Kiran Raj

The Supreme Court of India, Division Bench of Justice Dipankar Datta and Justice Augustine George Masih upheld the Punjab and Haryana High Court’s decision refusing to refer the dispute between a healthcare institution and a technology company to arbitration. The Court observed that the mere use of the term “arbitration” in a contractual clause does not by itself establish a binding intent to arbitrate unless the parties have clearly agreed to resolve their disputes through that process. It held that Clause 8.28 of their software implementation agreement only contemplated internal negotiation and mediation between the companies’ Chairmen, lacking any element of finality or enforceable adjudication. Consequently, the Court dismissed the appeal while permitting the appellant to pursue remedies before a competent civil court.

The dispute arose from a Software Implementation Agreement executed on 1 November 2018 between a private healthcare institution located in Haryana and a Bengaluru-based technology company engaged in providing digital health-management systems. The agreement required the respondent to install and operationalize its proprietary “HINAI Web Software” in the appellant’s hospitals to manage patient care, billing, diagnostics, and records.

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After implementation began, the appellant alleged repeated procedural delays and technical malfunctions, including slow performance, billing issues, and incomplete module integration. A second attempt at implementation was made on 1 January 2020, but similar operational problems persisted, leading to the system’s rollback on 1 April 2020. On the same date, the appellant invoked Clause 8.28 of the Agreement and sought a mediation meeting between the companies’ Chairmen.

The respondent replied by e-mail seeking cooperation and suggesting continued efforts to resolve the software issues. Subsequently, on 29 June 2020, the appellant issued a notice under Sections 11 and 21 of the Arbitration and Conciliation Act, 1996, proposing the appointment of a sole arbitrator. The respondent acknowledged the notice but did not consent to arbitration, instead requesting another trial run of the project.

The appellant then approached the Punjab and Haryana High Court under Section 11(6) of the Arbitration and Conciliation Act for appointment of a sole arbitrator. The High Court dismissed the application, holding that Clause 8.28 did not constitute a valid arbitration agreement as it only provided for negotiation, mediation between the Chairmen, and eventual recourse to courts. The appellant challenged this decision before the Supreme Court of India.

The Supreme Court observed that “the seemingly simple question… is whether Clause 8.28 of the Agreement can be considered to be a valid arbitration agreement under the A&C Act.” The Bench referred to Section 7 of the Arbitration and Conciliation Act, 1996, explaining that it requires an express agreement between parties to submit disputes to arbitration arising from a defined legal relationship.

It recorded that “mere use of the word ‘arbitration’ is not sufficient to treat the clause as an arbitration agreement when the corresponding mandatory intent to refer the disputes to arbitration and the consequent intent to be bound by the decision of the arbitral tribunal is missing.”

The Court cited K.K. Modi v. K.N. Modi and Jagdish Chander v. Ramesh Chander to note that an arbitration agreement must include the intention that the tribunal’s decision be final and binding, and that the tribunal act impartially in determining substantive rights. The Bench stated that “where the clause provides that the decision of the authority will not be final and binding on the parties… it cannot be termed as an arbitration agreement.”

Upon examining Clause 8.28, the Court stated that “there is no indication that the proposed ‘arbitration’ was supposed to be final and binding.” It highlighted that the clause itself provided that if the dispute was not resolved within fifteen days, “the complaining party shall seek remedies through the courts of law,” which reflected only an attempt at amicable resolution rather than a definitive submission to arbitration.

Regarding the designation of both companies’ Chairmen as “arbitrators,” the Court observed that “ordinarily, arbitration contemplates reference to a neutral third party,” but the mechanism here resembled “an internal settlement process between the Chairmen of the two companies.” The Bench concluded that “Clause 8.28 of the Agreement does not evince an intention to refer disputes to arbitration.”

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On the issue of post-notice correspondence, the Court stated that although the respondent had not denied the arbitration clause, “when there has indeed been no arbitration agreement in the first place, subsequent correspondence between the parties cannot displace the original intention.”

The Supreme Court held that “the impugned final judgment and order of the High Court is affirmed and the appeal is consequently dismissed. The appellant is free to seek remedy in accordance with law before the competent civil court. If the benefit of Section 14 of the Limitation Act, 1963 is claimed, the relevant court may decide such claim appropriately. Parties shall bear their own costs.”

Advocates Representing the Parties

For the Petitioner: Mr. Puneet Bali, Sr. Adv. Mr. Aditya Soni, AOR Mr. Gunjan Rishi, Adv.
For the Respondent: Mr. Shamik Shirishbhai Sanjanwala, AOR Mr. Rishab Gupta, Adv. Ms. Aakanksha Luhach, Adv. Mr. Aditya Tripathi, Adv. Ms. Aarushi Gupta, Adv.

Case Title: M/s Alchemist Hospitals Ltd. v. M/s ICT Health Technology Services India Pvt. Ltd.
Neutral Citation: 2025 INSC 1289
Case Number: Civil Appeal arising out of SLP (Civil) No. 19647 of 2024
Bench: Justice Dipankar Datta, Justice Augustine George Masih