TaxTMI 
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2025 (11) TMI 430
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..... 17438-17439 of 2025) CIVIL APPEAL NOs OF 2025 (@ Special Leave Petition (C) Nos. 17641-17642 of 2025) CIVIL APPEAL NOs OF 2025 (@ Special Leave Petition (C) Nos. 17037-17038 of 2025) CIVIL APPEAL NOs OF 2025 (@ Special Leave Petition (C) Nos. 18771-18773 of 2025) CIVIL APPEAL NOs OF 2025 (@ Special Leave Petition (C) Nos. 17550-17552 of 2025) CIVIL APPEAL NOs OF 2025 (@ Special Leave Petition (C) Nos. 16888-16889 of 2025) CIVIL APPEAL NOs OF 2025 (@ Special Leave Petition (C) Nos. 15650-15651 of 2025) For the Petitioner(s): Mr. Tushar Mehta, S.G., Mr. Ciccu Mukhopadhyaya, Sr. Adv., Mr. Vinay Kumar Misra, AOR, Mr. Saurav Aggarwal, Adv., Mr. Anshuman Chaudhary, Adv., Mr. Rajat Dasgupta, Adv., Mr. Rajat, Adv., Ms. Akshita Totla, Adv., Ms. Priya Misra, Adv., Ms. Raadhika Chawla, Adv., Mr. Parag Tripathi, Sr. Adv., Mr. Sanjay Jain, Sr. Adv., Mr. Joy Basu, Sr. Adv., Ms. Ritwika Nanda, Adv., Ms. Petal Chandhok, Adv., Mr. Gaichangpou Gangmei, Adv., Mr. Anoop, Adv., Mr. Nishank, Adv., M/s. Trust Legal, AOR. For the Respondent(s): Mr. Parag Tripathi, Sr. Adv., Mr. Sanjay Jain, Sr. Adv., Mr. Joy Basu, Sr. Adv., Ms. Ritwika Nanda, Adv., Ms. Petal Chandhok, Adv., Mr. Gaichangpou Gangmei....
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.... Tender Notice dated 27.05.2013 inviting bids for providing catering services on the train referred to above. The contract period was for 5+5 years from the date of commencement of the catering services. The tender document prescribed the food items/beverages which were to be supplied to the passengers travelling on these trains. The tariff/apportionment charges ['tariff(s)'.] for each service were also prescribed. We may note, at this stage, that the tariffs are fixed on the basis of the commercial circulars issued by the Railway Board. At the time of issuance of the tender notice, the tariffs set out therein were reflective of the tariffs fixed in the year 1999, under Commercial Circular dated 27.05.1999. 6. While so, before the opening of the bids pursuant to Tender Notice dated 27.05.2013, the Railway Board issued Commercial Circular No. 63 of 2013 dated 09.10.2013 whereby, while increasing the tariffs, the concept of 'combo meal' was introduced as a measure to reduce wastage of food. It was proposed that, instead of providing a second regular/full meal during the course of the journey, a combo meal could be served, i.e., a smaller meal consisting of lesser number of items a....
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....rains, viz., morning tea/welcome drink/light refreshment; breakfast; lunch; high tea/evening tea; and dinner. Separate charges were framed for 2AC/3AC/CC, on the one hand, and 1AC/EC, on the other. This circular held the field for nearly a decade and a half. 9. The tender document for provision of catering services on Train Nos. 12423-24, New Delhi-Dibrugarh-New Delhi Rajdhani Express, was issued by the Northern Railway on 27.05.2013. Chapter I therein dealt with the scope of work. Clause 1.3 stated that the bidder, once selected, shall become the licensee and shall be liable to pay licence fee as per the terms and conditions determined by the Northern Railway. Clause 1.2.1 stated that the licensee shall provide catering services on Train Nos. 12423-24 and provide meals from the kitchens at the originating/enroute stations of the train. Clause 1.3, titled 'Scope of work of catering services on train' indicated the major components. Clause 1.3.1 reads as follows: '1.3.1 The Licensee shall be responsible for all catering services from pantry car on Train No. 12423/24 as per Policy, guidelines, instructions issued by Railway and other statutory regulations. This will in....
