Permissive arbitration wording is not binding: a clause saying disputes "can" be arbitrated does not oust the right to sue.
A clause stating that disputes "can be settled by Arbitration" was treated as permissive rather than a present and binding submission to arbitration. A valid arbitration agreement requires a concluded obligation to refer present or future disputes to arbitration; wording that merely contemplates arbitration, or leaves it to a later agreement, is only an agreement to agree and cannot displace the ordinary right to sue. Because the clause did not clearly identify who could invoke arbitration, it was considered uncertain and ineffective as an arbitration agreement.
Issues: Whether the arbitration clause stating that disputes "can be settled by Arbitration" constituted a valid and binding arbitration agreement so as to justify stay of the suit under Section 34 of the Arbitration Act.
Analysis: The clause was construed as expressing only a possibility of arbitration, not an obligation to submit disputes to arbitration. A valid arbitration agreement requires a present and concluded agreement to submit present or future differences to arbitration. Words of mere possibility are insufficient, and a clause that leaves arbitration to a later agreement is only a contract to enter into a contract. The clause also did not clearly indicate whose option would trigger arbitration, and an uncertain or equivocal term cannot deprive a party of the ordinary right to sue in court.
Conclusion: The arbitration clause was held invalid and ineffective as an arbitration agreement. The application for stay was dismissed against the applicant.
Final Conclusion: The suit was allowed to proceed because the contractual stipulation did not create a binding submission to arbitration.
Ratio Decidendi: An arbitration clause must contain a present and concluded obligation to submit disputes to arbitration; a term expressing only that disputes "can" be arbitrated is merely permissive and does not amount to a valid arbitration agreement.
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