In Nagreeka Indcon Products Pvt. Ltd. v. Carfocare Logistics (India) Pvt. Ltd.¹, the Supreme Court clarified that the mere use of the word “can” in an arbitration clause does not amount to a binding agreement to arbitrate. The Court held that unless the language of the clause reflects a clear and unequivocal obligation to submit disputes to arbitration, the clause merely preserves arbitration as one of the possible modes of dispute resolution and cannot be enforced under the Arbitration and Conciliation Act, 1996 (“A&C Act, 1996”).

The dispute arose out of a contract for the international transportation of goods. Nagreeka Indcon Products Pvt. Ltd. (“Appellant”) engaged Carfocare Logistics (India) Pvt. Ltd (“Respondent”) for the shipment of six containers to the United States. While four consignments were delivered without incident, the fifth container became the subject of controversy. The Respondent delivered the goods to the consignee without insisting upon payment or the production of the original bill of lading, allegedly causing financial loss to the Appellant.

Relying on Clause 25 of the contract, titled "Arbitration", the Appellant invoked arbitration. The clause provided that "Any difference of opinion or dispute thereunder can be settled by arbitration in India or a place mutually agreed..." The Respondent contested the invocation, arguing that the clause merely contemplated the possibility of arbitration and did not obligate either party to refer disputes to arbitration.

The Bombay High Court accepted the Respondent's contention and refused to appoint an arbitrator under Section 11 of the A&C Act, 1996. It held that the use of the word "can" did not create a mandatory arbitration agreement and that either party remained free to decline arbitration. Aggrieved by this decision, the Appellant approached the Hon’ble Supreme Court.

The Hon’ble Supreme Court examined two principal issues, first, the scope of judicial intervention while considering an application under Section 11 of the A&C Act, 1996, and secondly, whether the expression "can" in an arbitration clause creates a binding obligation to arbitrate.

While reaffirming that the court's jurisdiction under Section 11 is limited to determining the prima facie existence of an arbitration agreement, the Court observed that this limited scrutiny cannot compel parties into arbitration where no valid arbitration agreement exists. Referring to its earlier decisions, the Court reiterated that an arbitration agreement must demonstrate a definite and binding intention of the parties to resolve disputes through arbitration.

Interpreting the contractual language, the Hon’ble Supreme Court noted that the ordinary meaning of the word "can" denotes capability or possibility rather than compulsion. Unlike the expressions "shall" or, in certain contexts, "may", the word "can" does not impose a legal obligation. Applying settled principles of contractual interpretation, the Court held that the words chosen by the parties are the best evidence of their intention and cannot be rewritten by judicial interpretation.

The Court relied upon its earlier judgments, including K.K. Modi v. K.N. Modi and Jagdish Chander v. Ramesh Chander, which recognise that an arbitration agreement must disclose a clear determination to submit disputes to arbitration. Clauses that merely indicate a future possibility or contemplate a further agreement between the parties do not satisfy the requirements of Section 7 of the A&C Act, 1996.

Applying these principles, the Court concluded that Clause 25 merely stated that disputes "can" be settled through arbitration, thereby leaving open the possibility of other modes of dispute resolution. Since the clause did not evidence a mandatory and enforceable commitment to arbitrate, it did not constitute a valid arbitration agreement. The appeal was accordingly dismissed.

This judgment reinforces the principle that party autonomy remains the cornerstone of arbitration. While courts continue to adopt a pro-arbitration approach, they cannot compel parties to arbitrate unless the contractual language unequivocally demonstrates such an intention. The decision serves as an important reminder that careful drafting of dispute resolution clauses is essential, as seemingly innocuous expressions such as "can" may ultimately determine whether an arbitration agreement is enforceable at all.

By - Akarsh Pandey and Shreyash Dube