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....e fares of these trains. Clause 1.4 is of relevance in the context of a combo meal and it reads as follows: '1.4 The concept of combo meal for Rajdhani/Shatabdi/Duronto express trains has been introduced in place of regular second meal of the day where more than one meal services are provided. The third/following meal shall be the regular meal and the sequence of every alternate meal as combo meal shall be followed for the particular train. At one point of time only one type of meal will be served in the entire train.' The menu for each service was furnished in Annexure A, which was to be adopted uniformly. The price of lunch/dinner for 1AC/EC was increased to Rs. 145/Rs. 129.50 (with and without service tax) and for 2AC/3AC/CC, it was enhanced to Rs. 125/Rs. 112.50 (with and without service tax). The newly introduced combo meal for all AC classes was priced at Rs. 75/Rs. 66.50 (with and without service tax). 12. However, on 23.10.2013, the Railway Board issued Commercial Circular No. 67 of 2013, again revising the menu and tariffs of catering services on the three trains. It was stated therein that a review of the decision on revision of the menu/tariffs of catering....
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.... as set forth in Annexure II of this Agreement. The Licensee also hereby confirms and acknowledges that Railway shall have the absolute right and discretion to change and modify the prices set forth in Annexure II without any need for prior discussion with the Licensee and the decision of Railway shall be strictly enforced by the Licensee during the Term of this Agreement.' 14. The tenure of the Agreement was to commence on 21.01.2014 and was for a period of five years. On the completion of five years, one renewal for another five years could be given subject to satisfactory performance. Article 20 was titled 'Dispute Resolution' and Clause 20.2 therein provided for settlement of disputes through arbitration, as per the provisions of the Act of 1996. Clause 21.6, titled 'Waiver', stated that unless otherwise expressly provided in the agreement, a delay or omission by either party to exercise any of its rights under the agreement would not be construed to be a waiver thereof. Annexure II to the MLA was a copy of the modified Section C, setting out Special Conditions of Contract I and Special Conditions of Contract II. The Special Conditions of Contract I detailed the cyclic menus....
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....ces. It is advised that the actual charges of catering services as per the requirement of the journey of Rajdhani/ Shatabdi/Duronto Express trains should be added to the basic fare and the amount so arrived will be rounded off to the next higher multiple of Rs. 5/-. Payment of appointment charges to the caterers should be made according to the actual services rendered to the passengers as per the following rates given below except in case of combo meal where charges will be as per below but menus shall be as per regular Lunch/Dinner meal as issued vide CC-67/2013:- (in Rs.) 1A/EC Type of service Catering charges to be disbursed to the licensee without service tax. Catering charges to be included in fare (Inclusive of present service tax @8.66%) (1) (2) (3) Morning Tea 12.50 15.00 Breakfast 81.50 90.00 Lunch/Dinner 129.50 145.00 Evening Tea where dinner is served 41.00 45.00 Evening Tea where dinner is not served 66.50 75.00 Combo Meal 66.50 75.00 2AC/3AC/CC Type of service Catering charges to be disbursed to the licensee ....
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....hese instructions were directed to be implemented with prospective effect. The 'Note' pertaining to this modification indicated that the IRCTC had highlighted the inadequacy of the tariff of catering services as there was a special case of the second meal of the day in the case of Rajdhani/Shatabdi/Duronto Express Trains. The IRCTC pointed out that after the tenders were allotted and agreements were executed, the menu of the second meal was changed and made similar to that of a normal lunch/dinner but instead of charging Rs. 112/- from the passengers, the Railway continued to charge Rs. 66.50/- for this meal. The IRCTC pointed out that this anomaly needed to be corrected with revision in the rates of the second meals and advised that either the menu of the meal should be restored as a combo meal or the tariff should be made similar to a normal meal. The IRCTC also pointed out that the caterers were continuously representing about this issue. However, as per the mandate of the Circular dated 03.10.2019, the parity brought about thereunder was to be with prospective effect only. 18. The grievance of BFP and the other caterers, leading to the thirteen arbitration claim petitions, w....
