Supreme Court Holds Clause 8.28 Not a Valid Arbitration Agreement—Mere Use of Word ‘Arbitration’ Without Binding Intent Insufficient

Case Name: M/s Alchemist Hospitals Ltd. v. M/s ICT Health Technology Services India Pvt. Ltd.
Citation: Civil Appeal arising out of SLP (C) No. 19647 of 2024; 2025 INSC 1289
Date of Judgment/Order: 06 November 2025
Bench: Hon’ble Mr. Justice Dipankar Datta & Hon’ble Mr. Justice Augustine George Masih

Held: The Supreme Court held that Clause 8.28 of the Software Implementation Agreement was not a valid arbitration agreement under Section 7 of the Arbitration and Conciliation Act, 1996. Although the word “arbitration” appeared several times in the clause, the structure and language revealed that the process contemplated only negotiation followed by mediation between the Chairmen of both companies, without any intent to submit disputes to a private adjudicatory tribunal whose decision would be final and binding. The clause expressly allowed parties to approach civil courts if the dispute remained unresolved within fifteen days, thereby negating the essential attributes of arbitration, such as finality, neutrality, adjudication, and enforceability.

Summary: Alchemist Hospitals entered into a Software Implementation Agreement with ICT Health for installation of the “HINAI Web” hospital-management system. After repeated implementation failures, the appellant invoked Clause 8.28 seeking mediation between Chairmen of the companies and, later, appointment of a sole arbitrator. When ICT Health did not concur, Alchemist approached the High Court under Section 11(6). The High Court rejected the request, holding Clause 8.28 non-arbitral. Before the Supreme Court, Alchemist argued that repeated use of the word “arbitration” and the designation of Chairmen as “arbitrators” demonstrated intent to arbitrate. The Court examined leading authorities—K.K. Modi, Jagdish Chander, Rukmanibai, Encon Builders, Mahanadi Coalfields, and BESCOM v. E.S. Solar Power—and confirmed that a clause must mandatorily reflect a clear obligation to submit disputes to arbitration and abide by the arbitral decision. Here, the process lacked neutrality, binding effect, and finality, and contemplated civil suits after failure of internal negotiations. Thus, Clause 8.28 was merely an internal dispute-resolution mechanism, not an arbitration clause.

Decision: The Supreme Court dismissed the appeal, affirmed the High Court’s refusal to appoint an arbitrator, and held that Clause 8.28 does not meet the statutory requirements of Section 7 of the Arbitration and Conciliation Act, 1996. The Court directed that the appellant is free to pursue remedies in a competent civil court, where any plea for exclusion of limitation under Section 14 of the Limitation Act may be considered on its merits; parties were left to bear their own costs.