Quick Summary: The Bombay High Court dealt with a heated arbitration case between Central Railway and A-1 Laundry Services over a laundry contract. The court partially overturned an arbitration award that favored A-1 Laundry Services, mainly because the arbitrators went beyond the contract terms.
In 2010, Central Railway gave A-1 Laundry Services a 15-year contract to run a laundry in Mumbai. The deal was worth about ₹80 crores and involved washing linens for trains. However, disagreements arose over penalties and payments, leading to arbitration.
The arbitration panel decided in favor of A-1 Laundry Services, granting them nearly ₹4.9 crores. This included claims for lost linen, penalties, and fixed costs during COVID-19. But Central Railway wasn't satisfied and took the matter to court.
Judge Sandeep V. Marne looked over the arbitration decision. He found that the panel had gone too far by using Railway Board guidelines to decide on claims, which wasn't part of the original agreement.
"The Arbitral Tribunal has clearly travelled beyond the scope of contractual covenant," said Judge Marne.
Lost Linen Costs: The panel reduced recovery rates based on guidelines, but the judge said this wasn't allowed since the contract had different terms.
Delay Penalties: The panel's decision to remove delay penalties was upheld, but the way they calculated it was corrected.
Fixed Cost Compensation: The panel awarded costs due to COVID-19 disruptions, but the judge overturned this, saying it wasn't in the contract.
The court partially set aside the arbitration award, reducing the amount A-1 Laundry Services would receive to about ₹1.73 crores, including interest.
