Holding

Clause 13 does not constitute an arbitration agreement, and the Referral Court must conduct a prima facie examination of its existence rather than defer to the arbitral tribunal.

Summary

The appellant and Eastern Coalfields Limited entered into a contract for transportation of goods that contained Clause 13, which the appellant claimed was an arbitration agreement. The appellant filed an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 for the appointment of an arbitrator, but the High Court dismissed it, holding that Clause 13 did not constitute an arbitration agreement. The Supreme Court examined whether the existence of an arbitration agreement can be left to the arbitral tribunal and whether Clause 13 and Clause 32 of the tender documents satisfied the requirements of Section 7 of the Act. Relying on the 2015 amendment and prior case law, the Court held that the Referral Court must make a prima facie examination of the clause and that language such as "may be sought" indicates an enabling provision, not a binding arbitration agreement. Consequently, the Court affirmed the High Court’s view that no arbitration agreement existed and dismissed the appeal.

Issues considered

Whether the question of existence of an arbitration agreement should be decided by the arbitral tribunal or by the Referral Court.
Whether Clause 13 of the contract constitutes an arbitration agreement under Section 7 of the Arbitration and Conciliation Act, 1996.
Whether Clause 32 of the Instructions to Bidders negates the existence of an arbitration agreement.

Legislation cited

Arbitration and Conciliation Act, 1996s. 11, s. 16, s. 6-A, s. 7

Headnote

Issue for Consideration (i) Whether the question of existence of an arbitration agreement should be left for the arbitral tribunal to decide; (ii) whether clause 13 of the General Terms and Conditions of the contract and relied upon by the appellant would constitute an arbitration as contemplated u/s.7 of the Arbitration and Conciliation Act, 1996; (iii) whether clause 32 of Instructions to Bidders negates the existence of an arbitration agreement. Headnotes† Arbitration and Conciliation Act, 1996 – Sub-section (6-A) of s.11 – Existence of

Subjects

Arbitration agreementExistence of an arbitration agreementReferral CourtArbitral TribunalSection 6-A of Section 11Consensus before reference to arbitrationEnabling clauseJuridical seat

Judgment

[2025] 7 S.C.R. 1275 : 2025 INSC 874

BGM and M-RPL-JMCT (JV)
v.
Eastern Coalfields Limited
(Civil Appeal No. 9795 of 2025)
18 July 2025
[Pamidighantam Sri Narasimha and Manoj Misra,* JJ.]

Issue for Consideration
(i) Whether the question of existence of an arbitration agreement
should be left for the arbitral tribunal to decide; (ii) whether clause
13 of the General Terms and Conditions of the contract and relied
upon by the appellant would constitute an arbitration agreement
between the parties as contemplated u/s.7 of the Arbitration and
Conciliation Act, 1996; (iii) whether clause 32 of Instructions to
Bidders negates the existence of an arbitration agreement.

Headnotes†
Arbitration and Conciliation Act, 1996 – Sub-section (6-A)
of s.11 – Existence of arbitration agreement – The appellant
and the respondent entered into a contract relating to
transportation/handling of goods – Dispute arose between the
parties – Appellant relied on clause 13 of the General Terms and
Conditions of the contract as arbitration agreement – However,
respondent contended that clause 13 is bereft of the essential
ingredients to constitute an arbitration agreement – According
to the appellant, the Referral Court should straight away
refer the matter and leave it to the arbitral tribunal to decide
whether the arbitration agreement exists or not – Whether the
question of existence of an arbitration agreement should be
left for the arbitral tribunal to decide:
Held: 1. The argument of the appellant that Referral Court should
straight away refer the matter and leave it to the arbitral tribunal
to decide whether the arbitration agreement exists or not cannot
be accepted. [Para 19]
2. In the instant case, the appellant is relying on just one clause in the
contract which, according to the appellant, constitutes an arbitration
agreement whereas according to the respondent, though the clause is
not disputed, the same does not constitute an arbitration agreement
* Author
1276 [2025] 7 S.C.R.

