Arbitral award must follow governing contract and policy framework; reimbursement and interest claims were set aside.

Under the governing catering contracts, the latest Railway Board policy circulars and the order-of-precedence clause controlled the menu and tariff terms, so an arbitral award granting reimbursement for a second regular meal and welcome drinks could not stand. The SC held that the tribunal had ignored the contractual framework and effectively rewritten the parties' bargain, attracting patent illegality and conflict with public policy under the Arbitration and Conciliation Act, 1996. As the principal reimbursement claims were unsustainable, the related interest award also failed and was displaced. The arbitral award and the High Court orders upholding it in part were set aside, and the caterers' claims failed in entirety.

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Issues: (i) Whether the arbitral award granting reimbursement for the second regular meal and welcome drinks was sustainable in view of the contractual terms and the Railway Board circulars governing the catering policy; (ii) whether the award of interest on the lump-sum amount could be sustained.

Issue (i): Whether the arbitral award granting reimbursement for the second regular meal and welcome drinks was sustainable in view of the contractual terms and the Railway Board circulars governing the catering policy.

Analysis: The catering contracts and the MLA were found to be governed by the Railway Board's policy circulars then in force. The bid document and agreement reflected the policy changes, including the deletion of the combo meal and the restoration of a regular second meal at the tariff fixed by the circulars, as well as the later introduction of welcome drinks. The contract expressly reserved to the Railway the right to change the menu and tariff, and the order of precedence in the MLA gave primacy to the latest catering policy. The arbitral tribunal's contrary interpretation was held to have ignored the controlling policy framework and to have effectively rewritten the bargain between the parties, which attracted the grounds of patent illegality and conflict with public policy under the Act of 1996.

Conclusion: The award granting differential reimbursement for the second regular meal and reimbursement for welcome drinks was unsustainable and was set aside.

Issue (ii): Whether the award of interest on the lump-sum amount could be sustained.

Analysis: Interest had been awarded by the arbitral tribunal on a consolidated amount from a date antecedent to the accrual of liability on several bills. Since the principal claims themselves were held unsustainable, the challenge to the interest component ceased to survive for independent consideration.

Conclusion: The interest award did not survive and stood displaced along with the principal award.

Final Conclusion: The arbitral award and the High Court orders upholding it in part were set aside, and the caterers' claims failed in entirety.

Ratio Decidendi: An arbitral award becomes vulnerable to interference when the tribunal, in disregard of the governing contract and binding policy framework, effectively rewrites the parties' bargain; such an award is liable to be set aside as patently illegal and contrary to public policy.

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