Clause Saying 'Can Be Settled By Arbitration' Does Not Create Mandate To Arbitrate : Supreme Court

The Supreme Court on Friday (April 17) held that an arbitration clause employing the word “can” does not constitute a binding arbitration agreement.

A bench of Justice Sanjay Karol and Justice N. Kotiswar Singh dismissed an appeal filed against the Bombay High Court's decision, which held that Clause 25 of the Bill of Lading containing the arbitration agreement lacked the essential attributes of a valid arbitration agreement as it stated that the dispute 'can be settled by arbitration'.

“…the words used in the agreement should disclose a determination and obligation to go for arbitration and not only provide for the possibility of going to arbitration. When the word provides only a possibility, the same does not constitute a valid arbitration agreement.”, the court endorsed the observation made in Jagdish Chander v. Ramesh Chander, 2007 (5) SCC 719.

Reference may also be made to the recent judgment of Alchemist Hospitals Ltd. v. ICT Health Technology Services India (P) Ltd., 2025 LiveLaw (SC) 1070, where the Court tried to connect the analogy that “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.”

In essence, the Court said that the words used in the contract play a prominent role in ascertaining the parties' intention to adjudicate the dispute via arbitration. Applying the law, the Court held that Clause 25 of the Bill of Laden would not constitute an arbitration clause, as it doesn't mandate arbitration.

Accordingly, the appeal lacking merit was dismissed.

Cause Title: NAGREEKA INDCON PRODUCTS PVT. LTD. VERSUS CARGOCARE LOGISTICS (INDIA) PVT. LTD.

Citation : 2026 LiveLaw (SC) 388

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Appearance:

For Petitioner(s) :Mr. Deepak Nargolkar, Sr. Adv. Mr. Krishan Kumar, AOR Mr. Abhay Nevagi, Adv. Mr. Nitin Pal, Adv. Mr. Hitesh Choudhary, Adv. Mr. Aziz Hasan, Adv.

For Respondent(s) :Mr. Rohan Ganpathy, AOR