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– In such circumstances, the Court while exercising power u/s.11
would not have to hold a mini-trial or an enquiry into its existence
rather a plain reading of the clause would indicate whether it is, or it
is not, an arbitration agreement, prima facie, satisfying the necessary
ingredients of it, as required by s.7 of the 1996 Act – In view of this
Court, such a limited exercise would not transgress the limit set
out by sub-section (6-A) of s.11 of the 1996 Act as introduced by
2015 Amendment because the object of such an exercise (i.e., of
examination) is to weed out frivolous claims for appointment of an
arbitrator/ reference to an arbitral tribunal. [Paras 18, 19]

Arbitration and Conciliation Act, 1996 – s.11 – The appellant
and the respondent entered into a contract – Dispute arose
between the parties – Appellant sought to invoke arbitration
through clause 13 of the General Terms and Conditions of the
contract – High Court held that clause 13 does not constitute
an arbitration agreement – Whether clause 13 of the General
Terms and Conditions of the contract and relied upon by the
appellant would constitute an arbitration agreement between
the parties as contemplated u/s.7 of the Arbitration and
Conciliation Act, 1996:
Held: 1. Any agreement, or clause in an agreement, requiring or
contemplating a further consent or consensus before a reference
to arbitration, is not an arbitration agreement. [Para 26]
2. In the instant case, 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 view of this Court, 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 – Therefore, the High Court was justified in holding that
clause 13 does not constitute an arbitration agreement. [Para 31]

Arbitration and Conciliation Act, 1996 – Whether clause 32 of
Instructions to Bidders negates the existence of an arbitration
agreement:
Held: In the instant case, clause 32 does not exclude resolution
of disputes through arbitration agreement – It only fixes jurisdiction
[2025] 7 S.C.R. 1277

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

and in the event of there being an arbitration agreement could
determine the juridical seat – However, since this Court has held
that there is no arbitration agreement between the parties, decision
of this issue is of no consequence. [Para 33]

Case Law Cited
Interplay Between Arbitration Agreements under Arbitration, 1996
& Stamp Act, 1899, In re [2023] 15 SCR 1081 : (2024) 6 SCC 1;
Cox and Kings Limited v. SAP India Private Limited and another
(2024) 4 SCC 1 – followed.
Bihar State Mineral Development Corporation v. Encon Builders
[2003] Supp. 2 SCR 812 : (2003) 7 SCC 418; Jagdish Chander v.
Ramesh Chander and Others [2007] 5 SCR 720 : (2007) 5 SCC
719 – relied on.
Mahanadi Coalfields Ltd. v. IVRCL AMR Joint Venture [2022] 7
SCR 522 : (2022) 20 SCC 636 – referred to.

List of Acts
Arbitration and Conciliation Act, 1996.

List of Keywords
Arbitration agreement; Existence of an arbitration agreement;
Referral Court; Arbitral Tribunal; Sub-section (6-A) of s.11 of
Arbitration and Conciliation Act, 1996; Consensus before a
reference to arbitration; Enabling clause; Juridical seat.

Case Arising From
CIVIL APPELLATE JURISDICTION: SLP (C) Diary No. 21451 of
2024
From the Judgment and Order dated 19.01.2024 of the High Court
at Calcutta in AP No. 745 of 2023

Appearances for Parties
Advs. for the Petitioner:
Subhabrata Dutta, Sunando Raha, Subhojit Seal, Kunal Malik,
Manish Awasthi.
Advs. for the Respondent:
Ritin Rai, Sr. Adv., R. Venkat Prabhat, Daksh Pandit.
1278 [2025] 7 S.C.R.

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Judgment / Order of the Supreme Court

Judgment

Manoj Misra, J.

1. Leave granted.
2. This appeal impugns an order of the High Court1 dated 19.01.2024
whereby the application2 of the appellant, under Section 11 of the
Arbitration and Conciliation Act, 19963, was dismissed on the ground
that there exists no arbitration agreement between the parties.

