Arbitral Tribunal Is The Final Arbiter On Facts: Delhi High Court

Summary:

^[1]The Hon’ble High Court of Delhi recently addressed an appeal challenging a lower court’s decision to partially overturn an Arbitral Award in a dispute between M/s Brandavan Food Products Ltd. and the Indian Railways Catering and Tourism Corporation Ltd. (hereinafter referred to as “IRCTC)”. Both the parties preferred the matter to a Division Bench before Hon’ble High Court for further consideration.

The case stemmed from catering service agreements between IRCTC and several service providers, including M/S Brandavan Food Products Ltd., for specific trains. The core issues revolved around the interpretation and execution of these contracts, particularly concerning the scope of services, adjustments to license fees, and contract renewal terms.

Facts:

• The said dispute arose from catering service agreements between M/S Brandavan Food Products Ltd. and IRCTC.
• An arbitral award was passed on April 27, 2022, subsequently IRCTC filed petition under Section 34 of the Arbitration and Conciliation Act, 1996 contesting certain aspects of the award.
• The lower court partially upheld IRCTC’s challenge, leading to the partial setting aside of the award.
• Both the parties filed an appeal before the Hon’ble Delhi High Court, challenging the lower court’s decision.
• The said conflict originated from IRCTC’s proposed changes to the contracts upon their expiration. These changes included:
• Removing food preparation responsibilities and limiting services to distribution.
• Reducing the fee payable to service providers by 75%.
• Increasing the license fee by 10%.
• Revising the fee structure on a pro-rata basis.

Issues:

1. Whether IRCTC’s proposed changes with regards to the scope of services and fee structure is legally justified and enforceable?
   1. Whether the catering companies, including M/s Brandavan Food Products Ltd., entitled to relief against IRCTC’s unilateral modifications?
   1. Whether the lower court correctly applied the Section 34 of the Arbitration and Conciliation Act, 1996 when partially setting aside the Arbitral Award?

Held:

The Hon’ble Delhi High Court held that IRCTC’s unilateral changes to the contracts were arbitrary and violated the agreed terms with the catering service providers, including M/s Brandavan Food Products Ltd. It was further held that the district court had incorrectly applied the principles of judicial interference under Section 34 of the Arbitration and Conciliation Act, 1996.

The Hon’ble High Court emphasized that the original Arbitral Award was well-reasoned and protected the rights of the catering companies, and should not have been altered.

Directions:

The Hon’ble Court directed the IRCTC to compensate the affected parties for financial losses caused by the unjustified modifications based on the damages assessed during arbitration.

Analysis:

By limiting judicial interference in arbitration, the court reinforced the integrity of the arbitral process, ensuring that awards remain binding unless they conflict with fundamental policy or demonstrate clear illegality. The decision also safeguards parties from unfair practices, particularly in cases where dominant entities like IRCTC attempt to impose arbitrary changes. Overall, the ruling strengthens confidence in arbitration as a reliable mechanism for resolving commercial disputes.

^[1] BEFORE THE HON’BLE HIGH COURT OF DELHI

M/s Brandavan Food Products Ltd. & Ors. v. Indian Railways Catering and Tourism Corp. Ltd. (IRCTC)

FAO (OS) (COMM) 263/2024 & CONNECTED MATTERS

Judgment Dated: February 10, 2025