Arbitration In IndiaArbitration Agreement not binding if clause says Arbitration “may be sought”

BGM and M-RPL-JMCT (JV) v. Eastern Coalfields Limited

Court – Supreme Court

Citation – 2025 INSC 874

Date – 18.07.2025

The Hon’ble Supreme Court has held that if the arbitration clause says Arbitration “may be sought”, it will not be a binding Arbitration Agreement and the parties are not bound to go for arbitration.

The Court held,

“31. We do not agree with the aforesaid submission because clause 13 does not bind parties to use arbitration for settlement of the disputes. Use of the words “may be sought”, imply that there is no subsisting agreement between parties that they, or any one of them, would have to seek settlement of dispute(s) through arbitration. It is just an enabling clause whereunder, if parties agree, they could resolve their dispute(s) through arbitration. In our view, the phraseology of clause 13 is not indicative of a binding agreement that any of the parties on its own could seek redressal of inter se dispute(s) through arbitration. We are, therefore, of the considered view that the High Court was justified in holding that clause 13 does not constitute an arbitration agreement.

32. As it is not the case of the appellant that parties at any later stage have agreed to refer the disputes to arbitration, in our view, the High Court was justified in rejecting the application seeking appointment of an arbitrator. Issue (ii) is decided in the aforesaid terms.”

– Team AMLEGALS

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