M/S BRANDAVAN FOOD PRODUCTS v. INDIAN RAILWAY CATERING AND TOURISM CORPORATION LIMITED

(ix) CCP 2010 is a policy framed by the railways, the MLA is a subsequent document containing specific terms to which the parties have consciously agreed and it is this document which binds the parties; the policy cannot alter the specific unambiguous terms of the contract, by which the parties are bound; there was no requirement to travel beyond the MLA; Article 21.[1] of the MLA primarily deals with the interpretation of the terms and arrangement between the parties and nothing more; therefore, it is not a provision which would determine the substantive rights and obligation of the parties.

5. The learned Senior Advocate further says that, interestingly the Arbitral Award has held, inter alia, as under:- “21.l From the above clauses, it is clear that the tenure agreed by the parties is for a period of 5 years from the date of commencement. Upon the completion of 5 years, one renewal for a period of 5 years may be given subject to satisfactory performance. The tenure shall continue until a period of 5+5 years from the commencement date and such renewal shall be on the recommendations provided by the evaluation committee in terms of Clause 3.[2] Clause 4 provides for the license fee, the mode of payment of license fee, and the catering charges in built in the ticket fare. The license fee was payable in advance for the duration of the license calculated on 2+2+1 yearly basis. In case of renewal, the license fee may be varied. The license fee was to be renewed for the additional period of 5 years calculated as per terms of the contract. The Railways could take any action as per the terms of the contract for delay in deposit of license fee. Without prejudice to which, there was a liability on the licensee to pay an interest of 14% per annum for the number of days or default in payment of license fee. The response of the licensee to the bid is also relevant as under Article 6.1. The licensee had agreed to fulfill all the commitments made in its response to the bid. It was the obligation of the Claimant being the licensee, to comply with the Food Adulteration Act and other statutory laws. The working of the base kitchens and serving of food, by the licensee, was subject to inspection by the Railways or any person authorized by the Railways.”

6. Therefore, he contended that (a) when the Tribunal largely agrees with the appellants' contentions, its conclusions could not be to the contrary, (b) the clause for a minimum 10% increase of the previous license fee was never incorporated by the respondents either in the SBD of in the MLA, (c) the language of Article 4.2(b) of the MLA is unambiguous, imperative and does not call for any interpretation, therefore, the reference by the learned Arbitrator to Article 21.[1] of the MLA was erroneous and unwarranted. There was no occasion to interpret any article, phrase, terminology or words of the MLA necessitating a linkage with Clause 17.[5] of the CCP 2010.

7. He further contended that the MLA was the only document which ought to have been referred to and by ignoring the terms of the said Agreement, the Arbitral Award has gone beyond the scope of section 28(3) of the Act, which mandates as under:- “While deciding and making an award, the arbitral tribunal shall, in all cases, take into account the terms of the contract and trade usages applicable to the transaction.”

8. The appellants further contended that the Arbitral Tribunal was aware of Article 4.2(b) of the MLA, yet it did not appreciate the same in its entirety. The said Article does not mention an interim arrangement of a compulsory/minimum increase of 10% of the existing license fee in the event of a renewal, pending mandatory reassessment of sales for variation of license fee. Only Clause 17.[5] of CCP 2010 makes a mandatory enhancement of a minimum 10% of the existing license fee, there is no such mandatory clause under Article 4.2(b) of the MLA. The latter does not even contemplate an increase of license fee. All it says is that there would, necessarily, have to be a reassessment of sales for “variation” of license fee. Therefore, the two clauses would have to be read separately in their specific contexts and not conjointly. It is argued that insofar as the Arbitral Award has overlooked the specific terms of the contract, it suffers from patent illegality and should, therefore, be set aside.

9. The learned Senior Advocate for the appellants contended that the interpretation of a statute or a clause or an agreement should always be meaningful i.e. a meaning should be given which would be reasonable and sensible. In support of this contention, he relied upon Percy and Anr v. Hall and Ors, 1996 (4) All ER 523, wherein it was observed that: “The rival approach urged by Mr. Howell is to be found in Lord Denning’s speech in the Fawcett case [1961] A.C. 636, 677-678: “...I can well understanding that a byelaw will be held void for uncertainty if it can be given no meaning or no sensible or ascertainable meaning. But if the uncertainty stems only from the fact that the words of the byelaw are ambiguous, it is well settled that it must, if possible, be given such a meaning as to make it reasonable and valid, rather than unreasonable and valid.... I am of the opinion that a planning condition is only void for uncertainty if it can be given no meaning or no sensible or ascertainable meaning, and not merely because it is ambiguous or leads to absurd results. It is the daily task of the courts to resolve ambiguities of language and to choose between them; and to construe words so as to avoid absurdities or to put up with them.”

10. There can be no dispute about the proposition. In the present case it has been applied fairly looking into the facts and circumstances of the case and a plausible view has been taken.