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....till 16.01.2020, when a certified copy of the judgment was made available, the Arbitrator found in favour of the caterers. Upon such exclusion, the Arbitrator concluded that the claims by the caterers could be said to have been instituted in or around January, 2018 and, in consequence, the claims of the caterers for three years prior to January, 2018, i.e., from January, 2015 would be within the period of limitation. He, accordingly, held that the claims prior thereto would be barred by time. The caterers were held disentitled to seek recovery of any amounts in relation to their catering services rendered prior to January, 2015. 21. The next objection of the IRCTC considered by the Arbitrator was as to whether the caterers could be said to have waived their right of recovery and reimbursement in relation to the second regular meal and the welcome drink provided by them, as they continued to raise their bills in terms of the commercial circulars and received regular payments against the bills so raised. The IRCTC contended that, as the caterers were satisfied with the payments made to them for the second regular meal at the price of a combo meal and with no payment being made for....
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....is investment was in the form of payments against regular monthly bills raised towards providing catering services on the trains. He opined that the caterers would not be in a position to adopt a cavalier attitude against the IRCTC given their status in the contractual arrangement and they could not, thus, be non-suited merely because they raised bills and received payments. 23. The IRCTC's next contention before the Arbitrator was that Clause 1.4 of the MLA would bar the caterers' demands being accepted. As per this clause, the Railway had the absolute right and discretion to change and modify the prices set forth in Annexure II without any need for prior discussion with the caterer and the same would be enforceable during the term of the contract. However, the Arbitrator found from a perusal of Annexure-II that it envisaged supply of a combo meal and not a second regular meal. He opined that this annexure did not support the case of the IRCTC as, once the caterer provided a regular meal instead of a combo meal, the reimbursement would also have to be on par with a regular meal. 24. The Arbitrator noted that Clause 8.1 of the MLA provided that the Railway had a right to chan....
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...., was examined as DW1. He spoke of the commercial circulars issued from time to time and the invoices submitted by the caterers based on the tariffs fixed in the said circulars. He stated that the caterers were reimbursed for regular meals at significantly higher prices than the prices fixed in the earlier Commercial Circular dated 27.05.1999 and that payments were made by the IRCTC for the bills, as submitted. He asserted that these transactions stood concluded and no further record was available with the IRCTC. He further stated that the transactions could not be re-opened as the caterers had received the payments made on the basis of the bills submitted by them. 27. However, holding that the documents produced by the caterers were sufficient evidence under Section 65(g) of the Indian Evidence Act, 1872, the Arbitrator noted that the IRCTC had all along maintained the stand that it was for the caterers to prove their computations but failed to point out any errors either in such computation or on account of insufficiency of supporting documents. The Arbitrator, accordingly, held that BFP was entitled to claim reimbursement of Rs. 20,97,85,202/- for the second regular meal whic....
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.... of Rs. 178.50/- for the supply of a first regular meal @ Rs. 112/- and a combo meal @ Rs. 66.50/- to the passengers in 2AC/3AC/CC. However, the combo meal came to be substituted by the later Circular No.67 of 2013 dated 23.10.2013 with a second regular meal. The learned Judge noted that it was only thereafter, i.e., on 17.01.2014 that the Letter of Award was issued to BFP and catering services commenced on 21.01.2014. The MLA was then executed on 21.04.2014 and, thereafter, Circular No.32 of 2014 dated 06.08.2014 was issued, directing the provision of welcome drinks at the beginning of the journey. 31. The learned Judge observed that the caterers had entered into their contracts with open eyes, knowing the rates of the meals to be supplied by them. He also noted that Clauses 8.1 and 1.4 of the MLA empowered the IRCTC to modify/alter the menu and the catering tariff without consulting the caterers. He, therefore, opined that Clause 21.6 of the MLA had no applicability and it was erroneously relied upon by the Arbitrator. He, accordingly, concluded that the finding of the Arbitrator with regard to waiver was perverse, having been passed in blatant ignorance of the binding contrac....
