Alchemist Hospitals Ltd. v. ICT Health Technology Services India Pvt. Ltd.; 2025 INSC 1289 - S.7 Arbitration Act

Arbitration and Conciliation Act 1996 - Section 7 - 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 A&C Act acknowledges the existence of an arbitration agreement based on its substance rather than its form. 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. That being said, the invocation of the word “arbitration” nonetheless provides, at the very least, a discernible clue to the parties’ underlying intention -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-an arbitration agreement should have an element of the nature of finality to refer the matters to arbitration. When there has indeed been 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 under Section 7 of the A&C Act. (Para 17-31)

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