The Supreme Court has made it clear that simply stating in a contract that disputes “can be settled by arbitration” does not make arbitration compulsory.

A Bench of Justices Sanjay Karol and N. Kotiswar Singh held that such wording only indicates an option, not a binding requirement for parties to resolve disputes through arbitration.

The Court delivered this ruling while dismissing an appeal against a decision of the Bombay High Court. The High Court had earlier held that a clause in a Bill of Lading did not qualify as a valid arbitration agreement because it lacked clear mandatory intent.

Emphasising the legal position, the Supreme Court said that an arbitration clause must clearly reflect the parties’ intention to be bound by arbitration. Merely mentioning arbitration or suggesting that disputes may be referred to it is not sufficient.

Referring to past judgments, including Jagdish Chander v. Ramesh Chander, the Court reiterated that the language of the agreement must show a definite commitment to arbitrate, rather than leaving it as a choice.

Overall, the judgment underlines that courts will closely scrutinise contractual wording, and only those clauses that clearly make arbitration mandatory will be treated as valid arbitration agreements.