for a combo meal. The Bench further

noted that, in neither the circulars nor the tender document/MLA was there

any clause which stipulated that for the second regular meal, the caterer

would be paid at the rate specified for a combo meal. According to the

Bench, Clause 1.3.1 of the Tender Document and Clauses 1.4 and 8.1 of

the MLA would have had relevance, if there was such a clause which

stipulated that though the caterer was obliged to serve a second regular

meal, it would only be paid at the rate specified for a combo meal. The

Bench opined that the learned Judge exceeded his jurisdiction by

interfering with the arbitral award. Noting that the arbitral tribunal was the

final arbiter on facts as also the interpretation of the contractual terms, the

Bench held that the learned Judge erred in holding that the Arbitrator had

exceeded his jurisdiction and travelled beyond the terms of the contract.

30

38. As regards, the supply of welcome drinks, the Bench opined that the

learned Judge had given contradictory findings on the issue of waiver, as

the fact situation in the claim relating to welcome drinks was almost

identical to that relating to the second regular meal. The caterers had not

raised claims either for the second regular meal or for the welcome drink

in their bills for over a period of one and a half years and the Arbitrator had

opined that, as the IRCTC was in a dominant position and the caterers

were forced to raise bills as directed by it so as to obtain regular payments,

the learned Judge was not correct in rejecting this premise.

39. Affirming the view of the learned Judge that a plea of economic

duress could not be accepted on the strength of mere pleadings without

any evidence, the Bench noted that the Arbitrator had inferred the same

from various facts, including the fact that the caterer had already

deposited the license fee in advance along with the security deposits and

their return was only in the form of payments regularly received against

monthly bills. The Bench, therefore, concluded that the Arbitrator was

entitled to draw his inferences from the facts proved before him and the

scope of jurisdiction under Section 34 of the Act of 1996 did not extend to

interfering with the merits of the inferences so drawn. The Bench was of

the view that it is only where an inference was drawn completely without

evidence or contrary to the express terms of the contract or the evidence

led by the parties and where no reasonable person could have drawn such 31 an inference, interference with the arbitral award may be warranted. The

Bench opined that the present case was not such a case.

40. While appreciating the contention urged by the IRCTC that, by not

raising the bills within time, the caterers had denied it an opportunity to

charge the same from the passengers, the Bench observed that this could

not be a ground to reject a legitimate and legal claim arising out of the

MLA and the circulars. The Bench observed that the IRCTC itself should

have rectified its stand at least when the first representation in that regard

was received by it. The Bench further noted that, in any event, the caterers

had not been granted their claims for the entire period due to limitation.

The Bench further opined that the question of estoppel did not arise, given

the terms of the MLA and the circulars as were interpreted by the

Arbitrator, with which the Bench found no reason to disagree. On the issue

of limitation and exclusion of time, the Bench affirmed the finding of the

Arbitrator which was upheld by the learned Judge. On the computation of

the claims, the Bench was disinclined to accept the submission made on

behalf of the IRCTC. Noting that the bills of the caterers were paid on the

basis of Occupancy Certificates, wherein the amount payable for the

second regular meal at the price of a combo meal was made by the

IRCTC, the Bench observed that instead of the price of a combo meal, the

caterer would be entitled to be paid the full price of a regular meal. The

number of passengers who were served the second regular meal, having 32 been accepted by the IRCTC, it was only a case of reimbursement of the

differential cost of the regular meal when compared with a combo meal.

41. As regards the evidence of Jeetmal Khandelwal (CW-1), the

Chartered Accountant examined by BFP in support of its claims, the

Bench noted that the Arbitrator had accepted his testimony by invoking

Section 65(g) of the Indian Evidence Act, 1872, and observed that the

Court would generally not interfere with such exercise of power by the

Arbitrator under Section 34 of the Act of 1996. The Bench observed that

this could not be said to be a case where there was no evidence at all

before the Arbitrator for allowing a claim. The Bench further observed that

this would also apply to the issue of welcome drinks, where the rates

adopted by the caterer, though not expressly determined by any circular

issued by the Railway or by the IRCTC, was acceptable as it was on the

basis of the charges applicable to service of tea to the passengers. The

Bench, therefore, opined that there was no infirmity in this exercise.

