Delhi High Court Upholds ₹130 Crore Arbitration Award Against South Eastern Railway

The Delhi High Court has upheld an arbitral award of more than ₹130 crore in favour of Sara International Pvt. Ltd. against South Eastern Railway.

It held that the Railways could not seek a fresh appreciation of evidence after repeatedly failing to cross-examine the company's witnesses or produce rebuttal evidence before the arbitral tribunal.

Justice Jasmeet Singh observed, "For the reasons best known to it, the petitioner elected not to avail any opportunity granted by the AT and has consciously refrained from actively participate in the proceedings. Even in the present petition, no satisfactory explanation has been given by the petitioner for its conduct and/or approach."

The dispute arose from the Wagon Investment Scheme introduced in 2005 to encourage private investment in railway transport. Sara International invested about ₹28.33 crore to purchase two rakes comprising 122 wagons under an agreement executed in 2006.

In return, South Eastern Railway was required to provide six guaranteed rakes every month for 10 years along with a 10% freight rebate.

Sara International claimed that from 2010 onwards, the Railways issued circulars restricting third-party indents and access to alternate loading and unloading stations. It alleged that the unilateral restrictions breached the agreement and caused heavy losses. The arbitral tribunal later awarded about ₹42.56 crore towards loss of profit, about ₹74.28 crore for loss of freight rebate and about ₹13.16 crore towards loss of premium on bonus rakes, besides interest.

Before the High Court, South Eastern Railway argued that the tribunal had mechanically accepted the claimant's expert report and had failed to properly assess damages. Sara International countered that the Railways had repeatedly delayed the proceedings, failed to cross-examine its witnesses despite several opportunities, and produced virtually no rebuttal evidence.

Dismissing the challenge, the court held that the agreement could be modified only with the consent of both parties. It found that South Eastern Railway had attempted to alter the contractual terms through unilateral circulars.

"The petitioner herein, unilaterally and under the guise of clarificatory circulars, sought to introduce conditions and imposed restrictions thus creating impediments for the respondent to place indents," the court observed.

The court also held that it could not reappreciate evidence in proceedings challenging an arbitral award. Finding no patent illegality, perversity or violation of the fundamental policy of Indian law, it dismissed the Railways' petition

For Petitioner (South Eastern Railway): Advocates Saransh Kumar and Harshita Kumar.

For Respondent (Sara International Pvt. Ltd.): Senior Advocates Gaurav Pachnanda and Gyanendra Kumar with Advocates Anuradha Mukherjee, Shreya Som, Soumya Dasgupta, Shivam Tiwari and Shreya Bansal.