The Supreme Court has held that the use of the word “can” in an arbitration clause does not make arbitration a compulsory mode of dispute resolution, reaffirming that mutual consent remains the cornerstone of arbitration.
The bench of Justice Sanjay Karol and Justice Nongmeikapam Kotiswar Singh dismissed the appeal seeking appointment of an arbitrator, holding that the clause merely indicated a possibility, not a binding obligation.
The dispute arose between Nagreeeka Indcon Products Pvt. Ltd. and Cargocare Logistics (India) Pvt. Ltd. over loss suffered due to delivery of goods without receipt of payment. The appellant invoked the arbitration clause contained in the bill of lading, which stated that disputes “can be settled by arbitration.” However, the respondent opposed arbitration, arguing that the clause did not mandate such a reference.
The matter reached the Supreme Court after the Bombay High Court refused to appoint an arbitrator, holding that the clause did not constitute a binding arbitration agreement. Upholding this view, the apex court examined whether the wording of the clause reflected a clear and enforceable intention to arbitrate.
The Court emphasized that arbitration is fundamentally based on party autonomy and mutual consent. It observed that the word “can” denotes possibility or discretion rather than obligation. Unlike terms such as “shall,” which indicate a mandatory requirement, “can” merely provides an option to the parties. Therefore, a clause using such language cannot compel parties to arbitrate in the absence of explicit agreement.
Highlighting settled principles of contractual interpretation, the Court noted that the intent of parties must be gathered from the words used in the agreement. Where the language only suggests a future possibility of arbitration, and not a definitive commitment, it cannot be treated as a valid arbitration agreement under law. The Court relied on precedents such as Jagdish Chander v. Ramesh Chander, which clearly distinguish between clauses that mandate arbitration and those that merely contemplate it.
Buy Now: E-Compilation of Supreme Court Judgements – March 2026
Importantly, the Court clarified that even at the stage of appointment of an arbitrator under Section 11 of the Arbitration and Conciliation Act, courts are required to undertake only a prima facie examination of the existence of a valid arbitration agreement. If such agreement itself is absent or ambiguous, parties cannot be forced into arbitration.
The bench further reiterated that arbitration, as an alternative dispute resolution mechanism, is inherently voluntary. Courts cannot impose arbitration where parties themselves have not unequivocally agreed to it. The ruling also underlined that clauses requiring further consent before invoking arbitration amount to mere agreements to agree, which are not enforceable.
The Supreme Court held that the clause in question only indicated a possibility of arbitration and required fresh consent of both parties for reference to arbitration. Since one party had refused, no binding arbitration agreement existed. Accordingly, the appeal was dismissed.
Case Details
Case Title: Nagreeka Indcon Products Pvt. Ltd. Versus Cargocare Logistics (India) Pvt. Ltd
Citation: JURISHOUR-840-SC-2026
Case No.: Special Leave Petition (Civil) No.19026 of 2023
Date: 17/04/2026