42. The Bench further noted that the concept of welcome drinks was

introduced after the signing of the MLA, by way of the Circular dated

06.08.2014, and there was, therefore, no stipulation either in the earlier

circulars or the terms of the MLA, prohibiting payment being made for

such welcome drinks. The plea of the IRCTC that it was entitled to set-off,

as a drink was to be reduced from the breakfast which was to follow, was

held to have been rightly rejected by the Arbitrator in the absence of 33 pleadings and proof. The Bench opined that this was a matter for evidence

and in the absence thereof, the same could not have been raised before

the Arbitrator either to reject or reduce the claim of the caterers.

43. Lastly, on the issue of interest, the Bench observed that the

Arbitrator had awarded interest on the total sum payable to the caterers

with effect from 01.01.2018 though the amount would become due in

instalments with each bill which was raised at the interval of 10 days,

subsequent to 01.01.2018. It was opined that the entire amount did not

become due and payable as on 01.01.2018. The Bench observed the

cause of action for each bill would arise separately and, therefore, the

cause of action for the amount due under the bills that were raised post

01.01.2018 or related to the billing period post 01.01.2018 would arise

only after the said date. As the amount would become payable post the

said date, the Bench opined that the Arbitrator had no authority under

Section 31(7) of the Act of 1996 to award interest on an amount which

was not even due as on a particular date and for which no cause of action

had arisen as on that date. Holding that the Court exercising power under

Section 37 could not modify an arbitral award, the Bench set aside the

Award to the extent of award of interest. In effect, the Bench set aside the

order dated 13.08.2024 passed by the learned Judge in part, i.e., insofar

as it related to the setting aside of the Award qua the claim of the caterers

for the second regular meal and the Award stood restored to that extent. 34 However, the Award insofar as it pertained to grant of interest was set

aside. The learned Judge’s order and the Award, insofar as they pertained

to the claim of the caterers for welcome drinks, were confirmed.

44. The IRCTC would contend before us that the Arbitrator exceeded

his jurisdiction in rewriting the contract. It is argued that when a

commercial contract was entered into by the parties with clarity and full

volition, it would not be open to import therein the concept of fairness on

the part of a State instrumentality and to hold that IRCTC could not have

acted in a particular manner. It is pointed out that Section 28(2) of the Act

of 1996 had no application in the present matter as the parties did not

expressly authorize the Arbitrator to decide ex aequo et bono or as an

amiable compositeur and, therefore, Section 28(1)(a) thereof had

application, whereby the Arbitrator had to decide the dispute in

accordance with the substantive law for the time being in force and also

Section 28(3), which mandated that the Arbitrator had to take into account

the terms of the contract and trade usages applicable to the transaction.

45. BFP would contend that the Arbitrator was justified in placing the

interpretation that he did on the terms of the contract. Reference is made

to the decision of the Railway Board on 03.10.2019 to bring parity between

the prices fixed for the first and the second regular meals, thereby

addressing the injustice that was being meted out to the caterers by

paying them the price of a combo meal even for a regular meal. Though 35 BFP would contend that the phrase ‘the above changes will be done

without any increase in charges’ in Commercial Circular No. 67 of 2013

dated 23.10.2013 has to be interpreted to mean that the phrase was

applicable only to Clauses (ii) to (v), i.e., in respect of the additional items

that had been introduced and that it would have no application to Clause

(i), which reinstated a regular meal in the place of a combo meal, we are

not persuaded to agree. This argument does not stand to reason as a bare

reading of the clauses in Commercial Circular No. 67 of 2013 dated

23.10.2013 indicates that there is no distinction made between the

changes to be affected under Clause (i), on the one hand, and the

changes under Clauses (ii) to (v), on the other. All the changes were to be

made without any increase in charges is how the circular reads and no

distinction can be drawn between one clause and the other.

