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Optional Arbitration Clauses and Party Autonomy: The Supreme Court on the Limits of ‘Can’

  • Aug 1
  • 5 min read

Anvita Sharma & Vidhi Gala[1]

Introduction

In Nagreeeka Indcon Products Pvt. Ltd. v. Cargocare Logistics (India) Pvt. Ltd. (17 April 2026) (“Nagreeeka/Nagreeeka Indcon”), the Supreme Court held that usage of the word ‘can’ in a dispute resolution clause does not constitute a binding arbitration agreement under Section 7 of the Arbitration and Conciliation Act, 1996 (“the act”). The Court is of the view that such language is a mere indication of possibility of arbitration and does not disclose the clear determination and obligation necessary to establish arbitral consent.

 

The dispute arose from a commercial contract containing a dispute resolution clause providing that disputes “can be settled by arbitration”. Upon invocation of this clause, Cargo Logistics resisted reference to arbitration on the ground that the clause was not mandatory or obligatory. The Bombay High Court declined to appoint an arbitrator under Section 11, and this view was later affirmed by the Supreme Court. The Court held that the clauses which merely contemplate arbitration as a matter of future agreement, rather than present obligation, fall short of constituting enforceable arbitration agreements, as they require fresh consensus between the parties at the stage of dispute.

 

This post analyses the decision on three aspects. Firstly, it examines the Court’s insistence on textual precision as determinative of arbitral consent, particularly its distinction between permissive and mandatory language. Secondly, it situates the judgment within India’s pro-arbitration jurisprudence, arguing that it reflects a shift from facilitation to threshold scrutiny of consent. Thirdly, it evaluates the broader implications to commercial contracting, including the extent to which strict reliance on drafting formalism may influence litigation strategy and access to arbitration.

 

Background

 

While Section 7 of the act does not prescribe any formal requirements for the framing of an arbitration agreement, jurisprudence[2] suggests that judicial interpretation has consistently elevated language as the decisive indicator of arbitral consent. The author suggests that the enquiry is therefore not directed at reconstructing commercial expectation, but determining whether the clause, as drafted, evidences a concluded intention to arbitrate. The Apex Court in Nagreeeka Indcon reinforces this position by adopting a strictly textual approach. The Court treats the arbitration clause as a self-contained expression of consent and declines to read into it any broader commercial understanding between the parties. The authors contend that this approach reflects a conscious preference for certainty over flexibility. By anchoring the analysis in the ordinary meaning of the words used, the Court limits the scope for interpretative interpretation at the referral stage. This is consistent with BGM & M-RPL-JMCT (JV) v. Eastern Coalfields Ltd.[3] and Jagdish Chander v. Ramesh Chander [4]where clauses requiring further agreement were held insufficient to constitute enforceable arbitration agreements. The underlying principle is clear, that arbitration cannot be imposed through implication,  it must be demonstrable from the clause itself.

 

At the same time, the decision marks a departure from the more pragmatic approach adopted in Enercon (India) v. Enercon GmbH,,[5] where the Court was willing to preserve arbitral intent despite drafting delicences. In Nagreeeka, such corrective interpretation is expressly rejected. It is pertinent to note that even in contextual indicators such as the heading of the clause, are treated as insufficient to cure indeterminacy in the operative language. The judgment in paragraph no. 9.6 also recalibrates the pro-arbitration principle articulated in the landmark case of Vidya Drolia v. Durga Trading Corporation,[6]However, Vidya encouraged courts to lean in favour of arbitration in cases of interpretative doubt, Nagreeeka confines this presumption to situations where an arbitration agreement is prima facie established. While if the existence of such agreement is itself in question, the Court adopts a more restrained posture.

 

The authors argue that this shift has broader implications. Firstly, by prioritising textual certainty, the court effectively raises the threshold for establishing arbitral consent, thereby reducing the scope for judicial facilitation at the Section 11 stage. Secondly, while this might strengthen doctrinal clarity, it simultaneously narrows the interpretive space within which courts can accommodate imperfect drafting, which is an issue of particular relevance in standard-form commercial contracts.

 

Road Ahead: Pro Arbitration to Pro Consent

 

In the recent years, India has adopted a pro-arbitration approach over lengthy and time consuming litigation. Scholars[7]have praised this shift towards greater judicial restraint especially at key stages including referral to arbitration, conduct of proceedings, and post-award scrutiny. The authors critically question whether this judgment is truly ‘pro’ arbitration or forms another litigation hurdle for parties.

