Summary
| Category | Data |
|---|---|
| Court | Supreme Court of India |
| Case Number | C.A. No.-013405-013405 – 2025 |
| Diary Number | 35271/2024 |
| Judge Name | HON’BLE MR. JUSTICE DIPANKAR DATTA |
| Bench |
HON’BLE MR. JUSTICE DIPANKAR DATTA HON’BLE MR. JUSTICE AUGUSTINE GEORGE MASIH |
| Precedent Value | Binding authority; upholds established principles |
| Overrules / Affirms | Affirms High Court’s decision and affirms existing arbitration jurisprudence |
| Type of Law | Arbitration law; commercial contract disputes |
| Questions of Law | Whether Clause 8.28 of the Software Implementation Agreement constitutes a valid arbitration agreement under Sections 7 and 11 of the Arbitration and Conciliation Act, 1996 |
| Ratio Decidendi |
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| Judgments Relied Upon |
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| Logic / Jurisprudence / Authorities Relied Upon by the Court |
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| Facts as Summarised by the Court | Appellant (hospital) and respondent (technology provider) entered a Software Implementation Agreement (Nov 2018) including Clause 8.28 for negotiation, mediation by chairmen and “arbitration.” Two failed software rollouts led appellant to invoke Clause 8.28 in April 2020 and propose a sole arbitrator. Respondent sought one more implementation instead. Appellant then moved HC under Section 11(6). |
Practical Impact
| Category | Impact |
|---|---|
| Distinguishes |
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| Follows |
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What’s New / What Lawyers Should Note
- Reaffirms that the mere repetition of the word “arbitration” in a dispute-resolution clause does not create a binding arbitration agreement.
- Confirms that internal negotiation or mediation by company officers, without finality or independent adjudication, is not arbitration.
- Holds that a clause explicitly permitting court action if “arbitration” fails negates finality and binding effect.
- Establishes that post-notice correspondence cannot manufacture an arbitration agreement absent original express consent.
Summary of Legal Reasoning
- Section 7 of the A&C Act defines an arbitration agreement by three requirements: (a) clear consent to arbitrate disputes, (b) link to a defined legal relationship, (c) writing.
- Supreme Court applied attributes from K.K. Modi (binding, impartial tribunal, enforceability, finality) and Jagdish Chander (no binding effect, ability to litigate afterward vitiates arbitration).
- Clause 8.28: tiered process of senior-management negotiation, mediation by chairmen, then “arbitration” by those same chairmen.
- The clause permits court recourse if no resolution in 15 days, showing lack of finality.
- Chairmen are not independent arbitrators; the process resembles internal settlement rather than private arbitration.
- Subsequent emails did not deny arbitration but cannot override the absence of an arbitration agreement in Clause 8.28.
- Conclusion: no valid arbitration agreement; appeal dismissed; appellant may pursue civil remedy.
Arguments by the Parties
Petitioner (appellant)
- Clause 8.28 expressly provides for arbitration through chairmen and uses the term “arbitration” multiple times.
- Correspondence post-notice did not deny an arbitration agreement, implying consent.
- Section 11(6) application warranted appointment of arbitrator.
Respondent
- Clause 8.28 envisages only internal negotiation and non-binding mediation by company chairmen.
- No element of finality or binding decision; clause expressly allows litigation if no resolution in 15 days.
- No valid arbitration agreement exists; Section 11(6) application should be dismissed.
Factual Background
Appellant, a Haryana hospital, contracted respondent in Nov 2018 for hospital-management software under Clause 8.28 providing for negotiation, mediation and “arbitration.” Initial implementation failed and was rolled back twice by April 2020. Appellant invoked Clause 8.28, proposed retired judges as arbitrator; respondent instead sought a further trial. Appellant moved the Punjab & Haryana High Court under Section 11(6), which was dismissed.
Statutory Analysis
- Section 7 A&C Act: Defines “arbitration agreement,” requires express intent to arbitrate disputes in writing.
- Section 11(6): Court power to appoint arbitrator if valid arbitration agreement exists.
- Section 12 & Seventh Schedule: Requirements for impartiality and independence of arbitrator (not met by chairmen).
Alert Indicators
- ✔ Precedent Followed – Reaffirms established arbitration jurisprudence on attributes and finality.