46. During the course of arguments, the learned senior counsel

appearing for BFP, while strenuously contending that the Award deserved

to be confirmed insofar as the claims for reimbursement are concerned,

fairly conceded that the Arbitrator had erred in awarding interest on a

lumpsum amount from 01.01.2018 and that the Division Bench of the High

Court was justified in finding fault with the same. The learned senior

counsel would, however, argue that the interest component could be

scaled down by making it payable only from 13.01.2020, being the date

of filing of the statement of claims, instead of 01.01.2018. 36

47. Though it has also been argued on behalf of the caterers that the

IRCTC is projecting a new argument before us based on Commercial

Circular No. 32 of 2014 dated 06.08.2014, in the context of the second

regular meal, we may note that BFP itself sought quashing of the said

circular in its writ petition and it is, thus, clear that it had a grievance with

the same at the time it filed the said writ petition. The circular is, therefore,

not new to the litigation and was very much in focus even during the

arbitral proceedings.

48. As already noted, BFP offered the highest license fees of

₹35,63,00,000/- and was issued the Letter of Award dated 17.01.2014. It

was informed, thereafter, that the license fees would stand increased from

₹35,63,00,000/- to ₹43,14,08,040/- on a pro rata basis owing to the

increase in the tariffs. However, having made a representation against this

hike in the license fees, we are informed that BFP initiated a separate

arbitration on that count and the issue is pending consideration as on date.

49. Certain undeniable facts may be noted at this stage. The catering

policy under the Circular dated 27.05.1999 was holding the field at the

point of time the Tender Notice was issued by the Northern Railway on

27.05.2013. BFP submitted its bid dated 22.06.2013, based on that

catering policy. In terms of this policy, the menus as well as the tariffs for

different meals were shown in the tender document for all AC classes in

the train. Significantly, Para 6 of the Circular dated 27.05.1999 provided 37 that, apart from breakfast, lunch, high tea/ evening tea and dinner, the

caterer was also required to provide morning tea/welcome drink/light

refreshment. The tariff fixed for lunch/dinner was ₹75 for 2AC/3AC/CC and

₹112.50 for 1AC/EC. As regards breakfast, the tariff fixed was ₹40 and

₹60 for the above two categories of classes; for high tea/evening tea, the

tariff fixed was ₹40 and ₹60 respectively, while for the morning

tea/welcome drink/light refreshment, the tariff was shown as ₹13 and

₹19.50, respectively. The catering policy introduced in the year 2010, vide

Commercial Circular No. 35 of 2010 dated 21.07.2010, did not make any

substantial changes as regards the menus and tariffs shown in the earlier

circular of 1999 but left it open to the Railway Board to fix the menus and

tariffs for Rajdhani, Shatabdi and Duronto Express Trains.

50. Therefore, when BFP and the other caterers made their bids

pursuant to the tender notices in May, 2013, they did so under the

impression that they would be supplying food on the trains in question as

per the menus fixed under the circular of 1999 and would be paid tariffs in

terms of the rates fixed therein. This is also evident from Clause 1.3.3 of

the bid document, which stated that the menus and rates for each service

would be as per Section C thereof, though the Railway reserved the right

to modify/alter the menu and catering tariffs. Section C, appended to the

bid document, contained the menus for morning tea/coffee; welcome

drink; breakfast; lunch/dinner and evening tea for the two separate 38 categories in the AC classes. More significantly, tariffs in terms of the rates

mentioned in the Circular dated 27.05.1999 were replicated in the tabular

statement appended thereto. Thus, the bid submitted by BFP was in

contemplation of being paid the very same tariffs as were fixed in the

Circular dated 27.05.1999 and in accordance therewith, it made its bid

with license fees of ₹35,63,00,000/- for Train Nos. 12423/12424, New

Delhi-Dibrugarh-New Delhi Rajdhani Express.

51. It was only during the processing of the bids received pursuant to

the Tender Notice dated 27.05.2013, that the catering policy underwent a

change and Commercial Circular No. 63 of 2013 dated 09.10.2013 was

issued by the Railway Board, embodying the changes in the policy.

