New Delhi: The Supreme Court of India has ruled that the mere use of the word “arbitration” in a contractual clause does not automatically create a valid arbitration agreement unless there is a clear intention to refer disputes to arbitration and to be bound by the decision of the arbitral tribunal.
The ruling was delivered by a Bench comprising Justice Dipankar Datta and Justice Augustine George Masih in the case of M/s Alchemist Hospitals Ltd. v. M/s ICT Health Technology Services India Pvt. Ltd. (Civil Appeal arising out of SLP (Civil) No. 19647/2024), decided on November 6, 2025.
The appeal arose out of a dispute between Alchemist Hospitals Ltd., a private healthcare institution at Panchkula, Haryana, and ICT Health Technology Services India Pvt. Ltd., a Bengaluru-based technology company. The appellant entered into a Software Implementation Agreement, dated November 1, 2018, with the respondent for implementation of hospital-management software known as “HINAI Web Software,” intended to streamline patient-care operations, billing, diagnostics, and record management.
Following implementation in November 2018, the appellant alleged repeated procedural delays and technical failures, including sluggish performance, billing malfunctions, and incomplete integration. After a second attempt in January 2020, operational issues persisted, and the system was rolled back on April 1, 2020. The appellant invoked Clause 8.28 of the Agreement and requested mediation. Subsequently, by notice dated June 29, 2020, the appellant called upon the respondent to concur in appointing a sole arbitrator, suggesting names of two retired Chief Justices. The respondent sought more time and requested a final trial of the project. Constrained by this, the appellant approached the High Court under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking appointment of a sole arbitrator.
Clause 8.28 of the Agreement provided that “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.” The clause further stated that “if the matter is not resolved by negotiation pursuant to the paragraph above, then the matter will proceed to mediation.” It then specified that “any dispute, controversy or claim arising out of or relating in any way to the Agreement shall be resolved by arbitration through senior management comprising respective Chairmen of the two parties (Arbitrators).” Crucially, it provided that “should the dispute not be resolved within fifteen (15) days after arbitration, the complaining party shall seek remedies through the courts of law.”
The High Court observed that, on a plain reading of Clause 8.28, the parties had envisaged a three-tier process: first, negotiation between senior management; next, mediation between respective Chairmen; and finally, permitting the complaining party to seek remedies through courts if the dispute remained unresolved within fifteen days. The High Court held that the term “arbitration” had been loosely employed and the true intention was only to provide for negotiation and mediation at an internal company level. It observed that the Chairmen could not be regarded as private or independent adjudicators, and no element of finality or binding effect was attached to their determination. The High Court dismissed the application, holding that Clause 8.28 is not a valid arbitration agreement.
The appellant challenged this decision before the Supreme Court, contending that the use of the word “arbitration,” repeated three times in the clause, demonstrated a clear intention to arbitrate disputes.
The Supreme Court examined the requirements under Section 7 of the Arbitration and Conciliation Act, 1996, which defines an “arbitration agreement” as an agreement by the parties to submit to arbitration disputes which have arisen or may arise between them in respect of a defined legal relationship. The Court observed that Section 7 posits certain requirements: there must exist an agreement between the parties to refer disputes to arbitration; the disputes must be in connection with a defined legal relationship; and the agreement must be in writing. The Court held that “the crux of the controversy lies in the first requirement, i.e., whether the parties agreed to have the disputes and differences arising by and between them referred to arbitration in terms of Clause 8.28.”
The Court referred to K.K. Modi v. K.N. Modi, where relevant factors to determine the existence of an arbitration agreement were set out, including that the arbitration agreement must contemplate that the decision will be binding on the parties and that the agreement must contemplate that substantive rights will be determined by the agreed tribunal.
The Court also referred to Jagdish Chander v. Ramesh Chander, observing that “the intention of the parties to enter into an arbitration agreement shall have to be gathered from the terms of the agreement. If the terms of the agreement clearly indicate an intention on the part of the parties to the agreement to refer their disputes to a private tribunal for adjudication and a willingness to be bound by the decision of such tribunal on such disputes, it is an arbitration agreement.” The Court emphasized that “while there is no specific form of an arbitration agreement, the words used should disclose a determination and obligation to go to arbitration and not merely contemplate the possibility of going for arbitration.”
The Court further observed that “mere use of the word ‘arbitration’ or ‘arbitrator’ in a clause will not make it an arbitration agreement if it requires or contemplates a further or fresh consent of the parties for reference to arbitration.” The Court held that “the 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 referred to Mahanadi Coalfields Ltd. v. IVRCL AMR Joint Venture, where the mere use of the word “Arbitration” in the title of a clause without a corresponding substantive part relating to arbitration could not be considered a valid arbitration agreement. The Court concluded that “mere use of the word ‘arbitration’ in a clause of an agreement is not clinching or decisive. Section 7 presupposes an express intention of the dispute/difference being resolved through arbitration, and mere reference to the term is not sufficient to meet this threshold.”
The Court held that “regardless of the formal structure, effect has to be given to an arbitration agreement in essence. Arbitration being the creature of a contract, the ad idem intention of the parties is paramount to determine whether there exists a valid arbitration agreement.”
Examining Clause 8.28, the Court observed that in a catena of decisions, this Court has ruled that an arbitration agreement should have an element of finality. The Court held that when an agreement provides that if either party is not satisfied with the decision, he may file a civil suit seeking relief, it cannot be termed as an arbitration agreement.
The Court held that “there is no indication that the proposed ‘arbitration’ was supposed to be final and binding. In fact, the penultimate sentence of the clause stipulates that should the dispute not be resolved within fifteen (15) days after arbitration, the complaining party shall seek remedies through the courts of law. This suggests an attempt at amicable resolution inter se rather than a definitive submission to arbitration, failing which the party has the option to proceed to the courts of law.”
The Court further observed that the individuals designated as “arbitrators” are the respective Chairmen of the parties themselves. The Court noted that “ordinarily, arbitration contemplates reference to a neutral third party. Here, however, the mechanism envisaged is akin to an internal settlement process between the Chairmen of the two companies.”
The Court addressed whether non-denial of the arbitration agreement by the respondent in correspondence would have any bearing on the decision. The Court referred to Powertech World Wide Ltd. v. Delvin International General Trading LLC but distinguished the present case, noting that no such unequivocal consent existed here. The Court held that “when there has indeed been no arbitration agreement in the first place, subsequent correspondence between the parties cannot displace the original intention.”
The Court concluded that “once we take the view that there has, in fact, been no arbitration agreement in the first place, there exists no option available to the appellant other than approaching the courts of law.” The Court held that “in our view, Clause 8.28 of the Agreement does not evince an intention to refer disputes to arbitration.”
The Supreme Court affirmed the High Court’s judgment and dismissed the appeal. The Court observed that the appellant is free to seek remedy before the competent civil court.
Case Title: M/s Alchemist Hospitals Ltd. v. M/s ICT Health Technology Services India Pvt. Ltd.
Case No.: Civil Appeal arising out of SLP (Civil) No. 19647/2024
Coram: Justice Dipankar Datta and Justice Augustine George Masih
Date of Judgment: November 6, 2025
For Appellant: Mr. Puneet Bali, Senior Advocate
For Respondent: Mr. Shamik Sanjanwala, Advocate
