[Cites 16, Cited by 0]
Bombay High Court
Ambuj Hotel And Real Estate Pvt Ltd vs Ministry Of Railways on 7 April, 2026
2026:BHC-OS:8364
ARBP-836-2025 with CARBP-169-2026 (final).doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
COMMERCIAL ARBITRATION PETITION NO. 169 OF 2026
1. Ambuj Hotel and Real Estate Pvt. Ltd. ]
Through its Director Parth Singh ]
Having residential address at : ]
7575/1, Ram Nagar, ]
Paharganj, New Delhi - 110055 ]
Email : [email protected] ] ...Petitioner
Versus
1. Ministry of Railways ]
Through its General Manager ]
Off at : ]
]
Rail Bhawan, Raifi Marg,
]
New Delhi : 110001 ]
Email ID : [email protected] ]
2. Chief Commercial Manager, Catering ]
Western Railways ]
Off at : ]
]
Commercial Department,
]
Second Floor, Church Gate ]
Mumbai : 400020 ]
Email : [email protected] ] ...Respondents
WITH
COMMERCIAL ARBITRATION PETITION NO. 836 OF 2025
1. Ministry of Railway ]
Through its General Manager ]
Having office at Rail Bhawan, Rafi Marg, ]
]
New Delhi : 110001
2. Chief Commercial Manager, ]
(Catering), Western Railways ]
With its office at Commercial Department, ]
] ....Petitioners
2nd Floor, Churchgate, Mumbai : 400020
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Versus
M/s. Ambuj Hotels and Real Estate Pvt. Ltd. ]
a Company incorporated under the provisions of ]
Companies Act, 1956 ]
]
and having its office at 7575/1, Ram Nagar,
]
Paharganj, New Delhi - 110 055. ] ...Respondents
------------
Mr. Sandip Parikh, Mr. Ashok Singh, Mr. Sulalit Sisodiya and Mr. Pravin Singh for
Petitioner in CARBP No. 169 of 2026 and for Respondent in CARBP No. 836 of
2025.
Ms. Smita Thakur, Mr. Suresh Kumar for Petitioner in CARBP No. 836 of 2025
and for Respondent in CARBP No. 169 of 2026.
------------
Coram : Sharmila U. Deshmukh, J.
Reserved on : 24th March, 2026.
Pronounced on : 7th April, 2026.
Judgment :
1. Both these Petitions filed under Section 34 of Arbitration and
Conciliation Act, 1996 [for short, "the Arbitration Act"] challenges the
impugned Award dated 8th May, 2023 as corrected on 5th June, 2023.
Common submissions were canvassed and both Petitions are being
disposed of by this common judgment.
FACTUAL MATRIX :
2. Commercial Arbitration Petition No. 169 of 2026 is filed by the
Claimant being partly aggrieved by the impugned Award to the extent
that it upholds the validity of termination of Master License
Agreement [for short, "MLA"] and rejects the claim for damages.
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Commercial Arbitration Petition No. 836 of 2025 has been preferred by
the Respondents aggrieved by direction in the impugned Award for
refund of security deposit and license fees along with interest and
payment of legal fees to the Claimant. For the sake of brevity, the
parties are referred to as Claimant and Respondents.
3. The facts relevant for our purpose are that the Claimant is
engaged in the business of providing on-board catering services to
passengers on behalf of Indian Railways. The Respondents vide tender
bid notice dated 30th December, 2014 invited the bids for providing
catering services on the train "Swarna Jayanti Rajdhani Express". The
Claimaint's bid was accepted and the tender was awarded to the
Claimaint on 8th October, 2015. Due to pending litigation challenging
the Catering Policy 2010 and interim stay granted, which was
ultimately vacated on 16th February, 2016, there was delay in handing
over the train to the Claimant to start on board services. On 30th March,
2016, the Claimant deposited the security deposit and license fees for
two years. On 8th May, 2016, the concerned train was handed over to
the Claimant for on-board catering services. On 30 th May, 2016, the
MLA was executed between the Claimant and Respondents governing
the scope of arrangement.
4. On 9th March, 2017, Railways Board issued a departmental
direction/order to General Manager, Western Railways, Mumbai to
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terminate the claimant's catering contract with immediate effect in
terms of Commercial Circular No. 20/2017 dated 27 th February, 2017
and directions were issued to handover the train to IRCTC.