 

Firstly, the implications for foreign clientele are significant. In cross-border transactions, arbitration clauses which are typically drawn from institutional model clauses, such as those of International Chamber of Commerce (ICC) or the Singapore International Arbitration Centre (SIAC). These model clauses employ unequivocal language, for instance, providing that disputes “shall be finally settled by arbitration”.

 

However, scholars[8] suggest that in commercial practice, such clauses are frequently adapted or incorporated into broader contractual frameworks, particularly in multi-tier dispute resolution clauses or industry standard agreements. Gary Born[9] notes that arbitration agreements are often embedded within complex contractual structures and may vary in formulation depending on commercial context, giving rise to disputes over their binding nature. Similarly, Redfern and Hunter[10] observe that poorly drafted or ambiguous clauses often the result of modification or hybrid drafting are a recurring source of jurisdictional challenges. This concern is also reflected in judicial practice. In Fiona Trust & Holding Corp v. Privalov,[11] the House of Lords adopted a commercially sensible approach to uphold arbitration agreements despite drafting imperfections.

 

Secondly, from a public policy perspective, the judgment reaffirms consent as the cornerstone of arbitration, consistent with international norms. Nagreeeka’s text-centric approach raises concerns about India’s pro arbitration approach.  The UNCITRAL Model Law which underpins the act, adopts a pro- enforcement bias, encouraging courts to uphold arbitration agreements where reasonably possible.

 

Thirdly, an overly stringent approach may have spill over effects on enforcement of foreign arbitral awards in India. Under the New York Convention, to which India is a signatory, courts are required to recognise and enforce foreign awards subject to limited exceptions, including the absence of a valid arbitration agreement and violation of public policy. A heightened insistence on linguistic precision at the stage of determining arbitral consent could expand the scope of challenges under these grounds. As Gary Born[12] notes, enforcement regimes depend fundamentally on judicial restraint and consistency in recognising arbitration agreements across jurisdictions.  If Indian courts subject arbitration clauses to stricter scrutiny than that applied at the seat of arbitration, it may lead to increased threshold objections and enforcement delays, even where the award is otherwise valid.

 

Conclusion


The authors contend that the approach adopted in Nagreeeka reflects a shift that may sit uneasily with India’s broader pro arbitration trajectory. While reaffirming the centrality of consent, an overly stringent reliance on textual precision risks undermining recent efforts aimed at enhancing ease of doing business and strengthening India’s position as an arbitration friendly jurisdiction.


While the authors have laid down their views, the current position of under Indian Law remains firmly textual. The 2026 decision of Supreme Court in Nagreeka states that’s permissive language being can, may cannot be rendered binding by reference to commercial context, transactional intent, or the general judicial preference for arbitration; the clause's own wording remains dispositive.

 

[1] Anvita Sharma is a final year student at Jindal Global Law School and Vidhi Gala is an associate at Dhruve Liladhar & Co.

[3] BGM & M-RPL-JMCT (JV) v. Eastern Coalfields Ltd., 2024 SCC OnLine Cal 486 .

[4] Jagdish Chander v. Ramesh Chander, (2007) 5 SCC 719.

[5] Enercon (India) Ltd. v. Enercon Gmbh, (2014) 5 SCC 1.

[6] Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1.

[7] Rajat Singla, “Arbitration Environment in India- From the User’s Perspective” (Australian Disputes Centre, 2021) https://disputescentre.com.au/wp-content/uploads/2021/10/ARBITRATION-ENVIRONMENT-IN-INDIA-FROM-THE-USERS-PERSPECTIVE-Final.pdf

[8]Editor. “‘Consent’ in Arbitration Agreement — Substance Prevails Over Form: Crystallisation of Indian Jurisprudence.” SCC Times, 18 Sept. 2025, https://www.scconline.com/blog/post/2025/09/18/consent-arbitration-agreement-indian-jurisprudence  

[9]Born, Gary B. “International Commercial Arbitration.” WIPO Knowledge Repository, https://tind.wipo.int/record/44313  Accessed 2 July 2026.

[11] [2007] UKHL 40.

[12] Gary Born. International Law In American Courts. https://www.wolterskluwer.com/en/solutions/kluwerarbitration/born

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