Nagreeka Indcon Products Pvt. Ltd. Vs Cargocare Logistics (India) Pvt. Ltd.
The matter at hand involves Nagreeka Indcon Products Pvt. Ltd. and Cargocare Logistics (India) Pvt. Ltd., embodying a critical question of Law, i.e., Does an arbitration clause that employs the term ‘can’ form a binding arbitration agreement that compels the referral of all disputes to arbitration, or does it simply suggest a potential for arbitration that requires additional consent?
The appellant, a producer of aluminium foil containers, entered into a contract with the respondent for the transportation of goods to South Carolina, USA. A disagreement emerged concerning the consignment, prompting the appellant to request the appointment of an arbitrator. The essence of the dispute revolved around a particular clause in the contract that indicated disputes “can” be submitted to arbitration. The appellant maintained that this was a compulsory obligation, whereas the respondent claimed it was discretionary.
The Supreme Court rejected the appeal, determining that a provision indicating disputes “can” be submitted to arbitration does not form a binding arbitration agreement. The Court explained that for an arbitration agreement to be considered valid under Section 7 of the Arbitration and Conciliation Act, there must exist a clear and obligatory commitment to refer disputes to arbitration. The employment of permissive terms such as “can” or “may” suggests only a wish or a provisional arrangement to consider arbitration at a later time, which would necessitate a new agreement between both parties when a dispute actually occurs.
The Supreme Court rejected the appeal, determining that a provision indicating disputes “can” be submitted to arbitration does not form a binding arbitration agreement. The Court explained that for an arbitration agreement to be considered valid under Section 7 of the Arbitration and Conciliation Act, there must exist a clear and obligatory commitment to refer disputes to arbitration. The employment of permissive terms such as “can” or “may” suggests only a wish or a provisional arrangement to consider arbitration at a later time, which would necessitate a new agreement between both parties when a dispute actually occurs.