FACTS
3. The appellant and the respondent entered into a contract relating
to transportation/handling of goods. Disputes arose between the
parties during the subsistence of the contract. Clause 13 of the
General Terms and Conditions, appended to the e-tender notice,
which forms part of the contract and relied upon by the appellant
as an arbitration agreement, is the subject matter of interpretation.
The same is extracted below:
“13. SETTLEMENT OF DISPUTES
It is incumbent upon the contractor to avoid litigation
and disputes during the course of execution. However, if
such disputes take place between the contractor and the
department, effort shall be made first to settle the disputes
at the company level.
The contractor should make request in writing to the
Engineer-in-charge for settlement of such disputes/claims
within 30 (thirty) days of arising of the cause of dispute/
claim failing which no disputes/ claims of the contractor
shall be entertained by the company.
Effort shall be made to resolve the dispute in two stages.
In first stage dispute shall be referred to Area CGM, GM.
If difference still persist the dispute shall be referred to a

1 The High Court at Calcutta
2 A.P. No. 745 of 2023
3 1996 Act
[2025] 7 S.C.R. 1279

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

committee constituted by the owner. The Committee shall
have one member of the rank of Director of the company
who shall be chairman of the company.
If differences still persist, the settlement of the dispute
shall be resolved in the following manner:
In the event of any dispute or difference relating to
the interpretation and application of the provisions of
commercial contract(s) between Central Public Sector
Enterprises (CPSEs)/ Port Trusts inter se and also between
CPSEs and Government Departments/ Organizations
(excluding disputes concerning railways, Income Tax,
Customs & Excise Departments), such dispute or difference
shall be taken up by either party for resolution through
AMRCD as mentioned in DPE OM No. 4(1)/2013-DPE
(GM)/FTS-1835 dated 22-05-2018.
In case of parties other than Govt. Agencies, the redressal
of the dispute may be sought through ARBITRATION AND
CONCILIATION ACT, 1996 as amended by AMENDMENT
ACT OF 2015”
(Emphasis supplied)

4. Treating the underscored portion of clause 13 as an arbitration
agreement, the appellant filed an application under Section 11(6) of
the 1996 Act for appointment of an Arbitrator for settlement of the
disputes inter se the parties.
5. The respondent objected to the prayer for appointment of an Arbitrator,
inter-alia, on the ground that clause 13 is bereft of the essential
ingredients to constitute an arbitration agreement and therefore the
application seeking appointment of an Arbitrator deserves rejection.
6. The High Court accepted the objection and dismissed the application.
While rejecting the prayer, the High Court laid emphasis on use
of the word “may” before “be sought” in the underscored portion
of clause 13 and, inter alia, relied on two decisions of this Court,
namely, Jagdish Chander vs. Ramesh Chander and Others4 and

4 (2007) 5 SCC 719
1280 [2025] 7 S.C.R.

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Mahanadi Coalfields Ltd. vs. IVRCL AMR Joint Venture5 to hold
that where the word “may” is used there is no clear intention of the
parties to refer the dispute between them to arbitration and therefore,
the prayer to appoint an Arbitrator is not sustainable.
7. We have heard learned counsel for the parties and have perused
the materials on record.

Submissions on behalf of the Appellant
8. The learned counsel for the appellant contended that the use of
the word “may” is only to indicate that parties to the agreement
have an option to take recourse to settlement of dispute(s) through
arbitration under the 1996 Act. However, once that option is exercised
by any of the parties to the agreement, as in the present case, it
becomes a binding contract to settle inter se dispute(s) through
arbitration. It was contended that the decisions of this Court in
Jagdish Chander (supra) and Mahanadi Coalfields (supra)
dealt with entirely different clauses than the one in question and,
therefore, the High Court erred in placing reliance on them to reject
the application of the appellant.
9. In addition to above, it was argued that at the stage of appointment
of an arbitrator the court is required to examine whether arbitration
agreement exists or not. Such examination is for the Court to satisfy
itself that, prima facie, an arbitration agreement exists, though the
final call on its existence is to be taken by the arbitral tribunal, which
is competent to rule on its own jurisdiction, including ruling on any
objections with respect to the existence or validity of the arbitration
agreement. Thus, it was argued, the appropriate course for the High
Court was to appoint an arbitral tribunal and leave the issue open
for the arbitral tribunal to decide.