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....ng that, given a contract of commercial nature for supply of services, a party could legitimately expect reimbursement for actual services rendered. The learned Judge observed that this was not a case of inadequate reimbursement, as it was with the second regular meal, but a case of no reimbursement, which was a point of difference. The learned Judge, accordingly, upheld the view of the Arbitrator on this count. 34. The learned Judge concluded that the Award insofar as it pertained to recovery of differential costs for supplying the second regular meal was against public policy as it was in violation of the provisions of the Indian Contract Act, 1872, and was liable to be set aside. On the issue of welcome drinks, the learned Judge affirmed the reasoning of the Arbitrator, both on the liability aspect as well as on the computation aspect. He confirmed that there was no infirmity in the findings of the Arbitrator and upheld the Award to that extent. Lastly, on the issue of interest, the learned Judge observed that the same was solely within the domain of the Arbitrator under Section 31(7) of the Act of 1996 and observed that he found no infirmity with the reasoning of the Arbitra....
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....ward under Sections 34 and 37 of the Act of 1996, the Division Bench opined that interference under Section 34 could be on very limited grounds. It observed that the Court exercising jurisdiction under Section 34 could only see whether the arbitral tribunal's view was perverse or manifestly arbitrary. However, the Bench misread the finding of the learned Judge on the issue of waiver, as it observed that he had invoked the doctrine of waiver against the caterers in respect of their claim for the second regular meal. In this regard, we find that the learned Judge did not apply the doctrine of waiver at all. On the other hand, he held that the principle of waiver had no applicability to that claim as the contractual terms specifically empowered the IRCTC to unilaterally change the menu and the tariff. The Bench also noted the fact that the Arbitrator had placed reliance on Annexure-II appended to the MLA, which spoke of a combo meal instead of a second regular meal, and observed that the Circular dated 09.10.2013 seems to have been relied upon in the MLA, not realising that the concept of combo meal was no longer in vogue. It was observed that the caterers could not have served a comb....
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....payments, the learned Judge was not correct in rejecting this premise. 39. Affirming the view of the learned Judge that a plea of economic duress could not be accepted on the strength of mere pleadings without any evidence, the Bench noted that the Arbitrator had inferred the same from various facts, including the fact that the caterer had already deposited the license fee in advance along with the security deposits and their return was only in the form of payments regularly received against monthly bills. The Bench, therefore, concluded that the Arbitrator was entitled to draw his inferences from the facts proved before him and the scope of jurisdiction under Section 34 of the Act of 1996 did not extend to interfering with the merits of the inferences so drawn. The Bench was of the view that it is only where an inference was drawn completely without evidence or contrary to the express terms of the contract or the evidence led by the parties and where no reasonable person could have drawn such an inference, interference with the arbitral award may be warranted. The Bench opined that the present case was not such a case. 40. While appreciating the contention urged by the IRCTC....
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....refore, opined that there was no infirmity in this exercise. 42. The Bench further noted that the concept of welcome drinks was introduced after the signing of the MLA, by way of the Circular dated 06.08.2014, and there was, therefore, no stipulation either in the earlier circulars or the terms of the MLA, prohibiting payment being made for such welcome drinks. The plea of the IRCTC that it was entitled to set-off, as a drink was to be reduced from the breakfast which was to follow, was held to have been rightly rejected by the Arbitrator in the absence of pleadings and proof. The Bench opined that this was a matter for evidence and in the absence thereof, the same could not have been raised before the Arbitrator either to reject or reduce the claim of the caterers. 43. Lastly, on the issue of interest, the Bench observed that the Arbitrator had awarded interest on the total sum payable to the caterers with effect from 01.01.2018 though the amount would become due in instalments with each bill which was raised at the interval of 10 days, subsequent to 01.01.2018. It was opined that the entire amount did not become due and payable as on 01.01.2018. The Bench observed the cause....