11. In similar view, the learned Senior Advocate for the appellants also relied upon the decisions of the Supreme Court in Jaishri Laxmanrao Patil v. State of Maharashtra, (2021) 8 SCC 1; Bank of India v. K. Mohandas, (2009) 5 SCC 313; Nabha Power Ltd. v. Punjab SPCL, (2018) 11 SCC 508; Raghunath Rai Bareja v. Punjab National Bank, (2007) 2 SCC 230; United India Insurance Co. Ltd. v. Orient Treasures (P) Ltd., (2016) 3 SCC 49; State of Maharashtra v. Shri Vile Parle Kelvani Mandal, (2022) 2 SCC 725.

12. Refuting the aforesaid contentions of the appellants, Mr. Ciccu Mukhopadhyay, the learned Senior Advocate for the respondents has submitted that: i) There is a wide difference between the Proforma Master License Agreement and actual Agreement signed between the parties. Furthermore, the document contemplated revision of enhancement of license fee as under:- “8.[3] In the case of any revision in catering tariff, the License fee payable to Railway shall be varied based on the re-assessment of sales, from the date of revision of catering tariff.” ii) In the section 34 proceedings, the appellant‟s challenge was limited to the extent that the appellant was entitled to renewal of the license on the same terms and conditions i.e. without increase in the previous license fee and if at all there would be a change in the previous license fee, it would be a variation based upon the reassessment, as is mentioned in aforenoted Article 4.2(b) of the MLA, iii) The agreement and arrangement between the parties provide for variation of license fee based on the reassessment of sales, however, renewal under the revised policy provides for a minimum enhancement of 10% in the license fee; this minimum enhancement is a condition of the renewal and is embodied in the foundational document-the CCP 2010, the same would be applicable and cannot be limited or ignored. In effect, on renewal for another period of 5 years, a minimum 10% tariff can be applied on pro-rata basis under the CCP 2010 and the Commercial Circular bearing No. 82/2012. iv) The MLA between the parties was entered on 21.04.2014 in terms of the renewal master plan. Article 21.[1] of the MLA dated 21.04.2014 read as under: “21.[1] This Agreement and the arrangement between the parties shall at all times be read along with the terms of the Bid and the response of the Licensee to the Bid. In the event of any interpretation of the provisions of this arrangement between the parties, the documents shall be read in the following order of precedence:-

(i) Railway' latest catering policy as applicable from time to time

(ii) the Articles of this Agreement;

(iii) the contents of the Annexure(s) to this Agreement;

(iv) Licensee’s response to the Bid

(v) The Bid ” v) In the event of interpretation, the order of precedence/for reference to documents is already specified. Clauses 17.[5] and 18.[3] of the CCP 2010 provide for minimum increase of 10% license fee over the prevailing license fee. It is argued that in this scheme of arrangement, at least 10% increase in license fee was mandatory and it has rightly been so held, both by the Arbitral Award and the impugned order u/s section 34.

13. The respondents contended that the arrangement contained in the policy was reduced to the terms of the MLA, therefore, the arrangement in the policy would have to be read in the manner as has been done in the Award. The Policy under Clause 26.1.[4] also provides that it shall apply to fresh license as well. It reads as under: “26.1.[4] This policy will also apply in case of award of fresh licences and licences awarded in the event of termination, non-renewal, vacation etc. of the existing licenses.”

14. In this regard, the Award has held as under:

15. On the said issue, the impugned order under section 34 has reasoned as under: XXX “39. The 2010 Policy, as initially issued, did not provide for renewal in respect of a Major Unit However, the same was amended by the circular dated 31.12.2012. At the time of issuance of the 2010 Policy, Clause 17.[5] of the 2010 Policy, which provided for a minimum increase of 10% in the license fee, was inapplicable to Major Units as there was no provision for renewal of a license of a Major Unit. The Arbitral Tribunal held that after the substitution of Clause 16.1.[1] of the 2010 Policy, a license for a Major Unit could be renewed for a further period of five years and therefore, there was no reason to exclude the applicability of Clause I 7.[5] of the 2010 Policy to such renewal post amendment of Clause 16.1.[1] of the 20 IO Policy. The Arbitral Tribunal held that Clauses 16 and 17 of the 2010 Policy were to be read conjunctively. With the substitution of Clause 16.1.[1] of the 2010 Policy to provide for renewal of a license for a Mobile Unit and Base Kitchen, the attendant provisions for renewal under Clause 17 of the 2010 Policy also became applicable.

40. The MLA did not expressly provide for any increase in the license fee. However, there was no provision that proscribed increase in the license fee. The recitals to the MLA referred to the 2010 Policy and undisputedly, the tenders for providing catering services were issued in terms of the 2010 Policy.

41. The decision as to interpretation of a contract falls squarely within the jurisdiction of an arbitral tribunal; and unless this Court finds that such interpretation is manifestly erroneous and strikes at the root of the dispute, no interference would be warranted in these proceedings.

42. This Court finds no ground to fault with the Arbitral Tribunal's interpretation of the MLA. Clearly, the said interpretation is a plausible one and therefore, not amenable to challenge under Section 34 of the A&C Act.”

