Arbitration Agreement--Permissive Clause--Use of Word 'Can' in Dispute Resolution Clause Does Not Create Binding Obligation to Refer Disputes to Arbitration
An arbitration clause using the word 'can' does not constitute a binding arbitration agreement under Section 7 of the Arbitration and Conciliation Act, 1996. The word 'can' denotes capacity or future possibility, not a mandatory obligation. Consent is the source of an arbitral tribunal's jurisdiction, and parties must mutually intend to refer disputes to arbitration. A clause that requires further consensus before reference to arbitration is not an arbitration agreement but merely an agreement to enter into one in future. In the absence of a mandatory agreement, arbitration cannot be forced upon an unwilling party. Thus, an arbitration clause using the Word ‘Can’ does not constitute a binding agreement.
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