Caterers Cannot Claim Separate Reimbursement for Welcome Drinks Introduced by Circular: Supreme Court Affirms Primacy of Railway Policy in Commercial Contracts

“Addition of Welcome Drink Is a Menu Change Within Railway’s Power – No Separate Payment Entitlement Exists,” In a significant judgment delivered on November 7, 2025, the Supreme Court in Indian Railways Catering and Tourism Corporation Ltd. v. M/s. Brandavan Food Products & Others held that caterers engaged by the Indian Railways are not entitled to claim separate reimbursement for welcome drinks, as the same formed part of a valid menu revision under Railway Board policy. The Court ruled that the arbitral tribunal’s award granting over ₹5 crore towards welcome drinks was contrary to the contractual framework and binding policy decisions, and thus unsustainable.

The controversy arose when various caterers, including M/s. Brandavan Food Products (BFP), filed arbitration claims alleging financial loss due to serving second regular meals and welcome drinks without being paid the full or any corresponding amount. The Arbitrator accepted their claims in part, awarding substantial compensation including interest, which was challenged by the Indian Railways Catering and Tourism Corporation (IRCTC) under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996. The High Court partially upheld the award, distinguishing between the welcome drink and second meal issue. Ultimately, the Supreme Court set aside the entire award, holding both claims to be legally untenable.

The Court focused extensively on the status of the welcome drink, which was introduced through Commercial Circular No. 32 of 2014 dated 06.08.2014, requiring caterers to serve a flavoured drink to passengers in AC classes at the beginning of their journey. Though the Arbitrator treated this as an extra service outside the contract deserving compensation, the Supreme Court firmly disagreed.

Holding that the addition of welcome drinks was a permissible menu change under Clause 8.1 of the Master Licence Agreement (MLA), the Court declared:
“The reintroduction of the welcome drink on the train, which was initially contemplated in the bid document itself, was therefore squarely covered under the Railway’s power to modify the menu. No separate reimbursement was required to be made.”

The Court traced the presence of the welcome drink all the way back to the original tender issued in 2013, noting that:
“The bid document dated 27.05.2013, pursuant to which BFP submitted its bid, clearly indicated that a welcome drink was contemplated at that stage. BFP would, therefore, have been conscious that this item was to be supplied when it submitted its tender.”

Rejecting the Arbitrator’s view that the welcome drink was a new imposition, the Court held that its omission in subsequent circulars was temporary and its reappearance in the 2014 circular was merely a continuation of the original scope of work. Accordingly, it ruled:
“Addition of a welcome drink is clearly a change in the menu and was, therefore, directly traceable to the power conferred by Clause 8.1 of the MLA.”

The Court also found that the claim for welcome drink charges failed the test of public policy, as it sought payment for a service that was already embedded in the regulatory and contractual scheme. Noting the express absence of any tariff for welcome drinks in the relevant circulars, the Court declared:
“No doubt, the MLA and the tabulated statement in Annexure II appended thereto did not refer to a welcome drink and no tariff was stipulated therefor. However, that by itself does not entitle the caterer to an independent monetary claim.”

Interestingly, the Court also clarified that even if the caterers argued there was a reduction in the breakfast component to offset the welcome drink, this plea was never substantiated in the arbitration, nor was it pleaded with particularity. It held:
“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 rightly rejected by the Arbitrator in the absence of pleadings and proof. But even that does not justify awarding separate compensation for the welcome drink.”

The Court decisively rejected the Arbitrator’s attempt to construct a compensation entitlement based on equity or economic hardship.
“Once the IRCTC and its predecessor acted within the Railway Board’s binding policy framework, neither the Arbitrator nor the Court could substitute its view of commercial fairness for that of express policy,” the Court ruled.

Further, the Supreme Court took strong exception to the Arbitrator ignoring the structure of the agreement, which gave primacy to Railway Board policy over all other provisions. Referring to Clause 21.1 of the MLA, the Court held:
“This clause 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.”

The Court found that both the High Court and the Arbitrator committed a legal error in granting compensation where none was contractually or statutorily owed. It held that such an award was “patently illegal” under Section 34(2A) and violated the “fundamental policy of Indian law” under Section 34(2)(b)(ii) of the Arbitration and Conciliation Act, 1996.

Summarising its finding, the Court ruled:
“As the Railways was well within its domain under Clause 8.1 of the MLA in reinstating the welcome drink to be provided to passengers at the beginning of the journey—which was, in fact, contemplated in the bid document dated 27.05.2013—the caterers were not justified in seeking reimbursement on that count.”

Ultimately, the Supreme Court allowed IRCTC’s appeals and dismissed the cross-appeals by the caterers. The Arbitral Award dated 27.04.2022 (corrected on 26.07.2022) and the Delhi High Court judgments dated 13.08.2024 and 10.02.2025 were set aside in their entirety. All claims for welcome drinks, second regular meals, and interest were disallowed, and the Court ordered that parties shall bear their own costs.

Date of Decision: November 7, 2025