Facts Of The Case:
The appellant, M/s Alchemist Hospitals Ltd., entered into a Software Implementation Agreement with the respondent, M/s ICT Health Technology Services India Pvt. Ltd., on 1st November 2018 for upgrading its hospital-information software. Following implementation, the appellant alleged persistent technical failures and operational issues with the respondent’s “HINAI Web Software,” leading to the system being rolled back in April 2020. The appellant invoked the dispute resolution Clause 8.28 of the Agreement, which prescribed a process of negotiation, followed by what it termed “arbitration” to be conducted by the respective Chairmen of the two parties, and finally allowed recourse to courts of law if unresolved within 15 days. The appellant subsequently sought the appointment of a sole arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 before the Punjab & Haryana High Court. The High Court dismissed the application, ruling that Clause 8.28 did not create a binding arbitral process. On appeal, the Supreme Court was tasked with determining whether the clause constituted a valid arbitration agreement.
Procedural History:
The procedural history of the case originates with the appellant filing an application under Section 11(6) of the Arbitration and Conciliation Act, 1996, before the High Court of Punjab & Haryana for the appointment of a sole arbitrator. The High Court dismissed this application, holding that Clause 8.28 of the parties’ agreement did not constitute a valid arbitration agreement. Aggrieved by this order, the appellant approached the Supreme Court by way of a Special Leave Petition (Civil), which was granted, leading to the present Civil Appeal. The Supreme Court, after hearing the parties, affirmed the High Court’s judgment and dismissed the appeal, thereby upholding the finding that no arbitration agreement existed between the parties.
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Court Observation:
The Supreme Court made several key observations in its judgment. It emphasized that the mere use of the word “arbitration” in a contract clause is not determinative; the true intention of the parties must be discerned from the language used. The Court noted that Clause 8.28 lacked the essential attributes of an arbitration agreement as outlined in precedent, such as finality and a binding decision by a neutral tribunal. Crucially, the clause explicitly allowed the complaining party to seek remedies in civil courts if the dispute was not resolved within 15 days, indicating the process was merely a structured negotiation or mediation, not a conclusive arbitration. The Court also observed that designating the respective company Chairmen as “arbitrators” suggested an internal settlement mechanism rather than a submission to an impartial adjudicatory forum. Consequently, the clause was held not to be a valid arbitration agreement under Section 7 of the Arbitration and Conciliation Act, 1996.