Arbitration and Conciliation Act, 1996 – s.7 – Arbitration agreement – When not – Appellant, a private healthcare institution entered into a Software Implementation Agreement with the respondent, specialising in digital health-management platforms for upgrading its existing hospital-information software to a more advanced, integrated system – Disputes arose between the parties – Appellant invoked Clause 8.28 (Arbitration) of the Agreement calling upon the respondent to concur in the appointment of a sole arbitrator – Eventually, it filed application u/s.11(6) praying for the appointment of a sole arbitrator to adjudicate the disputes – Dismissed by High Court holding that the term “arbitration” was loosely employed in Clause 8.28 and the clause only provided for negotiation and mediation at an internal company level between senior management executives and in case the dispute remained unresolved, the parties were free to approach civil courts – Clause 8.28 of the Agreement, if can be considered to be a valid arbitration agreement:
Held: No – 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 – When an agreement provides that the decision of the authority will not be final and binding on the parties, or that if either party is not satisfied with the decision of the authority, he may file a civil suit seeking relief, it cannot be termed as an arbitration agreement – Clause 8.28 does not evince an intention to refer disputes to arbitration and does not indicate that the proposed “arbitration” was supposed to be final and binding – The clause stipulated that should the dispute not be resolved within fifteen 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 – Further, the individuals designated as “arbitrators” under the clause were the respective Chairmen of the parties themselves – Though, this does not ipso facto disqualify the clause from being an arbitration agreement since this may be waived under the proviso to s.12(5) but, it is a significant circumstance in discerning the true intention of the parties – There was no arbitration agreement in the present case – Impugned judgment and order of the High Court affirmed. [Paras 15, 24-27, 31]
Arbitration and Conciliation Act, 1996 – s.7 – Requirements to be fulfilled to satisfy the attributes of an arbitration agreement, stated – Mere use of the word “arbitration” in a clause of an agreement is not clinching or decisive – s.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 – In essence, an arbitration agreement should have an element of the nature of finality to refer the matters to arbitration. [Paras 11-13, 17, 23] Arbitration and Conciliation Act, 1996 – Whether the nondenial of the arbitration agreement by the respondent in the correspondence between the parties post the notice being issued would have any bearing upon the decision to refer the parties to arbitration:
Held: In the present case, there was no denial of the existence of an arbitration agreement by the respondent in its responses to the notice issued by the appellant – However, here, when there was indeed no arbitration agreement in the first place, therefore, subsequent correspondence between the parties cannot displace the original intention – Such correspondence would have indeed been sufficient to displace the original intention if it was unequivocally clear about referring the disputes to arbitration, i.e., the test mentioned u/s.7 of the A&C Act, which does not exist in the instant case – There was no arbitration agreement in the first place, thus, there exists no option available to the appellant other than approaching the courts of law. [Para 31]
As published in the Supreme Court Reports, Supreme Court of India. Headnotes prepared by: Divya Pandey. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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