Therein, it was noted that the menu and tariff of catering services for

Rajdhani, Shatabdi, and Duronto Express Trains were last revised in the

year 1999 and as the cost of raw materials used for catering services had

increased manifold due to inflation, etc., a review of the menu and tariff

had been done through the Committees set up by the Railway Board.

Based on the Committees’ recommendations, the Railway Board had

decided to revise the menus and tariffs as set out therein. The menu for

each service was set out in Annexure A to the circular, and the same was

to be uniformly adopted by the Zonal Railways.

52. It is this circular that introduced the concept of a combo meal. It was

stated in Clause 1.4 thereof that a combo meal had already been 39 introduced in Rajdhani and Duronto Express trains in the place of the

second regular meal of the day, where more than one meal service was

provided. The quantity of food to be served in a combo meal was lesser

than that served in a regular meal, i.e., lunch/dinner, and the tariff was

correspondingly lesser. For instance, the tariff for lunch/dinner, with

service tax, was fixed at ₹145/- for 1AC/EC and at ₹125/- for 2AC/3AC/CC

classes. However, the tariff for a combo meal was fixed at ₹75/-, with

service tax, for all the AC classes. The Railway Board also advised the

Zonal Railways to reassess and revise the license fees to be paid by the

caterers in the light of the enhancement of the tariff/apportionment

charges payable to them for the supply of food in these trains. It is on this

basis that BFP was also required to pay higher license fees over and

above its bid of ₹35,63,00,000/- and the same is now the subject matter

of a separate arbitration.

53. In any event, the new policy in relation to a combo meal in the

Circular dated 09.10.2013 came to be modified almost immediately

thereafter under Circular No. 67 of 2013 dated 23.10.2013. This circular

was stated to be a corrigendum to the earlier Circular dated 09.10.2013.

In consequence, the Railway Board scrapped the newly introduced combo

meal and directed that a regular meal should be restored in its place. The

Railway Board directed that Para 1.4 of Circular No. 63 of 2013 dated

09.10.2013 in relation to a combo meal would stand deleted. Certain other 40 changes in the menu were also indicated and, after setting out the details

thereof in Clauses (ii) to (v), the Railway Board categorically stated that

the above changes would be done without any increase in charges.

54. Therefore, by the time the bid of BFP was processed, resulting in

the issuance of Letter of Award dated 17.01.2014 to it, the aforestated

revised catering policy was already in place. In fact, the Letter of Award

ended with a reference to the revised catering policy and the concluding

para therein reads as under:

‘A copy of the revised catering charges is enclosed herewith for your reference; the revised license fee on ‘Pro Rata basis’ will be calculated and advised to you in due course. Difference amount of the license fee has to be deposited within seven days.’

55. Thus, knowing fully well that there was a change in the menu and in

the tariffs payable to it for the food to be supplied by it on the New Delhi-

Dibrugarh-New Delhi Rajdhani Express, BFP entered into the MLA dated

21.04.2014. This agreement made it clear that the scope of the

arrangement made thereunder was governed by Annexure I (Scope of

services to be rendered by the licensee). Clause 4.2(e) of the MLA noted

that, in terms of the Circular dated 09.10.2013, catering charges had been

revised. Article 8 of the MLA dealt with the changes in the menu, tariff and

duration of the train and Clause 8.1 therein put it beyond the pale of doubt

that the Northern Railway, the predecessor of the IRCTC, reserved the

right to change the menu and the catering tariff for the train at any time

41 after the award of the license. Annexure I to the MLA, titled ‘Scope of the

work’, provided that the main objective was to appoint a licensee for Train

Nos. 12423-12424 to ensure the provision of hygienic, good quality

meals/food to the passengers. As per the laid-down guidelines and as per

the specified menu, rate and policy directives issued by the Railway, the

menus and rates for each service, as per Clause 1.3.3 therein, were set

out in Section C, and the Northern Railway reserved the right to modify/

alter the catering tariff and the menu.

