Arbitral Awards granting reimbursement contrary to binding Railway Board policy circulars constitute patent illegality.

In brief

The question

1. Whether the Arbitral Tribunal exceeded its jurisdiction by awarding claims that were contrary to binding Railway Board policy circulars and the express terms of the contract.

The court held

The Court held that the Impugned Award was patently illegal and in conflict with the public policy of India as it disregarded binding Supreme Court precedent and the governing policy framework.

It also directed

The Petition was allowed, and the Arbitral Award dated 28.08.2023 was set aside in its entirety.

01Facts

The Petitioner (IRCTC) challenged an Arbitral Award dated 28.08.2023.

p. 1, para 1

The Respondent (Foodworld), a caterer, was awarded Rs. 2,30,40,995/- plus 12% interest for claims regarding the price difference between "combo meals" and "regular meals," and reimbursement for "welcome drinks".

pp. 1-2, para 2

The dispute arose from Railway Board Circulars issued in 2013-2014, which introduced combo meals at lower tariffs but later restored regular meals while maintaining the lower combo meal price.

pp. 9-15

The Petitioner contended that the Respondent had agreed to these terms and that the issue was covered by Supreme Court precedent.

p. 2, para 3

02Issues

i.1. Whether the Arbitral Tribunal exceeded its jurisdiction by awarding claims that were contrary to binding Railway Board policy circulars and the express terms of the contract.

pp. 2-5

ii.2. Whether the controversy is squarely governed and resolved by the Supreme Court’s decision in IRCTC v. Brandavan Food Products.

p. 2, para 4

03Law Applied

Section 34 of the Arbitration and Conciliation Act, 1996, specifically the grounds of "patent illegality" under Section 34(2A) and "conflict with public policy" under Section 34(2)(b)(ii).

pp. 4-5, para 14-15

The principle from OPG Power Generation (P) Ltd. v. Enexio Power Cooling Solutions (India) (P) Ltd. that disregarding a binding judgment of a superior court constitutes a violation of the fundamental policy of Indian law.

pp. 5-7, para 16

The ratio from IRCTC v. Brandavan Food Products (2025 SCC OnLine SC 2369), which held that caterers/licensees are bound by Railway Board policy decisions regarding tariffs and menus, and arbitrators cannot rewrite contracts to grant relief in contravention of such policies.

pp. 9-24

Provisions in the judgment · 6 · Linked ones open on LawLens

Arbitration and Conciliation Act, 1996 Section 18 Section 28 Section 34 Section 37 Section 75 Section 81

04Reasoning

The Court found the facts of the present case to be "substantially similar and materially akin" to the Brandavan case.

p. 3, para 7 · p. 27, para 22

The Supreme Court in Brandavan had already determined that while the disparity between regular meal service and combo meal tariff appeared arbitrary, it was a binding policy decision that the caterers accepted by entering into the Master License Agreement (MLA).

p. 20, para 57

The High Court noted that the Arbitrator in the present case adopted the same reasoning—granting parity of tariff—which the Supreme Court explicitly rejected as "patent illegality".

pp. 28, para 23-25

The Court dismissed the Respondent's attempts to distinguish the case based on specific tender clauses (e.g., Clause 3.5.4), holding that the primacy of Railway Board circulars overrides individual contractual interpretations.

pp. 29-30, para 27-29

the Award was found to be in "clear discordance" with the law as settled by the Apex Court.

p. 30, para 31

05Holding

The Court held that the Impugned Award was patently illegal and in conflict with the public policy of India as it disregarded binding Supreme Court precedent and the governing policy framework.

p. 30, para 32

The Petition was allowed, and the Arbitral Award dated 28.08.2023 was set aside in its entirety.

pp. 31, para 33-34

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