5. The Respondents issued notice dated 9th March, 2017 to the
Claimant stating that during the period from 2015 to 2017, there were
133 complaints received against the Claimant and called upon the
Claimant to show cause against termination. The contract came to be
terminated on 29th March, 2017 which also forfeited the security
deposit. The termination was challenged before this Court which
travelled upto Hon'ble Apex Court and the Respondents were directed
by this Court to give personal hearing to the Claimant. After hearing
the Claimant, the Respondents again passed termination order on 20 th
June, 2017 and imposed the penalty of forfeiture of security deposit
and annulment of license fees.
6. On 8th August, 2018, the Claimant called upon the Respondent
to release/refund license fees and security deposit on pro-rata basis
which request was rejected by the Respondents on 14th September,
2018. The Claimant invoked the arbitration clause of Master License
Agreement and the dispute was referred to the Learned Sole
Arbitrator.
7. The reliefs sought in the statement of claim were as under :
"1. Declare the show cause notice dated 09.03.2017 and
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termination letters dated 29.03.2017 & 20.06.2017 as illegal,
arbitrary, unfair and against the provisions of Master License
Agreement dated 30.05.2016 and thus, the same be set aside
and the claimant is entitled to get the renewal of the said
license for the further period of 5 years.
2. Award an amount of Rs. 7,34,33,000/- (Rupees Seven Crores
Thirty Four Lakhs Thirty Three Thousand Only) (Refund of
License Fees + Security Deposit) in favour of the claimant
towards the amount wrongfully withheld by the Respondents.
3. Award an Interest @12% per annum on Rs. 7,34,33,000/-
(Rupees Seven Crores Thirty Four Lakhs Thirty Three Thousand
Only) (Refund of License Fees + Security Deposit) till
17.02.2021 i,e. the date of filing of statement of claim.
4. Award Rs. 2,20,00,000/- (Rupees Two Crores Twenty Lakhs
Only) against the loss of profit for 5 years calculated
accordingly along with the interest @12% on the above said
amount.
5. Award Rs. 3,50,00,000 (Rupees Three Crores Fifty Lakhs
Only) along with the interest towards the investment in
utensils and infrastructure in settling up of the base kitchens.
6. Award Rs. 50,00,000/- (Rupees Fifty Lakhs Only) against the
loss of opportunity.
7. Award Rs. 50,00,000/- (Rupees Fifty Lakhs Only) against the
compensation for Mental agony and harassment.
8. Award Legal and Arbitration Cost/expenses of Rs.
25,00,000/-- (Rupees Twenty five Lakhs Only) in favour of the
claimant.
9. Award pendent-lite and future interest @12% on the total
claim amounting Rs. 14,29,33,000/- (Rupees Fourteen Crore
Twenty Nine Lakhs Thirty Three Thousand Only) (Claim
no.2+4+5+6+7).
10. Pass any such or further orders in favour of the Claimant as
the Ld. Sole Arbitrator deem fit and proper in the facts and
circumstances of the case and interest of justice, equity and
fairness."
8. The Respondents filed their statement of defense justifying the
termination and raised a counter-claim for legal expenses of
approximately of Rs.1,00,000/-. Evidence was led by the Claimant and
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no evidence was led by the Respondent. By the impugned Award, the
learned Arbitrator upheld the termination of MLA, rejected the claim
for renewal of contract, rejected the claim for damages and directed
the repayment of security deposit and refund of license fees to the
Claimant along with interest @ 14%. p.a and legal expenses.
SUBMISSIONS :
9. Mr. Parikh, learned counsel appearing for Claimant would draw
attention of this Court to the specific plea in the Statement of Claim
disputing the imposition of penalty as being unverified and
unpreceeded by any inquiry. He submits that it was specifically
pleaded that the penalty imposed was ex-parte decision without
affording any opportunity of hearing and hence, lis was raised as
regards the improper levying of penalty. He submits that despite
thereof, the learned Arbitrator did not frame any point for
determination as regards the improper levy of penalty. He submits that
the Learned Arbitrator has characterized the dispute about penalty as
background context and has held that the penalty being unchallenged
constitutes implicit admission of rendering of poor services. He
submits that the complaints were the reason for termination and not
the background. He submits that if the complaints are held to be
admitted, the Claimant had no leg to stand on. He submits that there
was no evidence produced by Respondents to prove the complaints
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which was the basis of termination. He would point out the Affidavit of
evidence of Claimant's witness which specifically deposes in respect of
improper levy of penalties and submits that in the absence of any cross
examination on this aspect by the Respondents, the evidence remained
uncontroverted. He submits that the specific case of the Claimant was
that the complaints are unverified and that there is not even a
suggestion that the Respondents were justified in levying the penalty.
