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

Reportable
2025 INSC 1294


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

CIVIL APPEAL NOs. .................... OF 2025

(@ 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)


J U D G M E N T
SANJAY KUMAR, J
Leave granted.
1.
The scope and ambit of interference with an arbitral award under
2.
1
Sections 34 and 37 of the Arbitration and Conciliation Act, 1996 , 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.
2
Indian Railways Catering and Tourism Corporation Limited is the
3
appellant in twelve sets of appeals while M/s. Brandavan Food Products ,
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.
In terms of the Catering Policy of 2010 issued by the Railway Board,
5.
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
4
tariff/apportionment charges 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.
While so, before the opening of the bids pursuant to Tender Notice
6.
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.
BFP’s bid dated 27.06.2013 emerged successful in relation to Train
7.
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.
The principal contention urged by the IRCTC before us is that the
8.
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.
It was only on 09.10.2013 that the Railway Board came up with the
11.
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).
However, on 23.10.2013, the Railway Board issued Commercial
12.
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.’

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

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.
During the course of the arbitration proceedings, the caterers and
20.
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.
Aggrieved by the Award dated 27.04.2022, corrected on
30.
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.
As regards the issue of welcome drinks, the learned Judge found no
33.
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.
Both parties were dissatisfied with this order of the learned Judge.
35.
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.
The Bench further noted that the concept of welcome drinks was
42.
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.
BFP would contend that the Arbitrator was justified in placing the
45.
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.
Certain undeniable facts may be noted at this stage. The catering
49.
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.
In any event, the new policy in relation to a combo meal in the
53.
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.’

Thus, knowing fully well that there was a change in the menu and in
55.
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.
Therefore, the policy as it stood then was that, though a second
57.
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.
Significantly, Clause 21.1 of the MLA, titled ‘Interpretation’, states
59.
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
5
vs. National Highway Authority of India , 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.
Again, in
65. PSA Sical Terminals Private Limited vs. Board of
6
, this
Trustees of V.O. Chidambranar Port Trust, Tuticorin, and others
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
7
, a 3-Judge Bench of this Court dealt with the issue as to
Private Limited
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
8
Authority 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.
Much earlier, in
67. Industrial Promotion and Investment
Corporation of Orissa Limited vs. Tuobro Furguson Steels Private
9
Limited and others , 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.
Given the settled legal position emerging from the above referred
68.
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.
The last contention urged by the caterers is as to whether the
70.
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.
In the result, the appeals filed by the Indian Railways Catering and
73.
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