A clause necessitating negotiation and mediation prior to court involvement does not constitute a valid arbitration agreement under the A&C Act, lacking the elements of binding arbitration.

JUDGMENT :

DIPANKAR DATTA, J.

1. Leave granted.

2. The present civil appeal assails the judgment and order of the High Court of Punjab & Haryana at Chandigarh¹[High Court] in ARB No. 471 of 2021, whereby a learned Judge of the High Court dismissed an application under Section 11 (6) of the Arbitration and Conciliation Act, 1996²[A&C Act] filed by the appellant.

BRIEF FACTS

3. The material facts relevant to decide the present appeal are as follows:

a. The appellant is a private healthcare institution having its principal establishment at Panchkula, Haryana. Desirous of upgrading its existing hospital-information software to a more advanced, integrated system, the appellant entered into a Software Implementation Agreement³[Agreement] dated 1st November 2018 with the respondent, a Bengaluru-based technology company specialising in digital health-management platforms.

b. Under the agreement, the respondent undertook to implement its proprietary hospital-management product known as “HINAI Web Software”⁴[HINAI software], a software intended to streamline patient-care operations, billing, diagnostics, and record management across the appellant’s facilities.

c. Clause 8.28 of the Agreement which forms the focal point of this lis is reproduced as follows:

“8.28 – Arbitration

The parties shall attempt in good faith to resolve any dispute arising out of or relating to this Agreement promptly by negotiation between executives, who have authority to settle the controversy and who are at a higher level of management, than the persons with direct responsibility for administration of this Agreement.

If the matter is not resolved by negotiation pursuant to paragraph above, then the matter will proceed to mediation as set forth below:

Any dispute, controversy or claim arising out of or relating in any way to the Agreement/the relationship, including without limitation, any dispute concerning the construction, validity, interpretation, enforceability or breach of the Agreement, shall be resolved by arbitration through senior management comprising respective Chairmen of the two parties (Arbitrators). Should the dispute not be resolved within fifteen (15) days after arbitration, the complaining party shall seek remedies through the courts of law. The demand for arbitration should be made within a reasonable time (maximum 60 days) after the dispute or matter in question has arisen.”

d. Following execution of the agreement, the appellant began implementing the HINAI software in November 2018. However, the appellant alleges that there were repeated procedural delays and technical failures on the part of the respondent, including sluggish performance, billing malfunctions, and incomplete integration of diagnostic modules.

e. Relying on assurances from the respondent, the appellant permitted a second attempt at implementation within three