He submits that this evidence led by the Claimant had been ignored by
the learned Arbitrator which constitutes patent illegality. He submits
that as the termination was held to be valid, the claim for damages
came to be rejected.
10. He would further submit that the Award is severable as the issue
of repayment of security deposit and license fee is not linked with
other part of the Award as regards the termination. He submits that
the Claimant is not seeking specific performance of contract and was
seeking damages for invalid termination of the contract.
11. He would further submit that insofar as the Respondent's
Petition is concerned, the learned Arbitrator has rightly directed the
refund of security deposit and license fees in accordance with the
terms of MLA and has held that the same is independent of validity of
the termination. He submits that the learned Arbitrator has rightly held
that even if the termination is valid, there is no contractual right to
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withhold or forfeit the security deposit and license fees. He submits
that there was deduction of penalties and fines from running bills
drawn by Claimant and hence no ground to sustain the forfeiture. He
submits that the interest @14% p.a. was granted as Article 4.3 of the
MLA provided for imposition of interest of 14% p.a. upon failures/delay
in deposit of license fee by the Claimant. He submits that on the
ground of parity, the same interest has been levied by the learned
Arbitrator. In support, he relies upon the following decisions :
ONGC vs. Saw Pipes Ltd.1
M/s. Kailash Nath Associates vs. Delhi
Development Authority and Another2
A. T. Brij Paul Singh and Others vs. State of
Gujarat3
Secretary of Irrigation Department, Govt. of Orissa
vs. G. C. Roy4
G. Sagar Suri vs. State of U.P.5
OPTO Circuit India Ltd. vs. Axis Bank6
Devchand Construction vs. Union of India7
I.B.C. Patel vs. Harihar Behara8
State of Maharahstra vs. S. N. Chawhan9
1 (2003) 3 SCR 69.
2 (2015) 1 SCR 627.
3 Civil Appeal No. 2054 of 1973, decided by Supreme Court on 25th July, 1984.
4 Civil Appeal No. 1403 of 1986, decided on 12.12.1991 by Supreme Court of India.
5 (2000) 1 SCR 418.
6 (2021) 2 SCR 81.
7 Order dated 16.02.2022 passed by Kerala High Court in Arbitration Appeal No. 29 of 2018.
8 (1999) 1 SCR 1097.
9 First Appeal No. 6 of 1975 decided by Bombay High Court on 22nd March, 1984.
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Union of India vs. V. Pundarikakshudu and Sons10
State of Orissa vs. B. N. Agarwalla and Others11
PSA SICAC Terminals Pvt. Ltd. vs. The Board of
Trustees12
Delhi Metro Rail Corporation Ltd. vs. Delhi Airport
Metro Express Pvt. Ltd.13
12. Per contra, Ms. Thakur, learned counsel appearing for
Respondents would submit that the grounds set out in the Petition
does not raise any ground of patent illegality under Section 34 (2)(a) of
Arbitration Act. She submits that the statement of claim does not seek
any refund of penalty imposed and hence, learned Arbitrator has
rightly held that the penalties have remained unchallenged and has
been accepted by the Claimant. She submits that as the termination is
valid, the claim for damages has been rejected. She submits that after
upholding the validity of termination, there could not be any direction
for refund of security deposit and license fees. She submits that the
refund of amounts is linked to termination and is not independent of
termination. She has taken this Court through Articles 5.1, 5.2, 5.3 and
Article 17.4 of MLA and would contend that apart from penalty, the
Respondents had the right under the contract to forfeit the security
10 (2003) Supp. 3 SCR 506.
11 Civil Appeal Nos. 471 with 472 of 1997, decided on 29th January, 1997 by Supreme Court.
12 (2021) 5 SCR 408.
13 (2024) 4 SCR 473.
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deposit. She would further submit that there is no basis for award of
interest @ 14% p.a. on the refund of the amounts and no basis for
saddling the Respondents with the legal expenses.
13. Rival contentions now falls for determination.
14. There was no claim raised by the Claimant challenging the
imposition of penalities as being improper and seeking refund of the
penalty amount. Mere pleadings in the Statement of Claim raising
grievance about the penalty imposed without seeking further relief in
that respect did not necessitate framing of an issue in that regard. The
Learned Arbitrator has rightly considered the issues which arose for
determination as regards the validity of termination, claim for damages
and refund of security deposit and license fees and accordingly
formulated the correct issues for determination.