Submissions on behalf of the Respondent
10. Per contra, the learned counsel for the respondent supported the
impugned order and also referred to Clause 32 of the Instructions
to Bidders to contend that there was no definite agreement between
the parties to settle their disputes through arbitration. According to

5 (2022) 20 SCC 636
[2025] 7 S.C.R. 1281

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

the learned counsel for the respondent, the use of the word “may”
in the so-called arbitration clause clearly indicates that at the time
of entering the agreement, parties were not ad idem on referring
present or future disputes between them to arbitration. The clause
only enabled the parties to agree on any future date to refer the
disputes to arbitration. Therefore, in the absence of proof of any
such agreement, reference to arbitral tribunal has been justifiably
declined.
11. In addition to above, by referring to Clause 32 of the Instructions
to Bidders, the learned counsel for the respondent contended that
disputes between the parties were to be settled through regular court
proceedings and not through arbitration. Clause 32 is extracted below:
“Clause 32- Legal Jurisdiction: - Matters relating to
any dispute or difference arising out of this tender and
subsequent contract awarded based on this tender shall
be subject to the jurisdiction of District Court where the
subject work is to be executed.”
12. Besides above, the learned counsel for the respondent submitted
that if, on a plain reading of the relevant clause, relied by any one
of the parties as an arbitration agreement, it does not appear that
parties are ad idem on settlement of inter se, present or future,
disputes through arbitration to the exclusion of domestic courts, the
very existence of an arbitration agreement comes into question, which
can be taken notice of by the Court so as to decline the prayer for
appointment of an arbitral tribunal under Section 11 of the 1996 Act.

Issues
13. Having regard to the facts and the submissions made before us, we
are of the view that following three issues arise for our consideration:
(i) Whether the question of existence of an arbitration agreement
should be left for the arbitral tribunal to decide?
(ii) Whether clause 13 (supra) would constitute an arbitration
agreement between the parties as contemplated under Section
7 of the 1996 Act?
(iii) Whether clause 32 of Instructions to Bidders negates the
existence of an arbitration agreement?
1282 [2025] 7 S.C.R.

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Issue (i)
14. Insofar as issue (i) is concerned, a seven-Judge Constitution Bench
of this Court in Interplay Between Arbitration Agreements under
Arbitration, 1996 & Stamp Act, 1899, In re6, after surveying several
decisions as also the impact of the 2015 Amendment on the 1996
Act, has settled the law in the following terms:
“164. The 2015 Amendment Act has laid down different
parameters for judicial review under Section 8 and Section
11. Where Section 8 requires the Referral Court to look into
the prima facie existence of a valid arbitration agreement,
Section 11 confines the Court’s jurisdiction to the
examination of the existence of an arbitration agreement.
Although the object and purpose behind both Sections 8
and 11 is to compel parties to abide by their contractual
understanding, the scope of power of the Referral Courts
under the said provisions is intended to be different. The
same is also evident from the fact that Section 37 of the
Arbitration Act allows an appeal from the order of an
Arbitral Tribunal refusing to refer the parties to arbitration
under Section 8, but not from Section 11. Thus, the 2015
Amendment Act has legislatively overruled the dictum of
Patel Engg. [SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC
618] where it was held that Section 8 and Section 11 are
complementary in nature. Accordingly, the two provisions
cannot be read as laying down a similar standard.
165. The legislature confined the scope of reference under
Section 11(6-A) to the examination of the existence of an
arbitration agreement. The use of the term “examination”
in itself connotes that the scope of the power is limited to
a prima facie determination. Since the Arbitration Act is a
self-contained code, the requirement of “existence” of an
arbitration agreement draws effect from Section 7 of the
Arbitration Act. In Duro Felguera [Duro Felguera, S.A. v.
Gangavaram Port Ltd., (2017) 9 SCC 729 : (2017) 4 SCC
(Civ) 764] , this Court held that the Referral Courts only
need to consider one aspect to determine the existence