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....injustice that was being meted out to the caterers by paying them the price of a combo meal even for a regular meal. Though BFP would contend that the phrase 'the above changes will be done without any increase in charges' in Commercial Circular No. 67 of 2013 dated 23.10.2013 has to be interpreted to mean that the phrase was applicable only to Clauses (ii) to (v), i.e., in respect of the additional items that had been introduced and that it would have no application to Clause (i), which reinstated a regular meal in the place of a combo meal, we are not persuaded to agree. This argument does not stand to reason as a bare reading of the clauses in Commercial Circular No. 67 of 2013 dated 23.10.2013 indicates that there is no distinction made between the changes to be affected under Clause (i), on the one hand, and the changes under Clauses (ii) to (v), on the other. All the changes were to be made without any increase in charges is how the circular reads and no distinction can be drawn between one clause and the other. 46. During the course of arguments, the learned senior counsel appearing for BFP, while strenuously contending that the Award deserved to be confirmed insofar as t....
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.... Rs. 40 and Rs. 60 respectively, while for the morning tea/welcome drink/light refreshment, the tariff was shown as Rs. 13 and Rs. 19.50, respectively. The catering policy introduced in the year 2010, vide Commercial Circular No. 35 of 2010 dated 21.07.2010, did not make any substantial changes as regards the menus and tariffs shown in the earlier circular of 1999 but left it open to the Railway Board to fix the menus and tariffs for Rajdhani, Shatabdi and Duronto Express Trains. 50. Therefore, when BFP and the other caterers made their bids pursuant to the tender notices in May, 2013, they did so under the impression that they would be supplying food on the trains in question as per the menus fixed under the circular of 1999 and would be paid tariffs in terms of the rates fixed therein. This is also evident from Clause 1.3.3 of the bid document, which stated that the menus and rates for each service would be as per Section C thereof, though the Railway reserved the right to modify/alter the menu and catering tariffs. Section C, appended to the bid document, contained the menus for morning tea/coffee; welcome drink; breakfast; lunch/dinner and evening tea for the two separate ca....
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....of Rs. 35,63,00,000/- and the same is now the subject matter of a separate arbitration. 53. In any event, the new policy in relation to a combo meal in the Circular dated 09.10.2013 came to be modified almost immediately thereafter under Circular No. 67 of 2013 dated 23.10.2013. This circular was stated to be a corrigendum to the earlier Circular dated 09.10.2013. In consequence, the Railway Board scrapped the newly introduced combo meal and directed that a regular meal should be restored in its place. The Railway Board directed that Para 1.4 of Circular No. 63 of 2013 dated 09.10.2013 in relation to a combo meal would stand deleted. Certain other changes in the menu were also indicated and, after setting out the details thereof in Clauses (ii) to (v), the Railway Board categorically stated that the above changes would be done without any increase in charges. 54. Therefore, by the time the bid of BFP was processed, resulting in the issuance of Letter of Award dated 17.01.2014 to it, the aforestated revised catering policy was already in place. In fact, the Letter of Award ended with a reference to the revised catering policy and the concluding para therein reads as under: ....
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....t in a separate table therein. Notably, the tariffs were detailed with reference to the meal. For example, where lunch and evening tea were served, it was indicated as 'L+ET' and the tariffs were shown separately for 2AC/3AC and 1AC/EC. Significantly, where a first regular meal was served along with another meal, it was shown as L+ET+CM, i.e., lunch+evening tea+combo meal. The tariff payable was shown as the aggregate of the tariffs payable for lunch, evening tea and the second regular meal at the price of a combo meal. Merely because this tabular statement referred to CM (combo meal), it is not open to BFP and the other caterers to contend that they were only required to serve a combo meal and not a second regular meal. The circulars issued and put in place by the date of execution of BFP's MLA on 21.04.2014 clearly evidenced that the concept of a combo meal, which was introduced under Circular dated 09.10.2013, was already done away with under the later Circular dated 23.10.2013. Further, this circular made it clear that the changes made thereunder did not warrant any increase in charges and that is the reason why CM continued to be used in the context of the second regular meal.....
