Court emphasizes limited judicial intervention in arbitration, dismisses appeal by M/s R.K. Associates against contract termination due to unsatisfactory services.
In a significant decision, the Delhi High Court, presided over by Justice Mini Pushkarna, has upheld the termination of a catering contract by the Indian Railway Catering and Tourism Corporation Limited (IRCTC) with M/s R.K. Associates and Hoteliers Pvt. Ltd. The case revolved around the termination of a Master License Agreement by IRCTC due to persistent complaints regarding unsatisfactory services provided by R.K. Associates on the PURI-NDLS Purushottam Express train.
The court, while dismissing the appeal filed by R.K. Associates, underscored the limited scope of judicial intervention in arbitral proceedings as defined under Section 37(2)(b) of the Arbitration and Conciliation Act, 1996. Justice Pushkarna reiterated that the appellate court cannot re-evaluate evidence or substitute its discretion for that of the arbitral tribunal unless the decision is perverse, patently illegal, or suffers from jurisdictional infirmity.
R.K. Associates had been awarded the license for on-board catering services in 2024, but the agreement was terminated by IRCTC on May 2, 2025, citing unsatisfactory services and numerous passenger complaints. In response, R.K. Associates challenged the termination, arguing that the termination process was arbitrary and violated principles of natural justice, including inadequate notice and lack of adherence to contractual terms.
IRCTC defended its decision, stating that the termination was valid under Clause 6.10 of the Master License Agreement, which permits termination without notice in cases of persistent complaints and service deficiencies. The court noted that the appellant had been adequately notified of service issues through multiple communications, penalties, and show cause notices, thereby fulfilling the intent of the contractual provisions for notice.
The court held that the arbitral tribunal's findings were reasonable and that there was no basis for judicial interference. It observed that the learned Arbitrator had considered all relevant facts, including the substantial number of complaints and the appellant's failure to improve service standards despite repeated warnings.
This judgment reinforces the principle of minimal judicial interference in arbitration matters, aligning with the legislative intent of the Arbitration and Conciliation Act to ensure a swift and effective resolution of disputes.
Bottom Line:
Arbitration and Conciliation Act, 1996 - Limited scope of interference under Section 37(2)(b) - Court cannot re-appreciate evidence or substitute discretion of the Arbitral Tribunal unless the impugned order is perverse, patently illegal, or suffers from jurisdictional infirmity.
Statutory provision(s): Arbitration and Conciliation Act, 1996 - Sections 9, 11, 17, 34, 37