6 (2024) 6 SCC 1
[2025] 7 S.C.R. 1283

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

of an arbitration agreement — whether the underlying
contract contains an arbitration agreement which provides
for arbitration pertaining to the disputes which have arisen
between the parties to the agreement. Therefore, the
scope of examination under Section 11(6-A) should be
confined to the existence of an arbitration agreement on
the basis of Section 7. Similarly, the validity of an arbitration
agreement, in view of Section 7, should be restricted to the
requirement of formal validity such as the requirement that
the agreement be in writing. This interpretation also gives
true effect to the doctrine of competence-competence by
leaving the issue of substantive existence and validity of
an arbitration agreement to be decided by Arbitral Tribunal
under Section 16. We accordingly clarify the position of law
laid down in Vidya Drolia [Vidya Drolia v. Durga Trading
Corpn., (2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549] in the
context of Section 8 and Section 11 of the Arbitration Act.
166. The burden of proving the existence of arbitration
agreement generally lies on the party seeking to rely on
such agreement. In jurisdictions such as India, which
accept the doctrine of competence-competence, only prima
facie proof of the existence of an arbitration agreement
must be adduced before the Referral Court. The Referral
Court is not the appropriate forum to conduct a mini-trial
by allowing the parties to adduce the evidence in regard to
the existence or validity of an arbitration agreement. The
determination of the existence and validity of an arbitration
agreement on the basis of evidence ought to be left to the
Arbitral Tribunal. This position of law can also be gauged
from the plain language of the statute.
167. Section 11(6-A) uses the expression “examination
of the existence of an arbitration agreement”. The
purport of using the word “examination” connotes that
the legislature intends that the Referral Court has to
inspect or scrutinise the dealings between the parties
for the existence of an arbitration agreement. Moreover,
the expression “examination” does not connote or imply
a laborious or contested inquiry. [ P. Ramanatha Aiyar,
The Law Lexicon (2nd Edn., 1997) 666.] On the other
1284 [2025] 7 S.C.R.

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hand, Section 16 provides that the Arbitral Tribunal can
“rule” on its jurisdiction, including the existence and
validity of an arbitration agreement. A “ruling” connotes
adjudication of disputes after admitting evidence from
the parties. Therefore, it is evident that the Referral Court
is only required to examine the existence of arbitration
agreements, whereas the Arbitral Tribunal ought to rule
on its jurisdiction, including the issues pertaining to the
existence and validity of an arbitration agreement. A similar
view was adopted by this Court in Shin-Etsu Chemical Co.
Ltd. v. Aksh Optifibre Ltd. [Shin-Etsu Chemical Co. Ltd. v.
Aksh Optifibre Ltd., (2005) 7 SCC 234]

xxx xxx xxx
169. When the Referral Court renders a prima facie opinion,
neither the Arbitral Tribunal, nor the Court enforcing the
arbitral award will be bound by such a prima facie view.
If a prima facie view as to the existence of an arbitration
agreement is taken by the Referral Court, it still allows
the Arbitral Tribunal to examine the issue in depth. Such
a legal approach will help the Referral Court in weeding
out prima facie non-existent arbitration agreements. It will
also protect the jurisdictional competence of the Arbitral
Tribunals to decide on issues pertaining to the existence
and validity of an arbitration agreement.”
15. The legal principles deducible from the above decision qua the
scope of Referral Court’s power under Section 11 of 1996 Act are as
follows:
(a) Section 11 confines the Court’s jurisdiction to the examination
regarding the existence of an arbitration agreement.
(b) The use of the term “examination” in itself connotes that the
scope of the power is limited to a prima facie determination.
(c) Referral Courts only need to consider one aspect to determine
the existence of an arbitration agreement — whether the
underlying contract contains an arbitration agreement which
provides for arbitration pertaining to the disputes which have
arisen between the parties to the agreement. Therefore, the
scope of examination under Section 11(6-A) should be confined
[2025] 7 S.C.R. 1285

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

to the existence of an arbitration agreement on the basis of
Section 7. Such a legal approach will help the Referral Court
in weeding out prima facie non-existent arbitration agreements.
(d) The purport of using the word “examination” connotes that the
legislature intends that the Referral Court has to inspect or
scrutinise the dealings between the parties for the existence of
an arbitration agreement. However, the expression “examination”
does not connote or imply a laborious or contested inquiry.
(e) The burden of proving the existence of arbitration agreement
generally lies on the party seeking to rely on such agreement.
Only prima facie proof of the existence of an arbitration
agreement must be adduced before the Referral Court. The
Referral Court is not the appropriate forum to conduct a mini-
trial by allowing the parties to adduce the evidence in regard
to the existence or validity of an arbitration agreement. The
determination of the existence and validity of an arbitration
agreement on the basis of evidence ought to be left to the
Arbitral Tribunal.
(f) Section 16 provides that the Arbitral Tribunal can “rule” on its
jurisdiction, including the existence and validity of an arbitration
agreement. A “ruling” connotes adjudication of disputes after
admitting evidence from the parties. Therefore, when the Referral
Court renders a prima facie opinion, neither the Arbitral Tribunal,
nor the Court enforcing the arbitral award is bound by such a
prima facie view. If a prima facie view as to the existence of
an arbitration agreement is taken by the Referral Court, it still
allows the Arbitral Tribunal to examine the issue in depth.
16. What can be deduced from the above decision is that the Referral
Court before appointing an arbitral tribunal will have to be prima facie
satisfied that an arbitration agreement as contemplated in Section
7 of the 1996 Act exists. For this limited purpose it can scrutinize
the documents relied upon by the parties in proof of its existence.
Though the burden of proving the existence of arbitration agreement
lies on the party seeking to rely on such agreement, only prima facie
proof of its existence must be adduced before the Referral Court
because the Referral Court is not the appropriate forum to conduct
a mini-trial by allowing the parties to adduce the evidence in regard
to its existence.
1286 [2025] 7 S.C.R.