16. Lastly, the learned Senior Advocate for the respondents contended that the argument now raised by the appellants that the license fee could not be enhanced in terms of Article 4.2(b) of the MLA, was neither raised during the arbitral proceedings nor was it raised in section 34 proceedings. No fresh adjudication can be done on an issue which was never framed on a point which was never raised before the Arbitral Tribunal. In this regard, he relied upon the dicta of the Supreme Court in Indian Oil Corpn. Ltd. v. Sathyanarayana Service Station, 2023 SCC OnLine SC 597, which has held that the arbitral proceedings come to an end with pronouncement of the Arbitral Award.

17. During the pendency of this appeal, the appellant has paid the enhanced license fee of 10% for the previous years. The said payment was accepted by the respondent in terms of the letter dated 30.12.2019 which stated that the said payment would be subject to the outcome of the arbitral proceedings.

18. What is seen from the above is that in the statement of claims, the challenge was to the minimum 10% increase in the license fee. Reference was made to Articles 3.[1] and 3.[2] of the MLA and Clauses 17.[5] and 18.[3] of CCP 2010 whereas the argument now raised is pivoted only on the methodology of computation, which according to the appellants was necessarily to be adopted in terms of Article 4.2(b) of the MLA for variation of license fee. At no stage earlier was any issue raised that the methodology of Article 4.2(b) would necessarily need to be adopted. Instead what was argued is that minimum 10% increase of the license fee was impermissible. The renewal was after the completion of first 5 years. The respondents imposed the minimum 10% increase in the existing license fee under Clause 17.[5] of CCP 2010. If it was the appellants‟ case that such increase or variation could only be made under Article 4.2(b) of the MLA, it should have specifically raised the issue of “mandatory” prior reassessment of sales. Instead, it simply contended that enhancement of 10% of the license fee was illegal. It did not set up a case for reassessment. Essentially, the argument now raised was never the subject matter of examination or framed as an issue by or before the Arbitral Tribunal. Also it was not raised in section 34 proceedings. Therefore, there is no occasion for it to be raised now in an appeal under section 37 of the Act in which the scope for examination is even lesser and more limited than what it is under section 34 of the Act. The Court is not persuaded with the appellants‟ argument that insofar as the Arbitral Tribunal has reproduced Article 4.2(b) of the MLA, it was incumbent upon it to return a finding in terms thereof.

19. The issue of revision of 10% of the license fee was neither pleaded nor argued and not made a part of the written statement, hence, the same cannot be allowed to now be raised in these section 37 proceedings as the same is prohibited by law. Reliance is placed on Union of India vs. Susaka Pvt. Ltd. (2018) 2 SCC 182.

20. The impugned order has rightly held that:- “40. The MLA did not expressly provide for any increase in the license fee. However, there was no provision that proscribed increase in the license fee. The recitals to the MLA referred to the 2010 Policy and undisputedly, the tenders for providing catering services were issued in terms of the 2010 Policy.

41. The decision as to interpretation of a contract falls squarely within the jurisdiction of an arbitral tribunal; and unless this Court finds that such interpretation is manifestly erroneous and strikes at the root of the dispute, no interference would be warranted in these proceedings.

42. This Court finds no ground to fault with the Arbitral Tribunal's interpretation of the MLA. Clearly, the said interpretation is a plausible one and therefore, not amenable to challenge under Section 34 of the A&CAct.

43. In view of the above, this Court finds no merit in Brandavan's petition [OMP(COMM) No.292/2021]. And, the same is liable to be dismissed.”

21. In view of the preceding facts and discussions, it is evident that the arguments now raised apropos Article 4.2(b) of the MLA is being raised for the first time. The appellant‟s arguments are a little late in the day. Howsoever attractive an argument may be for a party in arbitration, it must be made at the first instance. The Arbitral Tribunal has taken a plausible view which does not call for any interference. It is settled law that the jurisdiction of the Court under section 34 of the Act is narrow and limited. Reliance is placed upon UHL Power Company Ltd. vs State of Himachal Pradesh, (2022) 4 SCC 116,

16. As it is, the jurisdiction conferred on courts under Section 34 of the Arbitration Act is fairly narrow, when it comes to the scope of an appeal under Section 37 of the Arbitration Act, the jurisdiction of an appellate court in examining an order, setting aside or refusing to set aside an award, is all the more circumscribed. In MMTC Ltd. v. Vedanta Ltd. [MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163: (2019) 2 SCC (Civ) 293], the reasons for vesting such a limited jurisdiction on the High Court in exercise of powers under Section 34 of the Arbitration Act have been explained in the following words:

17. A similar view, as stated above, has been taken by this Court in K. Sugumar v. Hindustan Petroleum Corpn. Ltd. [K. Sugumar v. Hindustan Petroleum Corpn. Ltd., (2020) 12 SCC 539], wherein it has been observed as follows:

22. As discussed hereinabove, the scope for appeal under section 37 of the Act is limited. We find no reason to interfere with the impugned judgment and order passed under section 34 of the Act. The appeals are without merits and are accordingly dismissed. The pending applications also stand dismissed.

NAJMI WAZIRI, J. GAURANG KANTH, J. MAY 26, 2023