The Supreme Court dismissed an appeal challenging the Punjab & Haryana High Court’s refusal to appoint an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996.
The Bench of Justice Dipankar Datta and Justice Augustine George Masih held that Clause 8.28 of the Software Implementation Agreement between M/s Alchemist Hospitals Ltd. and M/s ICT Health Technology Services India Pvt. Ltd. did not constitute a valid arbitration agreement under Section 7 of the Act, as it lacked the essential conditions of a binding arbitral process.
The dispute arose from a Software Implementation Agreement between the appellant hospital and the respondent’s technology company, for the implementation of the HINAI Web Software. When the project failed due to repeated technical glitches, the appellant invoked the arbitration clause. However, the respondent urged trial of the project one last time. Constrained by this, the petitioner filed an application u/s 11(6) of the Act before the High Court.
The High Court, however, rejected the application, noting that the term “arbitration” had been loosely employed in the arbitration clause. The High Court had held that Clause 8.28, titled ‘Arbitration’, merely envisaged negotiation and mediation between the Chairmen of both companies, and did not constitute a valid arbitration agreement. Upholding that view, the Supreme Court observed that mere use of the word ‘arbitration’ in a clause is not decisive unless the clause reflects an intention to submit disputes to a binding adjudicatory process.
The Court emphasised that the clause lacked the essential elements of an arbitration agreement, including finality, binding effect, and recourse to a neutral adjudicator. The Court noted that individuals designated as “arbitrators” under the clause are the respective Chairmen of the parties themselves, which made the mechanism more akin to an internal settlement attempt than an independent arbitral process. Ordinarily, arbitration contemplates reference to a neutral third party, the Court added.
Finding no intent between the parties to submit disputes to arbitration, the Court held that Clause 8.28 did not qualify as an arbitration agreement under Section 7 of the Act.
Accordingly, the court dismissed the appeal, allowing the appellant to pursue remedies before a competent civil court.
Cases Referred
Smt. Rukmanibai Gupta v. Collector, Jabalpur & Ors, (1980) 4 SCC 536
K.K. Modi v. K.N. Modi, (1998) 3 SCC 573
Jagdish Chander v. Ramesh Chander, (2007) 5 SCC 719
Wellington Associates Ltd. v. Kirit Mehta, (2000) 4 SCC 272
Bihar State Mineral Development Corporation v. Encon Builders, (2003) 7 SCC 418
BGM and MRPL-JMCT (JV) v. Eastern Coalfields Limited, 2025 SCC OnLine SC 1471
Appearances:
Mr. Puneet Bali, Senior Advocate, appeared for the appellant; Mr. Shamik Sanjanwala, Advocate, appeared for the respondent.
