Introduction

One of the biggest conundrums since the enactment of the Arbitration and Conciliation Act, 1996^[1] has been when a matter can be rendered arbitrable. The Supreme Court recently in Nagreeka Indcon Products Pvt Ltd v Cargocare Logistics (India) Pvt Ltd^[2], has held that the usage of word “can” in an arbitration clause doesn’t mandate an obligation to arbitrate, and instead reflects a mere possibility of arbitration. The Supreme Court was called upon to decide whether a bill of lading clause stating that “disputes can be settled by arbitration” created a mandatory arbitration mechanism or merely left the door open for one party to later unilaterally block reference to arbitration. Recent Indian jurisprudence has attempted to reveal a consistent theme; arbitration is strictly consensual, and certain conditions must be satisfied before disputes can be compelled into arbitration. The Court’s response relies heavily on a principle that runs through decades of arbitration jurisprudence: “an arbitration agreement is only as strong as the mutual intent behind it.” Any clause which merely hints at the possibility of arbitration and not locking the parties into a commitment, is not an arbitration agreement at all. The ruling reaffirms that arbitral jurisdiction derives from unequivocal party consent expressed in clear contractual terms with emphasis on the usage of mandatory language when writing an arbitration clause. The obligation to arbitrate must be concluded and should not be contingent, merely indicating a future possibility of doing so.

Threshold Requirements for Arbitrability

Existence of a valid arbitration agreement, i.e., compliance with Section 7^[3], is one of the pre-requisites for invoking an arbitration. There must be an agreement in writing that meets Section 7 of the Arbitration & Conciliation Act, 1996. This requires

a.    existence of a present or future dispute;

b.    parties’ intention to refer that dispute to an arbitral tribunal ;

c.    a written promise to be bound by the tribunal’s decision; and

d.    consensus ad idem.

In Bihar State Mineral Development Corporation v. Encon Builders (I) Pvt. Ltd^[4], the Supreme Court held that an arbitration clause is valid only if these elements co-exist. Similarly, in Jagdish Chander v. Ramesh Chander^[5], the Court emphasized that the words must “disclose a determination and obligation to go to arbitration and not merely contemplate the possibility”. The mutual intent of the parties is indispensable.

Additionally, there must be a clear intent/binding commitment to arbitrate (“shall” not “may/can”); the arbitration clause must use a mandatory language. A clause stating disputes “may” or “can” be referred to arbitration is permissive and not self-executing. The Supreme Court in Nagreeka^[6] reiterated that the word “can” in a clause “indicates a possibility of arbitration and does not disclose a determination and obligation to arbitrate.” Likewise, in BGM and M-RPL-JMCT (JV) v. Eastern Coalfields Limited^[7], the Supreme Court held that phrases like “may be sought through arbitration” give only an option/possibility and do not create an enforceable arbitration agreement. Under Jagdish Chander, any clause that requires a “further agreement” to arbitrate is not a binding arbitration clause. Thus, a mandatory commitment (often indicated by words like “shall”) is essential; mere “permissive” language defeats the agreement.

Furthermore, both parties must be equally bound to arbitrate; a one-sided right defeats arbitration. Indian law requires reciprocity in arbitration clauses. A clause that allows only one party to compel arbitration (or permits one side an opt-out) lacks the mutuality needed for a valid agreement. In Tata Capital Housing Finance Ltd. v. Shri Chand Constructions^[8], for example, the High Court of Delhi struck down a clause giving only lender the right to arbitrate, holding that mutuality (equal right for both) is fundamental (so one party cannot retain court access while the other is stuck in arbitration). In Nagreeka Indcon itself, the clause “does not bind parties” and required “further consent,” demonstrated lack of mutual obligation.

In addition to that, the Arbitral Tribunal is an exclusive forum. An arbitration agreement must manifest the parties’ intent to exclude ordinary courts. The Supreme Court stated in Cox & Kings Ltd. v. SAP India Pvt. Ltd^[9]. , an arbitration clause is an undertaking to submit disputes “to arbitration to the exclusion of domestic courts.” If the clause contemplates parallel remedies (e.g. proceeding in court is still open without voiding arbitration), then it may not amount to an agreement.

