Clause Saying Disputes “May Be” Referred to Arbitration Not A Binding Arbitration Agreement u/s 7 : SC

The Supreme Court held that a contract clause stating disputes “may be” resolved through arbitration is not a binding arbitration agreement under Section 7 of the Arbitration and Conciliation Act, 1996.

A Bench of Justices PS Narasimha and Manoj Misra clarified that the phrase “may be sought” indicates the absence of a subsisting arbitration agreement, making arbitration an optional, non-mandatory remedy.

The Court upheld the Calcutta High Court’s dismissal of an application for appointing an arbitrator, noting the clause lacked language such as “shall” that would make arbitration obligatory.

The ruling confirms that arbitration clauses must clearly bind parties to arbitrate disputes for Section 7 to apply.