"Can" You Arbitrate? Supreme Court Says No Mandate When Clause Leaves It Optional

In a ruling that underscores the primacy of party consent in arbitration, the Supreme Court of India has held that using the word "can" in an arbitration clause does not compel parties to arbitrate disputes. A bench comprising Justice Sanjay Karol and Justice Nongmeikapam Kotiswar Singh dismissed an appeal by Nagreeka Indcon Products Pvt. Ltd. against Cargocare Logistics (India) Pvt. Ltd., affirming the Bombay High Court's refusal to appoint an arbitrator. The decision, delivered on April 17, 2026, in Nagreeka Indcon Products Pvt. Ltd. v. Cargocare Logistics (India) Pvt. Ltd. (2026 INSC 384), clarifies that such wording merely opens the door to arbitration as a possibility, not a binding path.

From Foil Containers to Freight Fiasco: The Cargo Dispute Unfolds

Nagreeka Indcon, a manufacturer of aluminium foil containers and kitchen rolls, secured a contract to supply corrugated boxes to American Alupack Industries (AAI) in South Carolina, USA. To handle transport, Nagreeka engaged Cargocare Logistics for Rs. 2,23,550, covering six containers' freight, ocean charges, and more. Four containers reached safely, but trouble hit with the fifth in October 2020.

Cargocare allegedly released the goods to AAI without payment or the original bill of lading—a standard safeguard—causing Nagreeka a loss of USD 28,064.86. Nagreeka raised the issue in December 2020; Cargocare cited past practices and denied liability. By March 2022, Nagreeka invoked arbitration under Clause 25 of the bill of lading: “Any difference of opinion or dispute thereunder can be settled by arbitration in India or a place mutually agreed with each party appointing an arbitrator.”

Cargocare refused, arguing the clause was optional. The Bombay High Court dismissed Nagreeka's Section 11 application in February 2023, leading to this Supreme Court appeal via special leave.

Appellant's Push for Prima Facie Arbitration vs. Respondent's Consent Demand

Nagreeka argued that Section 7 of the Arbitration and Conciliation Act, 1996 (A&C Act) requires no specific form for arbitration agreements. The clause's "Arbitration" heading and intent signaled a binding forum, urging a pragmatic interpretation per cases like Eastern Coalfields v. Sanjay Transport Agency and Vidya Drolia v. Durga Trading Corporation . At the Section 11 stage, courts should take a prima facie view favoring arbitration, they said, citing Zhejiang Bonly where "arbitration or the court" still allowed appointment.

Cargocare countered that "can" lacked mandatory intent, failing K.K. Modi v. K.N. Modi 's criteria for valid arbitration agreements. Echoing Jagdish Chander v. Ramesh Chander , words like "can" suggest possibility, not obligation, requiring fresh consent. The clause also omitted a third arbitrator mechanism, clashing with Section 10 A&C Act. LiveLaw reports noted Cargocare's reliance on recent precedents like BGM v. Eastern Coalfields , reinforcing non-binding options.

Decoding "Can": From Dictionary to Contractual Autonomy

The Court zoomed in on "can" , defining it via Oxford, Merriam-Webster, and Britannica as denoting possibility or capability—not obligation like "shall." In commercial contexts, arbitration thrives on party autonomy , as Justice P.S. Narasimha noted in Cox & Kings : consent births arbitral jurisdiction.

At Section 11, courts prima facie check agreement existence ( SBI General Insurance v. Krish Spg. ), avoiding deep dives. Scrutinizing precedents, the bench distinguished Nagreeka's citations: Eastern Coalfields used headings for scope, not modality; Babanrao Rajaram Pund and Visa International presumed clear intent absent here; Enercon filled gaps where arbitration was undisputed; Zhejiang Bonly involved "should," not "can." Vidya Drolia 's pro-arbitration tilt applies to construction doubts, not absent consensus.

Drawing from Jagdish Chander (reaffirmed in Alchemist Hospitals v. ICT Health , per other sources), clauses needing further agreement are mere "agreements to agree"—unenforceable.

Key Observations Straight from the Bench

  • On 'Can's' Meaning : “As ordinarily understood, it means capacity, capability or factual possibility.”
  • Party Autonomy Core : “The parties must mutually intend to refer their differences to arbitration as consent is the source of the Arbitral Tribunal's jurisdiction over them.”
  • Jagdish Chander Endorsed : “Mere use of the word ‘arbitration’... will not make it an arbitration agreement, if it requires or contemplates a further... consent of the parties.”
  • No Forced Arbitration : “When that is the case [parties not ad idem], it is not for a Court to compulsorily send such parties before the jurisdiction that they have not chosen.”

No Arbitration Forced: Appeal Sunk, Civil Courts Open

“This appeal is bereft of merit. It is accordingly dismissed.”

The Court upheld the High Court, ruling Clause 25 non-binding. Parties retain options like civil suits, preserving voluntary arbitration. For businesses, this mandates precise drafting—"shall" over "can"—to avoid ambiguity. As LiveLaw highlighted (2026 LiveLaw (SC) 388), it reaffirms mutual intent as arbitration's cornerstone, impacting bills of lading and commercial pacts nationwide.