Safiya Malik

The Delhi High Court has partially set aside an arbitral award that had directed the Indian Railways Catering and Tourism Corporation Ltd. (IRCTC) to reimburse M/s Brandavan Food Products for additional catering costs incurred due to menu modifications. The court held that IRCTC had the contractual authority to alter catering tariffs without prior consultation with service providers. While the arbitral tribunal had allowed Brandavan Food Products' claims for additional costs of supplying regular meals and welcome drinks on trains, the court found that the award was partly inconsistent with contractual terms and public policy.

The dispute arose from a catering contract between IRCTC and Brandavan Food Products for providing meal services on Rajdhani, Shatabdi, and Duronto trains. Under the terms of the contract, IRCTC set catering tariffs and service menus through policies issued by the Railway Board. The company submitted its bid for a tender issued on May 27, 2013, quoting Rs. 35.63 crore as the license fee for a five-year period.

Initially, IRCTC’s catering tariff structure included a "Combo Meal" for dinner service, priced lower than a regular meal. However, through a commercial circular dated October 9, 2013, IRCTC introduced the Combo Meal, reducing food quantity for certain meal services. Subsequently, another circular dated October 23, 2013, discontinued the Combo Meal and reinstated regular meals as the second meal of the day. Additionally, in August 2014, IRCTC introduced a requirement for catering contractors to serve a "Welcome Drink" to all AC-class passengers.

Brandavan Food Products claimed that these changes increased its operational costs without corresponding reimbursements. The company contended that the price difference between a Combo Meal and a Regular Meal should have been compensated and that it should be reimbursed for the cost of providing Welcome Drinks. IRCTC argued that its catering policy allowed modifications to meal tariffs and menus without requiring adjustments in contractor payments.

Following unsuccessful representations to IRCTC, Brandavan Food Products initiated arbitration, seeking reimbursement of Rs. 27.82 crore for serving regular meals at Combo Meal rates from October 2013 to March 2020 and Rs. 5.34 crore for Welcome Drinks served between August 2014 and March 2020.

The Delhi High Court, comprising Justice Navin Chawla and Justice Shalinder Kaur, examined the arbitration award and IRCTC’s challenge under Section 34 of the Arbitration and Conciliation Act, 1996. The court considered whether the arbitral tribunal had exceeded its jurisdiction by awarding claims that contradicted the contract.

Regarding the claim for additional reimbursement for Regular Meals, the court noted that "Clause 8.1 and Clause 1.4 of the Master License Agreement (MLA) clearly empower IRCTC to modify the catering tariff and menu structure without requiring prior consultation with the contractor." It found that "the claimant had no contractual right to claim additional payments based on tariff modifications made through the commercial circulars issued by the Railway Board." The court observed that the arbitral tribunal's reliance on the argument that IRCTC enjoyed a dominant position over catering contractors was unsupported by evidence and did not justify deviating from contractual terms.

On the issue of Welcome Drinks, the court upheld the arbitral award’s finding that "the introduction of an additional service item, not originally contemplated in the contract, could not be unilaterally imposed without reimbursement." It reasoned that while IRCTC retained authority over meal pricing, it did not have unilateral discretion to mandate additional services without payment.

The court also addressed the doctrine of waiver and estoppel, noting that "the claimant continued to supply Regular Meals and Welcome Drinks as per IRCTC’s directives without raising contemporaneous objections or separate invoices." It held that while IRCTC had contractual discretion over menu pricing, its directives could not override fundamental contractual principles regarding payment for additional services.

The Delhi High Court partially set aside the arbitral award, ruling that the reimbursement claim for Regular Meals was not maintainable under the terms of the contract. However, it upheld the tribunal's decision allowing reimbursement for Welcome Drinks. The court also found that the tribunal’s reasoning on interest awards was within its discretion and declined to interfere. The matter was remanded for recalculating the payable amount in light of the court's findings.

Case Title: Indian Railways Catering and Tourism Corp. Ltd. v. M/s Brandavan Food Products & Ors.
Case Numbers: FAO(OS) (COMM) 245/2024 & Connected Matters
Bench: Justice Navin Chawla and Justice Shalinder Kaur

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