56. Though an argument was advanced before us that Section C,

marked as Annexure II to the MLA, was not provided to BFP, we find from

the photocopy of the MLA and the Annexures placed before us in Volume

III in I.A. No. 140341 of 2025, filed in Special Leave Petition (Civil) Nos.

15507-15509 of 2025, that the pages therein from 290 to 307, containing

Section C/Annexure II, also bear the signatures of the partner of BFP who

signed each of the pages of the MLA on its behalf. Annexure II/Section C

consisted of two parts – 1. Special Conditions of Contract-I and 2. Special

Conditions of Contract-II. The Special Conditions of Contract-I set out the

cyclic menus for morning tea, breakfast, lunch/dinner and evening tea for

both categories of AC classes. The revised tariffs were set out in a

separate table therein. Notably, the tariffs were detailed with reference to

the meal. For example, where lunch and evening tea were served, it was

indicated as ‘L+ET’ and the tariffs were shown separately for 2AC/3AC 42 and 1AC/EC. Significantly, where a first regular meal was served along

with another meal, it was shown as L+ET+CM, i.e., lunch+evening

tea+combo meal. The tariff payable was shown as the aggregate of the

tariffs payable for lunch, evening tea and the second regular meal at the

price of a combo meal. Merely because this tabular statement referred to

CM (combo meal), it is not open to BFP and the other caterers to contend

that they were only required to serve a combo meal and not a second

regular meal. The circulars issued and put in place by the date of

execution of BFP’s MLA on 21.04.2014 clearly evidenced that the concept

of a combo meal, which was introduced under Circular dated 09.10.2013,

was already done away with under the later Circular dated 23.10.2013.

Further, this circular made it clear that the changes made thereunder did

not warrant any increase in charges and that is the reason why CM

continued to be used in the context of the second regular meal.

57. Therefore, the policy as it stood then was that, though a second

regular meal was to be resumed in the place of a combo meal, the lesser

tariff payable for a combo meal was to be paid for the second regular meal.

No doubt, on the face of it, this disparity between the tariff payable for two

regular meals appears arbitrary and disproportionate, but it may be noted

that the contracts entered into by Northern Railway with BFP and the other

caterers were in keeping with the policy of the Railway Board and there

was no independent discretion left with the parties to deviate therefrom. 43

58. It is perhaps for this reason that BFP chose to approach the Delhi

High Court. It may be noted that in WP(C) No. 15548 of 2017 filed by BFP

before the Delhi High Court, specific prayers were made to quash

Commercial Circular No. 67 of 2013 dated 23.10.2013 and Commercial

Circular No. 32 of 2014 dated 06.08.2014. The writ petition was dismissed

by a learned Judge of the Delhi High Court on 23.09.2019, relegating BFP

to the remedy of arbitration. Having suffered the dismissal of its writ

petition by the High Court, BFP did not choose to carry the matter further

and merely abided by the advice of the learned Judge that it should resort

to arbitration. This failure on the part of BFP to maintain and succeed in

its challenge to the policy decisions as to the payment of tariff for the first

and second regular meals is fatal. Circular No. 67 of 2013 dated

23.10.2013 and Circular No. 32 of 2014 dated 06.08.2014 were not set

aside and continued to remain in force. Once those policy decisions

remained in place untouched, they necessarily had to be given effect to

and the terms and conditions in the MLA merely reflected the same.

59. Significantly, Clause 21.1 of the MLA, titled ‘Interpretation’, states

that the agreement and the arrangement between the parties shall at all

times be read along with the terms of the bid and the response of the

licensee to the bid. It further states that, in the event of any interpretation

of the provisions of the arrangement between the parties, the documents

shall be read in the following order of precedence:

44

(i) Railway latest catering policy as applicable from time to time;

(ii) The Articles of this Agreement;

(iii) The Contents of the Annexure (s) to this Agreement;

(iv) Licensee’s response to the Bid; (v) The Bid.

This clause, therefore, made it clear that the policy decisions, as per

the Railway Board’s catering policy and circulars, had to be given primacy

and priority over and above even the terms of the agreement and other

connected documents.

