When the arbitration clause in the contract uses the word ‘can’ or ‘parties can’ does it necessitate the reference of the dispute to arbitration?
The aforesaid question was recently answered by the Hon’ble Supreme Court in Nagreeka Indcon Products Pvt. Ltd. v. Cargocare Logistics (India) Pvt. Ltd. (2026 SCC OnLine SC 630) wherein the Hon’ble Court stressed upon the fact that sine qua non for arbitral proceedings is that the parties must mutually intend to refer their differences to arbitration as consent is the source of the Arbitral Tribunal’s jurisdiction over them. Relying upon the ratio of Jagdish Chander v. Ramesh Chander the Hon’ble Court reiterated that mere use of the word ‘arbitration’ or ‘arbitrator’ in a clause will not make it an arbitration agreement, if it requires or contemplates a further or fresh consent of the parties for reference to arbitration. For example, use of words such as ‘parties can, if they so desire, refer their disputes to arbitration’ or ‘in the event of any dispute, the parties may also agree to refer the same to arbitration’ or ‘if any disputes arise between the parties, they should consider settlement by arbitration’ in a clause is not intended to be an arbitration agreement. The Court further observed that “such clauses merely indicate a desire or hope to have the disputes settled by arbitration, or a tentative arrangement to explore arbitration as a mode of settlement if and when a dispute arises. Such clauses require the parties to arrive at a further agreement to go to arbitration, as and when the disputes arise. Any agreement or clause in an agreement requiring or contemplating a further consent or consensus before a reference to arbitration is not an arbitration agreement, but an agreement to enter into an arbitration agreement in future.” Thus, the subject matter clause shall be articulated in a manner so as to obviate the possibility of further contemplation on the parties to refer the dispute. In other words, if the clause in question delineates a scheme which merely expresses a desire or hope for settlement of dispute by arbitration in future leaving room for a further or fresh consent of the parties then it cannot be said to be a binding arbitration agreement.