Arbitrability of the subject matter should not fall under the list of non-arbitrable matters. Even with a valid clause, a dispute must be arbitrable by law. Certain subject-matters are reserved for courts by statute or public policy. Following Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd^[10]., Indian law distinguishes between private rights, i.e., those in personam and public rights, rights in rem. Booz Allen also laid down that criminal, matrimonial, guardianship, insolvency, testamentary, and certain statutory tenancy disputes are non-arbitrable and must be decided by courts. Likewise, for ONGC Ltd. v. Saw Pipes Ltd^[11], the Supreme Court refused arbitration in a contract under the Petroleum Act holding statutory/public law contracts (e.g. rights in rem under statute) are non-arbitrable unless law expressly permits arbitration. The particular dispute must fall within the subject matter covered by the arbitration clause. At the Sec.11 stage, the court examines prima facie whether the clause can cover the dispute. As held in Booz Allen, only those disputes “covered by the arbitration agreement and capable of arbitration” may be referred for the same. If the claim arises from obligations or rights outside the arbitration clause’s scope, the court will refuse reference. For example, in Booz Allen, the appellant’s mortgage enforcement suit was excluded despite the agreement’s broad language because the enforcement of a mortgage (an in-rem action) fell outside the agreed coverage. A similar reasoning was applied to construction contracts executed under statutory powers.

Moreover, a prompt invocation and absence of waiver shall be there. At the stage of Section 11^[12], courts will not deny arbitration merely on procedural technicalities. For example, delays or minimal submission on merits, if the above conditions are met. However, if a party submits to the jurisdiction of courts by clearly taking a position on the substance of the dispute, the court may infer waiver. In Booz Allen, for example, filing a detailed affidavit did not amount to waiver, since the plaintiff was merely defending an injunction. The Supreme Court will always strive to abide by arbitration if a valid agreement exists and the dispute is arbitrable.

Recent Jurisprudence

Arbitration in India, as governed by the Arbitration and Conciliation Act, 1996, rests fundamentally upon the cornerstone principle of party autonomy. The legislative intent has always been minimization of judicial intervention while upholding and enforcing the parties’ agreement to resolve their disputes through private adjudication. Recently, the question before the Supreme Court in M/s Alchemist Hospitals Ltd. v. M/s ICT Health Technology Services India Pvt. Ltd^[13] was whether the use of the word “arbitration” in a contract would be sufficient to constitute a valid and enforceable arbitration agreement or not. The Supreme Court held that the essence of the arbitration clause lies in unequivocal intention of the parties to the contract, and reference to the isolated language should not be the criteria to adjudge arbitrability. The Court also took note of a clause titled as ‘Settlement of Disputes/Arbitration,’ in a disputed contract in the case of Mahanadi Coalfields Ltd. v. IVRCL AMR JV^[14], where the clause provided no mechanism for the arbitration but had provided for other remedies for dispute resolution, was held not valid to be arbitrated. The court noted that there was no binding effect attached to the arbitration term mentioned in the contract and thus is not a valid and enforceable one.

The Supreme Court in Nagreeka’s case has reaffirmed that parties cannot be compelled into arbitration in case of absence of clear consensus to arbitrate. By contrast, clauses that merely “enable” or “contemplate” arbitration, e.g., words like “may” or “can” fail to meet the test.

Citations and References

[1]  Arbitration and Conciliation Act, 1996, No. 26, Acts of Parliament, 1996 (India).

[2]  Nagreeka Indcon Prods. Pvt. Ltd. v. Cargocare Logistics (India) Pvt. Ltd., 2026 INSC 384 (India Apr. 17, 2026).

[3]  Arbitration and Conciliation Act § 7.

[4]  Bihar State Mineral Dev. Corp. v. Encon Builders (I) Pvt. Ltd., (2003) 7 SCC 418 (India).

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

[6]  Nagreeka Indcon, 2026 INSC 384.

[7]  BGM & M-RPL-JMCT (JV) v. E. Coalfields Ltd., 2025 INSC 874 (India July 18, 2025).

[8]  Tata Cap. Hous. Fin. Ltd. v. Shri Chand Constr. & Apartment Pvt. Ltd., 2021 SCC OnLine Del 5091, 2022 (1) ARB LR 213 (Del. High Ct. Nov. 24, 2021) (India).

[9]  Cox & Kings Ltd. v. SAP India Pvt. Ltd., (2024) 4 SCC 1, 2023 INSC 1051 (India Dec. 6, 2023).

[10]  Booz Allen & Hamilton Inc. v. SBI Home Fin. Ltd., (2011) 5 SCC 532 (India).

[11]  Oil & Nat. Gas Corp. Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705 (India).

[12]  Arbitration and Conciliation Act § 11.

[13]  Alchemist Hosps. Ltd. v. ICT Health Tech. Servs. India Pvt. Ltd., 2025 INSC 1289 (India Nov. 6, 2025).

[14]  Mahanadi Coalfields Ltd. v. IVRCL AMR Joint Venture, 2022 INSC 748 (India July 25, 2022).