The Delhi High Court has refused to interfere with an arbitral award directing South Eastern Railway to pay over ₹130 crore in damages to Sara International Pvt. Ltd., holding that courts exercising jurisdiction under Section 34 of the Arbitration and Conciliation Act cannot act as appellate forums to re-evaluate evidence or reassess the findings of an arbitral tribunal.
Justice Jasmeet Singh dismissed the Railway's challenge to the award, observing that the arbitral tribunal had taken a plausible view based on the evidence before it and that none of the objections raised justified judicial interference.
“The Court does not sit in appeal under Section 34,” the bench observed while reiterating the limited scope of interference with arbitral awards.
Background of the Case
The dispute arose under the Wagon Investment Scheme (WIS), introduced by the Ministry of Railways to encourage private investment in railway freight infrastructure. Under a 2006 agreement, Sara International purchased two railway rakes worth over ₹28.33 crore for use by South Eastern Railway.
In return, the Railway was required to provide the company with six guaranteed rakes every month for ten years, along with a 10% freight rebate. The agreement also entitled the company to two additional bonus rakes every month without freight concession. Ownership of the rakes was to vest in the Railways after the expiry of the contractual period.
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Sara International alleged that the Railways failed to supply the guaranteed rakes and later imposed unilateral restrictions through circulars that prevented it from transporting third-party goods and using alternate loading stations, causing substantial commercial losses. The arbitral tribunal accepted parts of these claims and awarded damages of about ₹130 crore together with interest at 8% per annum and costs.
Railway's Challenge Before the High Court
South Eastern Railway argued that the arbitral award was legally unsustainable because the tribunal relied heavily on the claimant's expert report without independently examining it. It also contended that the damages were based on incorrect assumptions, the expert calculations contained flaws, and the tribunal failed to properly appreciate the contractual terms.
The Railway further claimed that it had been denied a fair opportunity to present its case and that its counterclaim had been wrongly struck off during the arbitral proceedings.
Court's Observations
The High Court rejected these submissions after examining the arbitral record.
It noted that the tribunal had not mechanically accepted the expert report but had independently scrutinised the calculations and even reduced certain claim amounts after its own assessment. The Court also found that the Railway neither effectively cross-examined the claimant's witnesses nor produced evidence to rebut their testimony despite being granted multiple opportunities during arbitration.
Justice Jasmeet Singh observed that a party which chooses not to contest evidence before the arbitral tribunal cannot later seek a fresh factual examination in proceedings under Section 34.
“The petitioner cannot be permitted to agitate fresh factual grounds before the Court in a petition filed under Section 34,” the Court held while finding no reason to disturb the tribunal's conclusions.
The Court also upheld the tribunal's finding that the Railways could not unilaterally alter the terms of the Wagon Investment Scheme agreement through internal circulars when the contract required mutual consent for modifications. It further held that the respondent remained contractually entitled to six guaranteed rakes and two bonus rakes every month during the relevant period.
On the Railway's objection to the expert's assumption of a premium of ₹100 per metric tonne for calculating damages, the Court found the methodology reasonable and noted that no contrary evidence had been produced before the tribunal.
The Court also found no fault with the award of arbitration costs or the grant of pendente lite and future interest at 8% per annum, observing that such matters fall within the arbitral tribunal's discretion unless shown to be arbitrary.
Decision
Concluding that the arbitral tribunal had adopted a plausible view based on the evidence and contractual terms, Justice Jasmeet Singh declined to interfere with the award dated 9 June 2021 and the ratification order dated 27 July 2021. The petition filed by South Eastern Railway was accordingly disposed of, leaving the arbitral award intact.
Case Details:
Case Title: South Eastern Railway v. Sara International Pvt. Ltd.
Case Number: O.M.P. (COMM.) 62/2022
Judge: Justice Jasmeet Singh
Decision Date: 01 July 2026
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