Just a clause in an agreement using the word "arbitration" cannot be treated as an arbitration agreement

Supreme Court Upholds High Court Decision: Clause in Agreement Lacks Valid Arbitration Intent The Supreme Court confirms that a clause using the term "arbitration" without a binding mandate fails to qualify as an arbitration agreement under the Arbitration and Conciliation Act, 1996.

In a significant ruling, the Supreme Court of India has upheld the Punjab & Haryana High Court's decision, which dismissed an application seeking the appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996. The case, M/s Alchemist Hospitals Ltd. v. M/s ICT Health Technology Services India Pvt. Ltd., involved a dispute over the interpretation of a clause within a software implementation agreement. 

The Supreme Court, comprising Justices Dipankar Datta and Augustine George Masih, delivered the judgment on November 6, 2025, affirming that Clause 8.28 of the agreement between the parties does not constitute a valid arbitration agreement. This decision stems from the clause's failure to demonstrate a mandatory intent to refer disputes to arbitration and to provide for final and binding arbitration.

The dispute arose when Alchemist Hospitals Ltd., a healthcare institution, faced procedural delays and technical issues with the HINAI Web Software implemented by ICT Health Technology Services India Pvt. Ltd. The appellant sought resolution through an arbitration clause in their agreement, which outlined a multi-tiered dispute resolution process involving negotiation, mediation, and finally, court remedies if unresolved.

The Supreme Court meticulously examined whether the clause in question satisfied the requirements of an arbitration agreement as defined under Section 7 of the Arbitration and Conciliation Act, 1996. The Court emphasized that an arbitration agreement requires a clear intention to refer disputes to a neutral tribunal for binding adjudication, which was lacking in this case.

The judgment further clarified that the mere inclusion of the term "arbitration" does not suffice to establish an arbitration agreement. The Court noted that the clause primarily intended an internal settlement process, involving senior management and chairmen of the respective parties, without a neutral third-party arbitrator.

The Court also addressed the correspondence between the parties post the issuance of a notice invoking the arbitration clause, stating that the absence of a denial of the arbitration agreement in such correspondence does not establish its existence if the original clause does not fulfill the statutory requirements.

This ruling underscores the importance of clear and unequivocal language in drafting arbitration clauses to ensure enforceability under the Arbitration and Conciliation Act, 1996. The Court's decision reaffirms the principle that party autonomy and express consent are foundational to arbitration agreements.

Bottom Line:

Clause in an agreement using the word "arbitration" cannot be treated as an arbitration agreement under the Arbitration and Conciliation Act, 1996, if the clause lacks mandatory intent to refer disputes to arbitration and fails to provide final and binding arbitration.

Statutory provision(s): Arbitration and Conciliation Act, 1996, Sections 7, 11(6)

M/s Alchemist Hospitals Ltd. v. M/s ICT Health Technology Services India Pvt. Ltd., (SC) : Law Finder Doc Id # 2804907