Arbitral tribunal is the final arbiter on facts: Delhi High Court rules against IRCTC

The scope of jurisdiction of courts under Section 34 of the Arbitration and Conciliation Act to interfere with an arbitral award is restricted and arbitral tribunal is the final arbiter on factual aspects, the Delhi High Court recently held [IRCTC Vs Brandavan Food Products]..A Division Bench of Justices Navin Chawla and Shailender Kaur reiterated that it cannot interfere with an arbitral award merely because the interpretation of the contractual terms by the arbitral tribunal was incorrect.“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 stated. It made the observations while ruling against the Indian Railway Catering and Tourism Corporation (IRCTC) in a dispute with a catering company contracted for providing catering services on Rajdhani, Shatabdi and Duranto trains. .The controversy originated from tenders floated in 2013 for catering services. M/s Brandavan Food Products secured contracts and commenced operations. However, they contended that subsequent circulars issued by the Railway Board, specifically concerning the introduction and discontinuation of "Combo Meals" and the mandatory provision of "Welcome Drinks," resulted in them incurring unforeseen costs for which they were not adequately compensated. Specifically, Brandavan argued that the fluctuating meal policies forced them to serve two regular meals instead of the initially planned regular meal and "Combo Meal" (a smaller, cheaper meal), impacting their profitability. Furthermore, they claimed they were never reimbursed for the welcome drinks they were instructed to provide. .Brandavan initially filed a writ petition before the High Court, which was dismissed, but the Court permitted arbitration. The arbitrator awarded the amounts claimed by Brandavan with 6% interest from Jan 2018 and 9% if unpaid within four months. Key findings included that un-billed amounts didn’t waive Brandavan’s claims, payment acceptance was not voluntary due to the Railways' dominance, and cost changes weren't binding without agreement.IRCTC challenged the award before the Delhi High Court citing contract terms, lack of timely objections, insufficient evidence of welcome drink distribution and unauthorised arbitrator decisions based on equity. A single-judge Delhi High Court partially overturned the award. It upheld Brandavan's claims regarding welcome drinks, interest and limitation but rejected the claim for regular meals. The ruling left both parties with a mixed outcome with Brandavan losing its claim for meal cost differences.This prompted an appeal before the Division Bench under Section 37 of the Act. .The Bench emphasised the limited scope of its intervention in arbitral awards. It stressed that its role was not to re-evaluate the merits of the case but rather to ensure that the arbitrator and the lower court (which initially heard challenges to the award) acted within the boundaries of the law.“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 said. .Elaborating further on its powers under Section 37, the Court noted that it is limited only to examine whether the court from which the appeal arises, has erred in applying the principles applicable to the limited jurisdiction vested in such Court under Section 34 of theAct. "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.Crucially, the Court analysed the Master License Agreement (MLA) and found that it allowed Railways to change the tariff and menu. The Court found that no clause in any of the relevant documents (circulars, tender, or MLA) stipulated that a regular meal served in place of a combo meal would be compensated at the lower combo meal rate. Therefore, the court concluded that the single-judge erred by relying on certain contractual clauses to justify overturning the arbitrator's award..Regarding the welcome drinks, IRCTC argued that Brandavan, by not issuing invoices, had waived their right to reimbursement. The Court dismissed this, stating that a simple administrative oversight in invoicing doesn't constitute a waiver unless both parties explicitly agreed to it. The Court acknowledged the arbitrator's reliance on occupancy certificates and a Chartered Accountant's testimony to determine consumption, Contractual interpretations by a tribunal shouldn't be overturned unless completely unsustainable, the Court underscored.Since IRCTC failed to provide any counter-evidence regarding welcome drink supply, the Court found the compensation award justified, adding that allowing IRCTC to benefit without paying would be unjust enrichment.On the matter of interest, the court found a "patent illegality" in the arbitral award. The tribunal had awarded interest from January 2018 on the entire sum even though some amounts weren't due until later. The Court held that interest must be calculated on amounts actually due at the specified date and applying it retroactively to future dues is impermissible. Thus, the Court partially set aside the single-judge's order. .Brandavan Foods was represented by Senior Advocates Sanjay Jain and Joy Basu with advocates Sudhir Mishra and Ritwika Nanda, both Partners from Trust Legal..IRCTC was represented by Solicitor General Tushar Mehta and Senior Advocate Ciccu Mukhopadhyay with advocates Saurav Agarwal and Anshuman Choudhary..[Read Judgment]