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.... (v) The Bid. This clause, therefore, made it clear that the policy decisions, as per the Railway Board's catering policy and circulars, had to be given primacy and priority over and above even the terms of the agreement and other connected documents. 60. As regards the issue of a welcome drink, the Railway Board had issued Circular No. 32 of 2014 dated 06.08.2014, wherein it was stated that review of the menu and tariff had been undertaken through the Committees set up by it, and based on the recommendations made, the revised menu and tariff had already been notified, vide Circular No. 63 of 2013 dated 09.10.2013. Circular No. 67 of 2013 was then referred to, whereby certain modifications were made in the earlier Circular No. 63 of 2013. It was then stated that, the Board had decided to revise the instructions and, therefore, consolidated instructions were being issued. One of the changes made thereunder was that a welcome drink would be served to all passengers in AC classes on commencement of the journey, but when breakfast followed immediately after the welcome drink, the Frooti/Tetra Pack drink hitherto being provided along with breakfast, would not be served. BFP....
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....h an award may be set aside. For the purposes of this adjudication, Section 34(2A) is also relevant. This provision was inserted with retrospective effect from 23.10.2015, vide Amendment Act No. 3 of 2016. It states to the effect that a domestic arbitral award may be set aside if the Court finds that the said award is vitiated by patent illegality appearing on the face of that award. The proviso thereto, however, adds a caveat that an award should not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence. 63. Pertinently, Section 34(2)(b)(ii) provides that if the Court finds that an arbitral award is in conflict with the public policy of India, the Court would be justified in setting it aside. Explanation 1, as it presently reads, and Explanation 2 were inserted by the Amendment Act No. 3 of 2016 with retrospective effect from 23.10.2015. Explanation 1 provides that, for the avoidance of doubt, it is clarified that an award is in conflict with the public policy of India only if its making was induced or affected by fraud or corruption or was in violation of Sections 75 or 81 of the Act of 1996 or it is in contravention with the....
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....ilders v. Delhi Development Authority (2015) 3 SCC 49 and Ssangyong Engineering (supra) and it was held that the failure of the arbitral tribunal to decide in accordance with the terms of the contract governing the parties would certainly attract the 'patent illegality' ground as the said oversight amounted to gross contravention of Section 28(3) of the Act of 1996, which enjoined the arbitral tribunal to take into account the terms of the contract while making the award. 67. Much earlier, in Industrial Promotion and Investment Corporation of Orissa Limited vs. Tuobro Furguson Steels Private Limited and others (2012) 2 SCC 261, this Court observed, on facts, that the High Court had completely overlooked the fact that the parties, with their eyes widely open, had entered into a contract, which was subject to the terms and conditions clearly spelled out therein, and in furtherance of the contract, payments were made and possession changed hands. This Court noted that both sides had therefore acted on the basis of the contract, changed their respective positions and assumed rights and obligations against each other. This Court held that the contract, having been acted upon, could n....
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....aking the Award, to take into account the terms of the contract and the trade usages applicable to the transaction. The trade usages in this regard were the policy decisions of the Railway Board, Ministry of Railways, Government of India, that governed contracts of this nature. Therefore, the Arbitrator was bound to consider such policy decisions in that light and evaluate the contractual terms in the context thereof. In the present case, the Arbitrator completely overlooked the weightage to be given to the policy decisions embodied in the Railway Board's circulars and compounded the error by contrarily interpreting the contractual terms, which were strictly in consonance therewith, to grant relief to the caterers. 70. The last contention urged by the caterers is as to whether the IRCTC, being a State instrumentality, has to be tied down by principles of fairness and reasonableness even in the contractual sphere. It was argued that the IRCTC could not act unreasonably or unfairly even while acting under a contract. This contention no longer stands to reason as we have held that the IRCTC and its predecessor, Northern Railway, had no independent discretion in the matter while dra....