Legal Review and Analysis of Ms Alchemist Hospitals Ltd vs Ms ICT Health Technology Services India Pvt Ltd 2025 INSC 1289

In-Short

Case: Alchemist Hospitals vs. ICT Health Technology (2025 INSC 1289): The Supreme Court upheld the High Court's decision, ruling that a dispute resolution clause allowing parties to approach civil courts after a non-binding internal process is not a valid arbitration agreement under Section 7 of the Arbitration and Conciliation Act, 1996.

1. Heading of the Judgment

Case Name: M/s Alchemist Hospitals Ltd. vs. M/s ICT Health Technology Services India Pvt. Ltd.
Citation: 2025 INSC 1289
Court: Supreme Court of India
Jurisdiction: Civil Appellate Jurisdiction
Judges: Hon'ble Mr. Justice Dipankar Datta and Hon'ble Mr. Justice Augustine George Masih
Date of Judgment: November 06, 2025

2. Related Laws and Sections

This judgment extensively deals with the following legal provisions and precedents:

• The Arbitration and Conciliation Act, 1996:
  Section 7: Defines what constitutes an "Arbitration Agreement".
  Section 11(6): Deals with the procedure for appointment of arbitrators by the Chief Justice or his designate.

• Key Legal Precedents Cited:
  K.K. Modi vs. K.N. Modi, (1998) 3 SCC 261
  Jagdish Chander vs. Ramesh Chander, (2007) 5 SCC 719
  Mahanadi Coalfields Ltd. vs. IVRCL AMR Joint Venture, (2022) 20 SCC 636
  Bangalore Electricity Supply Co. Ltd. vs. E.S. Solar Power (P) Ltd., (2021) 6 SCC 718

3. Basic Judgment Details

This appeal was filed by M/s Alchemist Hospitals Ltd. (the Appellant) against the judgment of the High Court of Punjab & Haryana, which had dismissed the Appellant's application under Section 11(6) of the Arbitration and Conciliation Act, 1996. The application sought the appointment of a sole arbitrator to adjudicate disputes arising from a Software Implementation Agreement dated November 1, 2018, between the Appellant and the Respondent, M/s ICT Health Technology Services.

The core dispute originated from the alleged failure of the Respondent's "HINAI Web Software" to perform as promised, leading to operational issues and its eventual rollback by the Appellant. The Appellant invoked the dispute resolution clause (Clause 8.28) of the agreement and subsequently filed the Section 11 application. The High Court held that Clause 8.28 was not a valid arbitration agreement, leading to the present appeal before the Supreme Court.

4. Core Principle and Analysis of the Judgment

The Central Legal Issue

The singular question before the Supreme Court was whether Clause 8.28 of the Software Implementation Agreement constitutes a valid "arbitration agreement" as defined under Section 7 of the Arbitration and Conciliation Act, 1996.

In-Depth Analysis of the Court's Reasoning

A. The Legal Test for an Arbitration Agreement

The Supreme Court began its analysis by revisiting the statutory definition of an "arbitration agreement" under Section 7 of the A&C Act. The Court emphasized that the foundational pillars of an arbitration agreement are:

1. Consensus ad idem: There must be a clear agreement between the parties to refer present or future disputes to arbitration.

2. Defined Legal Relationship: The disputes must arise from a defined legal relationship.

3. In Writing: The agreement must be in writing.

The Court then elaborated on the essential attributes of an arbitration agreement, as crystallized in its precedents, particularly K.K. Modi (supra) and Jagdish Chander (supra). These attributes include:

• The decision of the tribunal must be binding on the parties.

• The tribunal must determine the substantive rights of the parties.

• The process must be impartial and judicial.

• The agreement must be intended to be enforceable in law.

• Crucially, the clause must reflect an obligation to arbitrate, not merely a possibility or a hope for future agreement.

B. Applying the Test to Clause 8.28: Substance Over Form

The Court then meticulously dissected Clause 8.28. It noted that while the clause used the word "arbitration" multiple times, the mere use of the word is not decisive. The Court focused on the substance of the clause, which revealed several fatal flaws:

• Lack of Finality and Binding Nature: The clause explicitly stated that if the dispute was not resolved within 15 days after "arbitration", the complaining party "shall seek remedies through the courts of law." The Supreme Court held that this provision fundamentally negated the very essence of arbitration, which is to provide a final and binding resolution. It indicated that the process was merely a preliminary, amicable settlement step, not a conclusive adjudication.

• Identity of the Adjudicators: The clause designated the "respective Chairmen of the two parties" as the "Arbitrators". The Court observed that arbitration ordinarily contemplates a neutral third party. While parties can waive neutrality, the appointment of individuals who are inherently interested parties to the dispute was a significant circumstance indicating that the process was intended to be an internal negotiation or mediation, not a formal arbitration.

• Absence of a True Adjudicatory Process: The clause did not indicate that the Chairmen were to act impartially, receive evidence, or hear contentions from both sides in a judicial manner. The mechanism was akin to a high-level management resolution attempt.

The Court distinguished this case from precedents like Powertech World Wide Ltd. (supra) and Visa International Ltd. (supra), where subsequent correspondence had confirmed the intention to arbitrate. It held that in the present case, since there was no valid arbitration agreement at the inception, the respondent's subsequent failure to deny its existence in correspondence could not create one.

5. Final Outcome and Supreme Court's Directions

The Supreme Court dismissed the appeal and upheld the impugned judgment of the High Court. The Court issued the following consequential directions:

1. The application under Section 11(6) of the A&C Act for appointment of an arbitrator was rightly dismissed.

2. The Appellant was granted liberty to seek its remedy in accordance with law before the competent civil court.

3. The Supreme Court clarified that if the Appellant claims the benefit of Section 14 of the Limitation Act, 1963 (which excludes the time spent in bona fide proceedings in a court without jurisdiction), the civil court would be free to decide such a claim appropriately.

4. The parties were directed to bear their own costs.

5. MCQs Based on the Judgment

Question 1: According to the Supreme Court's judgment in Alchemist Hospitals vs. ICT Health Technology (2025 INSC 1289), what is the most critical factor in determining whether a clause constitutes a valid arbitration agreement?

A. The repeated use of the word "arbitration" in the clause.
B. The designation of the process with a title like "Arbitration".
C. The substantive attributes, such as the intention to be bound by a final and binding decision of a tribunal.
D. The subsequent correspondence between the parties not denying the existence of an arbitration agreement.

Question 2: In the aforementioned case, which specific feature of Clause 8.28 was held by the Supreme Court to be fundamentally incompatible with the concept of arbitration?

A. The clause required negotiations before initiating arbitration.
B. The clause allowed the parties to seek remedies in court if the dispute was not resolved within 15 days after the "arbitration".
C. The clause was part of a software implementation agreement.
D. The clause was not signed separately by both parties.