60. As regards the issue of a welcome drink, the Railway Board had

issued Circular No. 32 of 2014 dated 06.08.2014, wherein it was stated

that review of the menu and tariff had been undertaken through the

Committees set up by it, and based on the recommendations made, the

revised menu and tariff had already been notified, vide Circular No. 63 of

2013 dated 09.10.2013. Circular No. 67 of 2013 was then referred to,

whereby certain modifications were made in the earlier Circular No. 63 of

2013. It was then stated that, the Board had decided to revise the

instructions and, therefore, consolidated instructions were being issued.

One of the changes made thereunder was that a welcome drink would be

served to all passengers in AC classes on commencement of the journey,

but when breakfast followed immediately after the welcome drink, the

Frooti/Tetra Pack drink hitherto being provided along with breakfast, would

not be served. BFP and the other caterers claimed that this addition to the

catering services to be provided by them resulted in extra costs being

45 incurred, for which they were not reimbursed. This was the claim put forth

before the Arbitrator which was accepted by him.

61. However, two crucial aspects were overlooked by the Arbitrator in

this regard. The bid document dated 27.05.2013, pursuant to which BFP

had submitted its bid dated 27.06.2013, clearly indicated that a welcome

drink was contemplated at that stage. BFP would, therefore, have been

conscious that this item was to be supplied when it submitted its tender.

However, in the circulars that were issued thereafter, the welcome drink

was overlooked and that oversight was sought to be rectified by the

subsequent Circular dated 06.08.2014. No doubt, the MLA and the

tabulated statement in Annexure II appended thereto, did not refer to a

welcome drink and no tariff was stipulated therefor. However, Clause 8.1

of the MLA empowered the Railway to change the menu for the train at

any time without consultation with the caterer. The reintroduction of the

welcome drink on the train, which was initially contemplated in the bid

document itself, was therefore squarely covered thereby. Addition of a

welcome drink is clearly a change in the menu and was, therefore, directly

traceable to the power conferred by Clause 8.1 of the MLA. That apart,

the Circular dated 06.08.2014 again emphasized that, as per the

instructions issued under the earlier Circular No. 67 of 2013, the regular

meal (lunch/dinner) was to be served in the place of a combo meal,

wherever applicable, at the tariff applicable to a combo meal. This 46 categorical statement in the Circular dated 06.08.2014 put it beyond doubt

that the Railway and the caterers were bound by this policy decision and

there was no room for discretion or alteration in this regard.

62. Given these facts, we have to examine whether the hermeneutical

exercise undertaken by the Arbitrator, culminating in the Award dated

27.04.2022, warrants interference. It is now well settled that Section 34 of

the Act of 1996 provides limited grounds on which an arbitral award can

be set aside. Section 34(1) makes it clear that recourse to a Court against

an award may be made only by an application to set it aside in accordance

with sub-sections (2) and (3) thereof. Section 34(2) details the grounds on

which an award may be set aside. For the purposes of this adjudication,

Section 34(2A) is also relevant. This provision was inserted with

retrospective effect from 23.10.2015, vide Amendment Act No. 3 of 2016.

It states to the effect that a domestic arbitral award may be set aside if the

Court finds that the said award is vitiated by patent illegality appearing on

the face of that award. The proviso thereto, however, adds a caveat that

an award should not be set aside merely on the ground of an erroneous

application of the law or by reappreciation of evidence.

63. Pertinently, Section 34(2)(b)(ii) provides that if the Court finds that

an arbitral award is in conflict with the public policy of India, the Court

would be justified in setting it aside. Explanation 1, as it presently reads,

and Explanation 2 were inserted by the Amendment Act No. 3 of 2016 with 47 retrospective effect from 23.10.2015. Explanation 1 provides that, for the

avoidance of doubt, it is clarified that an award is in conflict with the public

policy of India only if its making was induced or affected by fraud or

corruption or was in violation of Sections 75 or 81 of the Act of 1996 or it

is in contravention with the fundamental policy of Indian law or it is in

conflict with the most basic notions of morality or justice. Explanation 2

provides that, for the avoidance of doubt, the test as to whether there is a

contravention with the fundamental policy of Indian law shall not entail a

review on the merits of the dispute.