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17. However, where professed arbitration agreement is found in an
undisputed document, no trial or inquiry is required as to its existence.
In such a situation, the Court would have to simply peruse the same
to satisfy itself whether it, prima facie, fulfills the essential ingredients
of an arbitration agreement as contemplated under Section 7 of
the 1996 Act. But where the professed arbitration agreement is not
contained in any one document and is to be inferred from two or
more documents, such as exchange of letters or communications,
parties may raise various pleas and place various documents to prove
or disprove its existence. In such a scenario, if from the documents
placed, existence of an arbitration agreement, as defined in Section
7, is prima facie made out, Referral Court, instead of undertaking a
deeper probe or inquiry, should refer the matter to the arbitral tribunal.
More so, because opinion of the Referral Court as to existence of
an arbitration agreement is neither binding on the arbitral tribunal
nor the Court dealing with the arbitral award.
18. In the instant case, the appellant is relying on just one clause in the
contract which, according to the appellant, constitutes an arbitration
agreement whereas according to the respondent, though the clause is
not disputed, the same does not constitute an arbitration agreement.
In such circumstances, the Court while exercising power under
Section 11 would not have to hold a mini-trial or an enquiry into its
existence rather a plain reading of the clause would indicate whether
it is, or it is not, an arbitration agreement, prima facie, satisfying the
necessary ingredients of it, as required by Section 7 of the 1996 Act.
In our view, such a limited exercise would not transgress the limit set
out by sub-section (6-A)7 of Section 11 of the 1996 Act as introduced
by 2015 Amendment because the object of such an exercise (i.e.,
of examination) is to weed out frivolous claims for appointment of
an arbitrator/ reference to an arbitral tribunal.
19. In view of the above discussion, the argument of the appellant that
Referral Court should straight away refer the matter and leave it
to the arbitral tribunal to decide whether the arbitration agreement
exists or not cannot be accepted. Issue (i) is decided accordingly.

7 Section 11.
(6-A). The Supreme Court or, as the case may be, the High Court, while considering any application
under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree
or order of any Court, confine to the examination of the existence of an arbitration agreement.
[2025] 7 S.C.R. 1287

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Issue (ii)
20. Before we proceed to consider whether Clause 13 would constitute
an arbitration agreement, it would be useful to examine the law
as to when an arbitration agreement comes into existence. An
arbitration agreement is the foundation of arbitration as it records
the consent of the parties to submit their disputes to arbitration.
Section 2(b) of the 1996 Act defines an arbitration agreement to
mean an agreement referred to in Section 78. In Bihar State Mineral
Development Corporation vs. Encon Builders9, this Court culled
out the essential ingredients of an arbitration agreement as follows:
(a) there must be a present or future difference in connection with
some contemplated affair; (b) the parties must intend to settle such
difference by a private tribunal; (c) the parties must agree in writing
to be bound by the decision of such tribunal; and (d) the parties
must be ad idem.
21. In Cox and Kings Limited vs. SAP India Private Limited and
another10, a Constitution Bench of this Court held:
“61. An arbitration agreement is a contractual undertaking
by two or more parties to resolve their disputes by the
process of arbitration, even if the disputes themselves
are not based on contractual obligations. An arbitration
agreement is a conclusive proof that the parties have
consented to submit their dispute to an arbitral tribunal to
the exclusion of domestic courts. The basis for an arbitration
agreement is generally traced to the contractual freedom

