Arbitrator's Findings As Per Evidence And Testimony Is Not Perverse, No Need To Interfere: Delhi High Court

The High Court referred to the decision of the Supreme Court in Associate Builders v. DDA (2015) 3 SCC 49 where the Supreme Court held that the grounds for setting aside an arbitral award under Section 34(2)(a) of the Arbitration Act do not encompass the merits of the award. Instead, they are limited to issues such as public policy and procedural fairness. The Supreme Court highlighted that the principle of judicial approach requires decisions to be fair, reasonable, and objective. Arbitrary or whimsical decisions are not fair or reasonable.

The Supreme Court noted that while applying the "public policy" test, it does not function as a court of appeal and cannot correct errors of fact. The arbitrator is considered the ultimate authority on factual matters. An award is not invalidated merely due to insufficient evidence if the arbitrator's approach is not arbitrary. Further, the High Court in Delhi Airport Metro Express (P) Ltd. v. DMRC reinforced this limited scope by stressing that Section 34 should only be invoked in cases of patent illegality or when an award is in conflict with public policy. It noted that judicial restraint is crucial and that courts should not interfere by reassessing facts or reapplying legal principles.

The High Court held that under Section 34, an arbitral award can be set aside for patent illegality if the tribunal's view is unreasonable, if it exceeds jurisdiction, or if it is based on no evidence or ignores material evidence. However, mere erroneous application of law or non-public policy-related contraventions do not justify setting aside the award. The court will not interfere if the arbitrator's interpretation is reasonable and not perverse.

Background:

M/s Deepak and Co (Respondent), a private railway catering service provider, was empaneled with the Petitioner, IRCTC, for allotment of temporary licenses on Category 'A' trains. Following the Railway Budget, railway catering services were restructured which led to the issuance of a limited tender by IRCTC. The Respondent won this tender and received a temporary license through a Letter of Award. The LOA specified the amounts payable by the Petitioner for production and service charges for meals on the train.

On 07.02.2017, IRCTC introduced new policies. These included offering a welcome drink to passengers at no extra charge or relinquishing the temporary license, reimbursement of production charges for meals served due to shortages, and additional reimbursement for meals served due to train delays. The Respondent contested these policies and stated that it was not included in the original tender document and expressed concerns about the reimbursement for train delays. Despite these concerns, the Respondent agreed to provide the welcome drink starting but under protest regarding the charges.

The Respondent raised issues about the adjustment of welcome drink charges and other related expenses. In response, IRCTC indicated that the charges incurred by it for welcome drinks would be deducted from the Respondent's bills. After further correspondence and agreement on an extension of the license, disputes over charges persisted which led the Respondent to invoke arbitration.

The arbitrator held that the term "welcome drink" included both the welcome drink and wet tissues, based on the IRCTC's instructions and documentary evidence. The arbitrator found that the IRCTC didn't raise the issue of separating the items until the stage of calculating dues, which was inconsistent with previous statements. This led to the arbitrator awarding Rs. 37,47,824 for both items. Feeling aggrieved, the IRCTC approached the High Court.

IRCTC contended that the arbitrator erred by awarding costs for both items when only the welcome drink was in dispute. It claimed that the deduction made was only for the welcome drink and that the arbitrator's award of Rs. 37,47,824/- for both items was beyond the claims adjudicated.

The arbitrator, however, relied on documentation that indicated the welcome drink and wet tissue were to be provided together as per the IRCTC's instructions. The arbitrator's interpretation was that the term "welcome drink" included both items. The arbitrator also noted that IRCTC only raised the issue of separating the items at the stage of calculating dues, which was inconsistent with previous statements.

The arbitrator considered the testimony of RW-1, who admitted that the Respondent provided both items, and that deductions made by IRCTC were corroborated by this testimony. The High Court found that the arbitrator's decision, based on the evidence and contractual terms, was reasonable and not arbitrary or capricious. It held that the findings were consistent with the documentary evidence and admissions made during cross-examination.

Therefore, the High Court upheld the award and dismissed the petition.

Case Title: Indian Railway Catering And Tourism Corporation Ltd. Vs M/S Deepak And Co

Case Number: O.M.P. (COMM) 124/2022 & I.A. 4210/2022 and OMP (ENF.) (COMM.) 98/2022 & EX.APPL.(OS) 1461/2023

Advocate for the Petitioner: Mr Shailender Saini and Ms Rashmi Malhotra

Advocate for the Respondent: Mr Naresh Thanai, Mr Abhilash Mathur and Ms Khushboo Singh

Date of Judgment: 01.07.2024

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