1. Software implementation dispute — Application for appointment of arbitrator under Section 11(6), Arbitration and Conciliation Act, 1996 — Validity of dispute resolution clause. (Para 3 )
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2025 Supreme(SC) 1891
SUPREME COURT OF INDIA
Dipankar Datta, Augustine George Masih, JJ.
M/s Alchemist Hospitals Ltd. – Appellant
Versus
M/s ICT Health Technology Services India Pvt. Ltd. – Respondent
Civil Appeal No. 13405 of 2025 [Arising Out Of SLP (Civil) no. 19647 of 2024]
Decided On : 06-11-2025
Important Points
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.
Subject
Civil Law - Arbitration Law
Act Referred
Headnote
(A) Arbitration and Conciliation Act, 1996 - Section 11(6) - Application for appointment of arbitrator - Clause 8.28 of the Agreement considered non-binding, lacking essential characteristics of arbitration agreements as outlined in Section 7, including finality and independence of arbitrators. High Court dismissed the application, affirming the interpretation of the clause. (Paras 4-5, 25-27)
(B) Arbitration Agreement - Must indicate intention to refer disputes to an independent tribunal with binding effect; mere use of the term 'arbitration' is insufficient if the clause allows recourse to courts for unresolved disputes. (Paras 19, 24)
Facts of the case:
The appellant, a healthcare institution, engaged the respondent for software implementation, experiencing operational failures prompting requests for mediation and arbitration. Disputes arose, including dissatisfaction with delays and performance. The High Court found Clause 8.28 did not constitute a valid arbitration agreement as it implied a mediation process rather than arbitration. (Paras 3, 4)
Findings of Court:
The parties' intentions, interpreted in light of contractual language, indicated no binding arbitration agreement existed; disputes were subject to potential immediate court involvement post-mediation. (Paras 25-27)
Issues: Whether Clause 8.28 suffices as a binding arbitration agreement under the A&C Act. (Para 6)
Ratio Decidendi: The court found no clear intention for arbitration in Clause 8.28; procedural ambiguity necessitated recourse to civil court, affirming the High Court's ruling. (Paras 32)
Result: Appeal dismissed, High Court's order affirmed. (Para 32)
(B) Arbitration Agreement - Must indicate intention to refer disputes to an independent tribunal with binding effect; mere use of the term 'arbitration' is insufficient if the clause allows recourse to courts for unresolved disputes. (Paras 19, 24)
Facts of the case:
The appellant, a healthcare institution, engaged the respondent for software implementation, experiencing operational failures prompting requests for mediation and arbitration. Disputes arose, including dissatisfaction with delays and performance. The High Court found Clause 8.28 did not constitute a valid arbitration agreement as it implied a mediation process rather than arbitration. (Paras 3, 4)
Findings of Court:
The parties' intentions, interpreted in light of contractual language, indicated no binding arbitration agreement existed; disputes were subject to potential immediate court involvement post-mediation. (Paras 25-27)
Issues: Whether Clause 8.28 suffices as a binding arbitration agreement under the A&C Act. (Para 6)
Ratio Decidendi: The court found no clear intention for arbitration in Clause 8.28; procedural ambiguity necessitated recourse to civil court, affirming the High Court's ruling. (Paras 32)
Result: Appeal dismissed, High Court's order affirmed. (Para 32)
Legal Category Hierarchy
Advocates appeared:
For the Petitioner(s): Mr. Aditya Soni, AOR Mr. Rajat Gautam, Adv.
For the Respondent(s): Mr. Shamik Shirishbhai Sanjanwala, AOR Mr. Aditya Tripathi, Adv. Ms. Aarushi Gupta, Adv. Mr. Rishav Gupta, Adv. Mr. Shamik Shirishbhai Sanjanwala, AOR
For the Petitioner(s): Mr. Aditya Soni, AOR Mr. Rajat Gautam, Adv.
For the Respondent(s): Mr. Shamik Shirishbhai Sanjanwala, AOR Mr. Aditya Tripathi, Adv. Ms. Aarushi Gupta, Adv. Mr. Rishav Gupta, Adv. Mr. Shamik Shirishbhai Sanjanwala, AOR
Table of Contents
2. Whether a clause prescribing negotiation, mediation by company chairmen, and subsequent recourse to courts constitutes a valid arbitration agreement under the Arbitration and Conciliation Act, 1996. (Para 7 , 20 )
3. The clause lacks finality and neutrality, as it permits court recourse after a failed internal process and designates company chairmen as adjudicators. (Para 4 , 5 , 6 , 17 , 19 , 21 , 24 , 25 , 26 )
4. Mere use of the word arbitration is insufficient; a valid agreement requires mandatory intent to refer disputes to a private tribunal and a willingness to be bound. (Para 15 , 17 , 23 , 24 )
5. Appeal dismissed — High Court order affirming the absence of a valid arbitration agreement upheld — Appellant granted liberty to approach civil court. (Para 32 , 33 )
6. What constitutes a valid arbitration agreement under Section 7 of the Arbitration and Conciliation Act, 1996?
A valid arbitration agreement requires an agreement in writing to refer disputes arising from a defined legal relationship to arbitration, demonstrating a clear intention to be bound by the decision of a private tribunal. (Para 9 , 11 , 15 )
7. Does the mere use of the word arbitration in a contract clause guarantee a valid arbitration agreement?
No. The court held that the substance of the clause, not its form, is paramount. Mere repetitive use of the word arbitration is not decisive if the mandatory intent to arbitrate and be bound is missing. (Para 15 , 16 , 17 , 21 )
8. Can a clause that allows parties to approach courts if a dispute is not resolved be an arbitration agreement?
No. An arbitration agreement must have an element of finality. If a clause provides that parties may file a civil suit if unsatisfied with the outcome, it cannot be termed an arbitration agreement. (Para 15 , 24 , 25 )
9. Does the non-denial of an arbitration agreement in post-notice correspondence create a valid agreement where none existed?
No. Subsequent correspondence cannot displace the original intention if no arbitration agreement existed in the first place, unless the correspondence unequivocally establishes a new agreement to refer disputes to arbitration. (Para 28 , 29 , 30 , 31 )
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 months. The HINAI software went live again on 1st January 2020. The appellant alleges that there were numerous operational issues once again and the system was rolled back on 1st April 2020.
f. On even date, the appellant addressed an e-mail to the respondent invoking Clause 8.28 of the Agreement and requesting a mediation meeting between the Chairmen of the two companies at Panchkula or, alternatively, through video- conference in view of pandemic restrictions. The respondent replied on 3rd April, 2020 vide e-mail asking for the appellant’s cooperation.
g. Appellant called upon the respondent to concur in the appointment of a sole arbitrator and suggested the names of two retired Chief Justices for acting as an arbitrator by a notice dated 29th June, 2020, issued under Sections 11 and 21 of the A&C Act. Respondent acknowledged receipt of the notice by e- mail dated 29th July 2020, sought time to respond, and on 25th August 2020 filed a reply requesting trial of the project one last time.
Having spent so much of effort by both parties. It was an unfortunate decision of roll back. For ICT it is not only loss of name but also loss in