15. The termination of the contract was governed by the terms and
conditions of MLA. Article 18.3 of the MLA permitted the Respondents
to terminate the contract in event of material breach by the Claimant
and Article 16 defined material breach to include non provision of
satisfactory services under the contract, if there was failure to adhere
to the desired performance levels and if the Railway received
persistent complaints against the Claimant from the passengers and
otherwise. In paragraph 29 and 30 of the Statement of Claim, the
Claimant has pleaded about the imposition of penalty/fine of Rs 8.72
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lakhs based on the complaints received by the Respondents and the
inspection carried out. It is also pleaded that from 29 th November, 2016
to 6th December, 2016, the Respondents had received total of 6
complaints about quality of food and on that basis had penalised the
Claimant by imposing penalty. It is pleaded in the subsequent
paragraphs that the complaints were unverified and penalties were
unilaterally imposed. As the persistent complaints constituted material
breach entailing termination of the contract itself, it was necessary to
raise a challenge to the penalty and seek refund of the same on the
ground of the penalties being illegal and unwarranted. Without any
such relief being claimed, the imposition of penalty as consequence of
the persistent complaints constitutes admission of material breach and
has been rightly held by the Learned Arbitrator as such in paragraph
nos. 82, 83 and 84 which reads as under:
"82. The penalties themselves are not the subject matter
of the arbitration in any way, shape or form. The Claimant
does not deny the imposition of these penalties, nor
their recovery from amounts owed to the Claimant. The
Claimant has not challenged the levy of these penalties
or sought their reimbursement. The Claimant's reference
to these penalties is only by way of background and to
provide context to its arguments on what it says is an
illegal termination of the MLA.
83. The Claimant's argument is that once pecuniary
penalties or fines are levied for unsatisfactory service,
termination on the same ground is illegal and is akin to
"double jeopardy." In short, the Claimant states that it
has already been punished for bad service and
termination for the same reason cannot ensue. This is an
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argument of desperation. The MLA is determinable in
nature and is a contract for provision of services. To
suggest that the imposition of a penalty (itself
unchallenged) forecloses the termination of a contract of
this nature is entirely misplaced, particularly as the MLA
not only provides for both eventualities but also
contemplates a no-fault termination. The judgment in G.
Sagar Suri does not assist the Claimant and neither does
the decision in OPTO Circuit.
84. The Claimant has also relied on an Investigation
Report issued by an office from the Railways in January
2017. However, this Investigation Report pertains only to
a particular complaint made by one Mr. Mukesh Kumar on
13th January 2017. The other complaints-aggregating to
over a hundred-have resulted in penalties that have
remained unchallenged and have in fact been accepted
by the Claimant. The Claimant's conduct constitutes an
implicit admission of poor service on certain occasions. In
view of this, the fact there has also been praise for the
Claimant's services from other passengers does not
provide a countervailing factor. Neither does the fact
that the total number of complaints varies in some
documents, being shown as 133 in some communication
and 142 in others."
16. It is well settled that dispute arises when claim is made by one
party and denied by the other. As there was no challenge to the
imposition of penalty, mere pleading did not give rise to a lis in that
respect between the parties. It is for the Claimant to raise appropriate
challenges and seek appropriate relief and having failed to do so must
suffer the consequences of such failure. In such eventuality, the
Claimant cannot be heard to say that by reason of the dispute about
the penalty not being adjudicated, there was nothing further to be
done in the arbitration proceedings. The Claimant's case as put forth in
the Statement of Claim implies admission of material breach and
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resultantly, the Learned Arbitrator has rightly held that the penalties
have remained unchallenged and have been accepted by the Claimant.
The absence of cross examination of the Claimant's witness on the
aspect of improper imposition of penalty is immaterial as the pleadings
did not give rise to any challenge to the penalty imposed. It is also
pertinent to note that while disputing the forfeiture of security
deposit, Mr. Parikh takes help of the penalties/fines imposed and
deducted from the running bills. A party cannot be permitted to blow
hot and cold. Having taken the defence of the penalties imposed while
assailing the forfeiture of security deposit, it is impermissible to then
dispute the imposition of penalties.
17. The Learned Arbitrator has rightly held that the terms of the
contract pertaining to the deductions made from the running bills are
not required to be interpreted as the penalties themselves are not the
subject matter of the arbitrator. There is no patent illegality
demonstrated in the findings of Learned Arbitrator upholding the
termination as there is proper consideration of evidence in the context
of the issues arising for consideration and in accordance with the
contractual arrangement.
