The Supreme Court has set aside a multi-crore arbitral award passed against the Indian Railways Catering and Tourism Corporation (IRCTC), holding that the arbitrator had exceeded jurisdiction by interpreting the contract contrary to Railway Board policies and effectively rewriting the parties’ agreement.

 

A Bench of Justice Sanjay Kumar and Justice Satish Chandra Sharma noted that the Master Licence Agreements (MLAs) clearly provided that Railway Board circulars and catering policies would prevail. The arbitrator’s award, which granted reimbursement for additional meal components and welcome drinks, was found to contradict the express terms of the MLA as well as binding catering policy circulars issued between 2013–2014.

 

The dispute arose out of catering contracts for Rajdhani and Shatabdi trains, where private caterers claimed higher tariffs for a second regular meal and reimbursement for the reintroduced welcome drink. The arbitral tribunal upheld these claims, and the Delhi High Court had partly sustained the award. IRCTC appealed to the Supreme Court.

 

Referring to the precedent in Ssangyong Engineering & Construction Co. Ltd. v. NHAI (2019), the Court held that when an arbitrator’s interpretation violates the fundamental terms of the contract and binding policy directions, courts are justified in intervening under Section 34 of the Arbitration and Conciliation Act.

 

The Court observed:

• Clause 21.1 of the MLA gave primacy to the latest Railway catering policy.

• The 2013 and 2014 circulars expressly permitted menu changes and set tariff parity rules, leaving no scope for additional reimbursement.

• The arbitrator had ignored policy weightage and “impermissibly rewrote the contract”.

 

Accordingly, the Supreme Court allowed the appeal and set aside the arbitral award.