Arbitral tribunal's decision binding on facts: Delhi HC rules against IRCTC

The Delhi HC reaffirms that courts have limited power under Section 34 to review arbitral awards, ruling that the tribunal is the final authority on factual determinations in disputes

The Delhi High Court recently reaffirmed that the jurisdiction of courts under Section 34 of the Arbitration and Conciliation Act to intervene in arbitral awards is limited, emphasising that an arbitral tribunal serves as the ultimate authority on factual determinations, Bar and Bench reported.  

 

A division Bench comprising Justices Navin Chawla and Shailender Kaur stated that an arbitral award cannot be set aside merely because a court disagrees with the tribunal's interpretation of contractual terms.  

 

“The Arbitral Tribunal is the final arbiter on facts as also on the interpretation of the contractual terms. The scope of jurisdiction under Section 34 of the A&C Act to interfere with an Arbitral Award is restricted, and merely because the interpretation of the learned Sole Arbitrator on a particular contractual term does not find favour with the Court exercising jurisdiction under Section 34 of the A&C Act, it cannot be said that the learned Sole Arbitrator has exceeded its jurisdiction or has travelled beyond the terms of the contract,” the court observed.  

 

The case stemmed from a dispute between the Indian Railway Catering and Tourism Corporation (IRCTC) and a catering service provider over contractual obligations for Rajdhani, Shatabdi, and Duronto trains.

 

The issue originated with tenders issued in 2013 for catering services, under which Brandavan Food Products was awarded contracts. However, the company later claimed that subsequent Railway Board circulars — specifically regarding changes in "combo meals" and mandatory provision of “welcome drinks” — led to unexpected financial burdens without adequate reimbursement, the news report said.

 

Brandavan argued that fluctuating meal policies forced them to provide two full meals instead of one regular meal and a smaller, less expensive “combo meal”, affecting profitability. Additionally, they claimed they had not been compensated for the welcome drinks they were required to serve.  

 

Arbitration and initial court rulings

After Brandavan’s writ petition was dismissed, arbitration was allowed. The company claimed Rs 27.82 crore for combo meals (2013-2020) and Rs 5.35 crore for welcome drinks (2014-2020).  

 

The arbitrator ruled in its favour, awarding these amounts with 6 per cent interest from 2018, rising to 9 per cent if unpaid in four months. IRCTC challenged the award in the Delhi High Court, citing contractual and evidentiary issues. A single-judge Bench of the court upheld some claims but denied compensation for regular meals. Both parties appealed, leading to a Division Bench review under Section 37, Bar and Bench reported.  

 

“It is evident that a petition under Section 34 of the A&C Act is not an appeal on merits against the Arbitral Award. The jurisdiction of the Court, while adjudicating on a petition under Section 34 of the A&C Act against a Domestic Award, is on extremely limited grounds,” the court stated.  

 

Further elaborating on its role under Section 37, the court clarified that its primary function was to determine whether the lower court had erred in applying the restricted grounds available under Section 34.

 

“If the award or part thereof has been set aside by the court going beyond the limited grounds stated in Section 34 of the Act, the Court in exercise of its powers under Section 37, shall set aside such order,” the division Bench said.  

 

Master Licence Agreement

The court examined the Master Licence Agreement (MLA) and found that the Railways retained the authority to modify tariffs and menus. It noted that no provision in the tender, MLA, or related circulars mandated that a regular meal substituted for a combo meal would be reimbursed at a lower rate. Consequently, the court ruled that the single judge erred in relying on certain contractual clauses to overturn the arbitral award, Bar and Bench reported. 

 

IRCTC argued that Brandavan waived reimbursement for welcome drinks by not issuing invoices, but the court rejected this, stating waiver requires explicit agreement. The arbitrator relied on occupancy certificates and CA testimony. The court upheld compensation, citing unjust enrichment, but found a ‘patent illegality’ in interest calculation, ruling it should apply only to due amounts.

 

As a result, the Division Bench partially set aside the single-judge order. Brandavan Foods was represented by senior advocates Sanjay Jain, Joy Basu, and Trust Legal’s Sudhir Mishra and Ritwika Nanda. IRCTC was represented by Solicitor General Tushar Mehta, senior advocate Ciccu Mukhopadhyay, and others.