18. The Claimant would be entitled to damages as a consequence of
invalid termination of the agreement. As the learned Arbitrator has
rightly upheld the validity of termination, there was no question of
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grant of damages. Though Mr. Parikh has tendered number of
decisions, he has relied only upon the decision in the case of Delhi
Metro Corporation Limited vs. Delhi Airport Metro Express Private
Limited (supra) setting out the well-settled contours of exercise of
jurisdiction under Section 34 of Arbitration Act, with which there is no
quarrel.
19. Insofar as the direction for refund of security deposit and license
fees is concerned, the terms of the MLA would have to be perused.
Article 5.1 of the MLA provides for the furnishing of security deposit
for an amount equal to 10% of the total license fees. Article 5.3
provides that upon any default or breach of obligations by licensee ,
the Railways may at its sole discretion draw upon the security deposit
to satisfy its claim against the licensee by imposition of penalties or
otherwise, irrespective of any other remedy under this agreement. This
clause is attempted to read by Ms. Thakur as conferring a right on the
Railways to forfeit the security deposit. I am unable to interpret the
said clause as interpreted by Ms. Thakur. Clause 5.3 permits the
Respondent-Railways to draw upon the Security Deposit where there
exists amounts due from the Claimant on account of penalties imposed
which is evident from the expression "to satisfy its claims against the
Licensee" used therein. In event the said clause was meant to confer
right of forfeiture, the clause would have been worded differently
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giving right to forfeit the security deposit upon material breach being
committed. There was no necessity of making reference to the
imposition of penalties and satisfaction of its claims against the
licensee.
20. The learned Arbitrator has rightly considered Clause 5.2 to hold
the security deposit operated as performance guarantee and gives
right to the Respondents to make deductions in event the Railways
have claims of its own by imposition of penalties, incurring of expenses
and so on. The Learned Arbitrator rightly noted that there is no
counter claim for loss or damages and that Railways had made various
deduction of penalties and fines from running bills drawn by the
Claimant. The Railways had thus recovered the loss or damage
sustained and there is no pending claim for which the Railways could
drawn upon the security deposit.
21. Before the Learned Arbitrator, the forfeiture of security deposit
was sought to be supported by placing reliance on Article 17.4 (a) of
MLA. Article 17.4 governs the penalties which may be imposed for
breach which is not limited to forfeiture of security. The learned
Arbitrator has held that the said clause providing for forfeiture is penal
in nature and the provision for forfeiture of security deposit without
cause is unenforceable in law. The Learned Arbitrator has interpreted
the terms of the contract to mean that there is no right in the
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Respondents to forfeit the security deposit, which cannot be
interfered with in exercise of jurisdiction under Section 34 of
Arbitration Act, unless there is error apparent shown. There is no
submission canvassed to demonstrate erroneous application of law and
the findings cannot be interfered with.
22. Insofar as license fees is concerned, Article 18.6 provides for
forfeiture of entire license fees in event of termination of agreement
by the Licensee under Article 18.4 of MLA, which is not the case here as
it is the Railways which have terminated the agreement.
23. The learned Arbitrator has interpreted the terms of the contract
and there is no error in jurisdiction. The upholding of validity of
termination does not ipso facto result in forfeiture of the security
deposit and license fees, which is governed by the terms of the
contract. The impugned Award arises out of enforcement of terms of
the contract.
24. As the contractual arrangement did not entitle the Railways to
forfeit the security deposit and license fees upon termination, the
Claimant was entitled to the said amounts upon termination. The
Respondents having failed to refund the amounts, the Learned
Arbitrator has directed the amount to carry interest from date of
termination. The learned Arbitrator has held that MLA provides for
levying of interest at the rate of 14% p.a. on failure of deposit of
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license fee and in view of contractual stipulation directed the deposit
of license fee with interest at the rate of 14% p.a. The said finding is
not shown to suffer from any patent illegality.
25. As far as the payment of legal expenses is concerned, under
Section 31-A of the Arbitration Act, the Arbitrator has the discretion to
determine whether costs are payable by one party to another and the
amounts of costs. The costs have been imposed on the Respondent as
the Claimant has been partially successful. The Learned Arbitrator has
further held that there were repeated delays on part of the
Respondents in clearing the arbitrator's fees and directed
reimbursement of the last installment which had been paid by the
Claimant. I am not inclined to interfere with the discretionary power of
the Learned Arbitrator of award of costs in light of the said findings.
26. In view of the above discussion, there is no reason to interfere
with the impugned Award under Section 34 of the Arbitration Act.
Resultantly, both Petitions fail and stand dismissed.
27. In view of above, nothing survives for consideration in pending
applications, if any, and the same stand disposed of.
[Sharmila U. Deshmukh, J.]
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