64. In Ssangyong Engineering and Construction Company Limited

vs. National Highway Authority of India5, this Court dealt with the

expression ‘most basic notions of morality or justice’ mentioned in

Explanation 1. It was opined that the breach must be of some fundamental

principle of justice, substantively or procedurally, which shocks the Court’s

conscience. On facts, this Court found that the award created a new

contract by applying a Circular that was not even placed before the arbitral

tribunal. It was, therefore, opined that a fundamental principle of justice

was breached, viz., that unilateral alteration of a contract cannot be foisted

upon an unwilling party nor can a party to an agreement be made liable

to perform a bargain not entered into with the other party. This Court held

5 (2019) 15 SCC 131

48 that such course of conduct was contrary to fundamental principles of

justice followed in this country and shocked its conscience. It was,

however, cautioned that this ground would be available in exceptional

circumstances only and under no circumstance can a Court interfere with

an award on the ground that justice, in its opinion, was not done.

65. Again, in PSA Sical Terminals Private Limited vs. Board of

Trustees of V.O. Chidambranar Port Trust, Tuticorin, and others 6, this

Court found that the arbitral tribunal had thrust a new term into the

agreement between the parties and thereby created a new contract for

them. Referring to Ssangyong Engineering (supra), this Court affirmed

that rewriting a contract for the parties would be a breach of the

fundamental principles of justice, entitling a Court to interfere as it would

shock its conscience and would fall within the exceptional category.

66. A little later, in State of Chhattisgarh and another vs. SAL Udyog

Private Limited7, a 3-Judge Bench of this Court dealt with the issue as to

what would constitute ‘patent illegality’ appearing on the face of the award,

in terms of Section 34(2A) of the Act of 1996. Reference was made to the

earlier decisions in Associate Builders v. Delhi Development

Authority 8 and Ssangyong Engineering (supra) and it was held that the

6 (2023) 15 SCC 781 7 (2022) 2 SCC 275 8 (2015) 3 SCC 49

49 failure of the arbitral tribunal to decide in accordance with the terms of the

contract governing the parties would certainly attract the ‘patent illegality’

ground as the said oversight amounted to gross contravention of Section

28(3) of the Act of 1996, which enjoined the arbitral tribunal to take into

account the terms of the contract while making the award.

67. Much earlier, in Industrial Promotion and Investment

Corporation of Orissa Limited vs. Tuobro Furguson Steels Private

Limited and others9, this Court observed, on facts, that the High Court

had completely overlooked the fact that the parties, with their eyes widely

open, had entered into a contract, which was subject to the terms and

conditions clearly spelled out therein, and in furtherance of the contract,

payments were made and possession changed hands. This Court noted

that both sides had therefore acted on the basis of the contract, changed

their respective positions and assumed rights and obligations against

each other. This Court held that the contract, having been acted upon,

could not unilaterally be abrogated at the sweet will of either of the parties.

68. Given the settled legal position emerging from the above referred

decisions, it is manifest that the Arbitrator erred in assuming that he was

only interpreting the terms and conditions of the contracts/MLAs and was,

therefore, at liberty to place a contrary construction on the express

9 (2012) 2 SCC 261

50 language used therein, which was actually reflective of the policy

decisions of the Railway Board, Ministry of Railways, Government of

India, in its circulars referred to supra. Merely because there was a

subsequent change in the policy with prospective effect, based on the

recommendations made by the IRCTC itself, whereby parity was brought

about in the tariffs to be paid to the caterers for the first and the second

regular meals, it did not have the effect of wiping out the policy decisions

set out in Commercial Circulars No. 67 of 2013 and 32 of 2014, during the

period that they continued to hold sway and were in operation.

