Arbitration Clause Using the Word “Can” Does Not Create a Mandatory Arbitration Agreement Without Clear Consent

Case Name: Nagreeka Indcon Products Pvt. Ltd. v. Cargocare Logistics (India) Pvt. Ltd.

Citation: 2026 INSC 384

Date of Judgment/Order: 17 April 2026

Bench: Justice Sanjay Karol and Justice Nongmeikapam Kotiswar Singh

Held: The Supreme Court held that a dispute resolution clause using the word “can” does not, by itself, create a mandatory and binding arbitration agreement. The Court held that arbitration is founded on party consent, and the words used in the contract must disclose a clear determination and obligation to refer disputes to arbitration. Where the clause merely provides that disputes “can be settled by arbitration”, it only indicates a future possibility or option of arbitration and not a concluded agreement to arbitrate. Therefore, unless both parties subsequently agree to refer the dispute to arbitration, such a clause cannot be enforced as a valid arbitration agreement under Section 7 of the Arbitration and Conciliation Act, 1996.

Summary: The appellant, Nagreeka Indcon Products Pvt. Ltd., had engaged the respondent, Cargocare Logistics (India) Pvt. Ltd., for transportation of consignments to South Carolina, USA. A dispute arose when the respondent allegedly delivered the fifth consignment without securing payment or production of the original bill of lading, causing financial loss to the appellant. The bills of lading contained Clause 25, titled “Arbitration”, which stated that any difference of opinion or dispute “can be settled by arbitration in India or a place mutually agreed”. The appellant invoked arbitration and approached the Bombay High Court under Section 11 of the Arbitration and Conciliation Act, 1996 for appointment of an arbitrator, but the High Court dismissed the application, holding that the clause did not mandatorily require arbitration. The Supreme Court affirmed that view, holding that while courts adopt a pragmatic approach to arbitration clauses, they cannot rewrite a contract or impose arbitration where the parties have not clearly consented to it. Relying on principles of contractual interpretation and precedents including K.K. Modi, Jagdish Chander and BGM and M-RPL-JMCT(JV), the Court held that mere use of the word “arbitration” or a heading titled “Arbitration” is insufficient if the operative language shows only a possibility of future reference.

Decision: The Supreme Court dismissed the appeal and upheld the Bombay High Court’s refusal to appoint an arbitrator. It held that Clause 25 did not constitute a binding arbitration agreement because it merely contemplated that disputes “can” be settled by arbitration and therefore required further consent of both parties before arbitration could be invoked. The Court concluded that the appeal was bereft of merit and disposed of all pending applications.