Nagreeka Indcon Products Pvt. Ltd. Vs Cargocare Logistics (India) Pvt. Ltd. (Supreme Court of India)
Summary: The Supreme Court held that a contractual clause stating that disputes “can be settled by arbitration” does not by itself constitute a binding arbitration agreement where the language merely provides a future possibility of arbitration and requires further consent of the parties. The dispute arose from Clause 25 of bills of lading issued in connection with transportation of goods, which stated that any difference of opinion or dispute “can be settled by arbitration in India”. The appellant sought appointment of an arbitrator, while the respondent contended that the clause made arbitration optional rather than mandatory. The Bombay High Court rejected the arbitration application. Affirming that view, the Supreme Court emphasised party autonomy and mutual consent as the foundation of arbitral jurisdiction.
The Court considered the ordinary meaning of the word “can” and contrasted it with mandatory expressions such as “shall”. It held that although the enquiry under Section 11 of the Arbitration and Conciliation Act, 1996 is confined to the prima facie existence of an arbitration agreement, the referral court can examine whether an arbitration agreement exists at all. Applying the requirements of a valid arbitration agreement explained in K.K. Modi and subsequent decisions, and particularly the principle in Jagdish Chander that language merely contemplating the possibility of arbitration is insufficient, the Court held that Clause 25 required a further agreement between the parties before disputes could be referred to arbitration. Since there was no binding obligation to arbitrate, the appeal was dismissed.