8 Section 7. Arbitration Agreement. - (1) In this Part, “arbitration agreement” means an agreement by
the parties to submit to arbitration all or certain disputes which have arisen or which may arise between
them in respect of a defined legal relationship, whether contractual or not.
(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a
separate agreement.
(3) An arbitration agreement shall be in writing.
(4) An arbitration agreement is in writing if it is contained in –
(a) a document signed by the parties;
(b) an exchange of letters, telex, telegrams or other means of telecommunication including communication
through electronic means which provide a record of the agreement; or
(c) an exchange of statements of claim and defense in which the existence of the agreement is alleged
by one party and not denied by the other.
(5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration
agreement if the contract is in writing and the reference is such as to make that arbitration clause part
of the contract.
9 (2003) 7 SCC 418
10 (2024) 4 SCC 1
1288 [2025] 7 S.C.R.

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of parties to codify their intention to consensually submit
their disputes to an alternative dispute resolution process.”
22. The principles regarding what constitutes an arbitration agreement
were summarized by this Court in Jagdish Chander (supra) in the
following terms: -
“8. …..this Court held that a clause in a contract can
be construed as an ‘arbitration agreement’ only if an
agreement to refer disputes or differences to arbitration is
expressly or impliedly spelt out from the clause. We may
at this juncture set out the well settled principles in regard
to what constitutes an arbitration agreement :
(i) The intention of the parties to enter into an
arbitration agreement shall have to be gathered
from the terms of the agreement. If the terms of the
agreement clearly indicate an intention on the part of
the parties to the agreement to refer their disputes to
a private tribunal for adjudication and a willingness
to be bound by the decision of such tribunal on such
disputes, it is arbitration agreement. While there is no
specific form of an arbitration agreement, the words
used should disclose a determination and obligation
to go to arbitration and not merely contemplate
the possibility of going for arbitration. Where there
is merely a possibility of the parties agreeing to
arbitration in future, as contrasted from an obligation
to refer disputes to arbitration, there is no valid and
binding arbitration agreement.
(ii) Even if the words ‘arbitration’ and ‘arbitral tribunal
(or arbitrator)’ are not used with reference to the
process of settlement or with reference to the private
tribunal which has to adjudicate upon the disputes, in
a clause relating to settlement of disputes, it does not
detract from the clause being an arbitration agreement
if it has the attributes or elements of an arbitration
agreement. They are : (a) The agreement should
be in writing. (b) The parties should have agreed to
refer any disputes (present or future) between them
to the decision of a private tribunal. (c) The private
[2025] 7 S.C.R. 1289

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tribunal should be empowered to adjudicate upon the
disputes in an impartial manner, giving due opportunity
to the parties to put forth their case before it. (d)
The parties should have agreed that the decision of
the private tribunal in respect of the disputes will be
binding on them.
(iii) Where the clause provides that in the event of
disputes arising between the parties, the disputes
shall be referred to arbitration, it is an arbitration
agreement. Where there is a specific and direct
expression of intent to have the disputes settled
by arbitration, it is not necessary to set out the
attributes of an arbitration agreement to make it
an arbitration agreement. But where the clause
relating to settlement of disputes, contains words
which specifically excludes any of the attributes of
an arbitration agreement or contains anything that
detracts from an arbitration agreement, it will not be
an arbitration agreement. For example, where an
agreement requires or permits an authority to decide
a claim or dispute without hearing, or requires the
authority to act in the interests of only one of the
parties, or provides that the decision of the Authority
will not be final and binding on the parties, or that if
either party is not satisfied with the decision of the
Authority, he may file a civil suit seeking relief, it
cannot be termed as an arbitration agreement.
(iv) But mere use of the word ‘arbitration’ or ‘arbitrator’
in a clause will not make it an arbitration agreement, if
it requires or contemplates a further or fresh consent
of the parties for reference to arbitration. For example,
use of words such as “parties can, if they so desire,
refer their disputes to arbitration” or “in the event of any
dispute, the parties may also agree to refer the same
to arbitration” or “if any disputes arise between the
parties, they should consider settlement by arbitration”
in a clause relating to settlement of disputes, indicate
that the clause is not intended to be an arbitration
agreement. Similarly, a clause which states that “if
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the parties so decide, the disputes shall be referred
to arbitration” or “any disputes between parties, if
they so agree, shall be referred to arbitration” is
not an arbitration agreement. Such clauses merely
indicate a desire or hope to have the disputes settled
by arbitration, or a tentative arrangement to explore
arbitration as a mode of settlement if and when a
dispute arises. Such clauses require the parties to
arrive at a further agreement to go to arbitration,
as and when the disputes arise. Any agreement or
clause in an agreement requiring or contemplating
a further consent or consensus before a reference
to arbitration, is not an arbitration agreement, but an
agreement to enter into an arbitration agreement in
future.”
(Emphasis supplied)

