Use Of The Word "Can" In A Dispute Resolution Clause Does Not Create A Binding Arbitration Agreement: Supreme Court

Introduction

In Nagreeka Indcon Products Pvt. Ltd. v. Cargocare Logistics (India) Pvt. Ltd. [2026 INSC 384], the Supreme Court considered whether a dispute resolution clause stating that disputes "can be settled by arbitration" constituted a binding arbitration agreement under the Arbitration and Conciliation Act, 1996.

The Supreme Court held that such language does not create a mandatory obligation to refer disputes to arbitration. The word "can" indicates possibility or choice, and not a binding commitment to arbitrate. Therefore, where the clause requires further consensus between the parties before arbitration can take place, it cannot be treated as a valid arbitration agreement.

The judgment reiterates that arbitration is founded on consent. A court cannot compel parties to arbitrate unless the dispute resolution clause discloses a clear and present intention to submit disputes to arbitration.