Madras HC Upholds IRCTC Vendor License Fee Hike Methodology Post-Tariff Revision

The Madras High Court has fortified the Indian Railway Catering and Tourism Corporation's authority to adjust IRCTC Vendor License Fee following food tariff hikes, ruling that a scientific formula applied uniformly across all vendors does not constitute an arbitrary exercise of power. This decision effectively shields public sector pricing mechanisms from challenges based on speculative market variables, provided licensees were granted an 'honourable exit' option to mitigate potential financial prejudice.

A single-judge bench of Justice D. Bharatha Chakravarthy heard the challenge brought by a partnership firm operating refreshment rooms across the South Zone. The petitioner contested the mathematical formula introduced by the IRCTC to calculate revised license fees following a nationwide increase in the prices of standard food items on railway premises.

Scientific Formula and Arbitrariness

The Madras High Court examined the methodology where IRCTC arrived at a percentage change in license fees by multiplying the tariff hike percentage with the share of standard items in total sales. The petitioner argued that this linear assumption was flawed as price hikes often lead to reduced sales volume. However, the Bench noted that when a uniform method is applied across the board, it cannot be termed arbitrary.

Addressing the petitioner's claim that the hike violated the Constitution of India and general contract conditions, the Madras Court clarified that Clause 2.1.9 of the tender specifically empowered IRCTC to revise fees on a pro-rata basis whenever tariffs changed.

The Madras High Court discussed that "When calculations are made across the board Pan India, any type of calculation will cause prejudice or heartburn to a particular category of licensees operating in a particular area, depending on their customers and their preferences. Only to redress the said situation, the option of an honourable exit is granted. Therefore, the contention that the impugned methodology is arbitrary stands rejected."

Background

The dispute originated from Commercial Circular No. 64 of 2019, through which the Railway Board increased the tariff for food items at static units. Subsequently, IRCTC issued an order dated September 12, 2022, prescribing a formula to hike license fees based on this tariff revision. The petitioner, which operates units at Erode, Chennai-Egmore, Salem, Thrissur, and Tirunelveli stations, challenged the hike as arbitrary and violative of the Catering Policy 2017, which suggested a 12% cap based on sales turnover.

IRCTC defended the move, stating the formula was scientific and that it had granted concessions during the COVID-19 pandemic. The respondent also highlighted that the petitioner had been offered an 'honourable exit' but chose to continue the contract. The Madras Court agreed with the respondent, noting that the Catering Policy allows for the evolution of formulas by Zonal Railways and that the pro-rata revision clause in the tender was the governing provision for tariff-linked hikes. While the respondent raised an objection regarding the maintainability of the writ due to an arbitration clause, the Bench chose to decide the matter on merits given the general nature of the impugned order.

Case Details:
Case No.: Writ Petition No. 33623 of 2023
Neutral Citation: 2026:MHC: [Not Available]
Case Title: M/s Sopan Restaurant Vs. Indian Railway Catering and Tourism Corporation Ltd.
Appearances:
For the Petitioner(s): Mr. Anirudh Krishnan
For the Respondent(s): Mr. V.G.Suresh Kumar

Source: 2026 CaseBase(MAD) 22540