The Bombay High Court recently made a decision involving Central Railway and A-1 Laundry Services (JV). The case was about a decision made by an arbitration panel that favored the laundry service provider. Here's a breakdown of what happened.
Central Railway had hired A-1 Laundry Services to run a mechanized laundry at Mumbai's Wadibundar Depot under a 15-year agreement where the laundry service would build, own, operate, and then transfer the facility. Disagreements came up over various fines and payments during the contract.
The arbitration panel decided that A-1 Laundry Services should get ₹4,89,49,985. This amount included claims for lost linens, fines for delays, and compensation for fixed costs. Central Railway challenged this decision, arguing that the panel went beyond its power.
"The arbitration panel has clearly gone beyond the scope of what was agreed in the contract," said Mr. Bubna, the lawyer for Central Railway.
Loss of Linen: The panel reduced the amount Central Railway could recover to 75% of the last purchase rate, instead of the 100% stated in the contract. The court found this change incorrect and canceled the award for this claim.
Delay Penalty: The panel stopped further fines beyond what was already collected, in line with the contract's 10% penalty limit.
Fixed Cost Compensation: Compensation for the COVID-19 lockdown period was given, but the court ruled this was not covered by the contract and canceled it.
Judge Marne agreed with some parts of the panel's decision but rejected others, especially where the panel had not followed the contract.
"The arbitration panel has changed the clear terms of the contract," the judgment noted.
The court's decision resulted in A-1 Laundry Services receiving a reduced amount of ₹1,73,20,991, with interest. This case highlights the importance of sticking closely to the terms of a contract in arbitration.