69. In its wisdom, having chosen to challenge the aforestated circulars,

BFP did not carry it forward after the dismissal of its writ petition and, in

consequence, BFP and the other caterers can raise no objection at this

stage to the policy decisions embodied in those circulars which were

merely replicated and applied in their contracts/MLAs. Once the contracts

between the parties were strictly in terms of and in keeping with the extant

policy, the terms of such contracts could not have been interpreted by the

Arbitrator contrary to and in violation of the policy, which remained intact

after the dismissal of BFP’s writ petition. The Arbitrator was, therefore, not

justified in undertaking interpretation of the contractual terms contrary to

language used therein, which merely mirrored the policy decisions of the

Railway Board which were binding in nature. In effect, the Arbitrator

practically rewrote the contract between the parties in such a manner that 51 it was in contradiction with the policy decisions set out in the Circulars

dated 23.10.2013 and 06.08.2014, which he could not have touched. In

the light of the judgments referred to supra, this error on the part of the

Arbitrator resulted in the Award not only being against the public policy of

India but also made it patently illegal. Section 28(3) of the Act of 1996

mandatorily required the Arbitrator, while deciding and making the Award,

to take into account the terms of the contract and the trade usages

applicable to the transaction. The trade usages in this regard were the

policy decisions of the Railway Board, Ministry of Railways, Government

of India, that governed contracts of this nature. Therefore, the Arbitrator

was bound to consider such policy decisions in that light and evaluate the

contractual terms in the context thereof. In the present case, the Arbitrator

completely overlooked the weightage to be given to the policy decisions

embodied in the Railway Board’s circulars and compounded the error by

contrarily interpreting the contractual terms, which were strictly in

consonance therewith, to grant relief to the caterers.

70. The last contention urged by the caterers is as to whether the

IRCTC, being a State instrumentality, has to be tied down by principles of

fairness and reasonableness even in the contractual sphere. It was

argued that the IRCTC could not act unreasonably or unfairly even while

acting under a contract. This contention no longer stands to reason as we

have held that the IRCTC and its predecessor, Northern Railway, had no 52 independent discretion in the matter while drawing up the contracts/MLAs

and giving effect to them, in so far as the two subject issues were

concerned, as they were bound by the policy directives of the Railway

Board and could not have deviated therefrom. The circulars which

embodied these policy directives were unsuccessfully challenged by BFP

before the Delhi High Court and left at that. Therefore, those policy

directives remained in force and the contracts/MLAs between the parties

merely reflected the same. Once IRCTC had no independence of its own

or discretion to condition or alter the contracts/MLAs, the question of

applying the principles of fair play in action and lack of arbitrariness,

traceable to Article 14 of the Constitution, would not even arise.

71. We are, therefore, of the considered opinion that the caterers were

not entitled to seek parity of tariff/apportionment charges for the second

regular meal on par with that payable for the first regular meal during the

period in question. Similarly, as the Railways was well within its domain

under Clause 8.1 of the MLA in reinstating the welcome drink to be

provided to passengers at the beginning of the journey, which was, in fact,

contemplated in the bid document dated 27.05.2013, the caterers were

not justified in seeking reimbursement on that count also.

72. The errors committed by the Arbitrator were not noted in the correct

perspective by either the Court exercising jurisdiction under Section 34 of

the Act of 1996 or by the Court exercising appellate jurisdiction under 53 Section 37 thereof. The Award, being patently illegal and in conflict with

the public policy of India is, therefore, unsustainable in law and is liable to

be set aside under Section 34(2A) and Section 34(2)(b)(ii) of the Act of

1996. In the light of this finding, the cross appeals filed by the caterers on

the issue of award of interest no longer survive for consideration.

73. In the result, the appeals filed by the Indian Railways Catering and

Tourism Corporation are allowed setting aside the Award dated

27.04.2022, corrected on 26.07.2022, along with the judgments and

orders dated 10.02.2025 and 13.08.2024 passed by the Delhi High Court,

and the appeals filed by the caterers, viz., M/s. Brandavan Food Products,

R.K. Associates and Hoteliers Pvt. Ltd. and Satyam Caterers Pvt. Ltd. are

dismissed.

Parties shall bear their own costs.

……………………...J [SANJAY KUMAR]

……………..……………………...J [SATISH CHANDRA SHARMA]

New Delhi;

November 07, 2025.

54