23. In Jagdish Chander (supra), the issue that arose for consideration
was whether paragraph 16 in the partnership agreement constituted
an arbitration agreement. Clause 16 under consideration there, is
extracted below:
“16) If during the continuance of the partnership or at
any time afterwards any dispute touching the partnership
arises between the partners, the same shall be mutually
decided by the partners or shall be referred for arbitration
if the parties so determine.”
While holding that clause 16 did not constitute an arbitration
agreement, this Court observed:
“9. Para 16 of the Partnership deed provides that if there
is any dispute touching the partnership arising between
the partners, the same shall be mutually decided by the
parties or shall be referred to arbitration if the parties so
determine. If the clause had merely said that in the event
of disputes arising between the parties, they “shall be
referred to arbitration”, it would have been an arbitration
agreement. But the use of the words “shall be referred
for arbitration if the parties so determine” completely
changes the complexion of the provision. The expression
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“determine” indicates that the parties are required to
reach a decision by application of mind. Therefore, when
clause 16 uses the words “the dispute shall be referred
for arbitration if the parties so determine”, it means that
it is not an arbitration agreement but a provision which
enables arbitration only if the parties mutually decide
after due consideration as to whether the disputes should
be referred to arbitration or not. In effect, the clause
requires the consent of parties before the disputes can be
referred to arbitration. The main attribute of an arbitration
agreement, namely, consensus ad idem to refer the
disputes to arbitration is missing in clause 16 relating to
settlement of disputes. Therefore, it is not an arbitration
agreement, as defined under section 7 of the Act. In the
absence of an arbitration agreement, the question of
exercising power under section 11 of the Act to appoint
an Arbitrator does not arise.”
(Emphasis supplied)

24. In Mahanadi Coalfields (supra), this court was required to consider
whether clause 15 constituted an arbitration agreement. Clause 15
under consideration there, is extracted below:
“15. Settlement of Disputes/Arbitration:
15.1 It is incumbent upon the contractor to avoid litigation
and disputes during the course of execution. However, if
such disputes take place between the contractor and the
department, effort shall be made first to settle the disputes
at the company level. The contractor should make request
in writing to the Engineer-in-Charge for settlement of such
disputes/claims within 30 (thirty) days of arising of the
case of dispute/claim failing which no disputes/claims of
the contractor shall be entertained by the company.
15.2 If differences still persist, the settlement of the
dispute with Govt. Agencies shall be dealt with as per
the Guidelines issued by the Ministry of Finance, Govt.
of India in this regard. In case of parties other than Govt.
Agencies, the redressal of the disputes may be sought in
the Court of Law.”
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25. Following the decision in Jagdish Chander (supra), this Court, in
Mahanadi Coalfields (supra), held that Clause 15 of the Contract
Agreement though is titled “Settlement of Disputes /Arbitration”,
the substantive part of it makes it abundantly clear that there is no
arbitration agreement between the parties to refer either present or
future dispute to arbitration.
26. What is clear from the judgment in Mahanadi Coalfields (supra) is
that mere use of the word “arbitration” or “arbitrator” in a clause will
not make it an arbitration agreement, if it requires or contemplates
a further or fresh consent of the parties for reference to arbitration.
In Jagdish Chander (supra), use of words such as “parties can,
if they so desire, refer their disputes to arbitration”, or “in the event
of any dispute, the parties may also agree to refer the same to
arbitration”, or “if any disputes arise between the parties, they should
consider settlement by arbitration”, in a clause relating to settlement
of disputes, were found not indicative of an arbitration agreement.
Similarly, a clause which states that “if the parties so decide, the
disputes shall be referred to arbitration” or “any disputes between
parties, if they so agree, shall be referred to arbitration” would not
constitute an arbitration agreement. Because such clauses merely
indicate a desire or hope to have the disputes settled by arbitration,
or a tentative arrangement to explore arbitration as a mode of
settlement if and when a dispute arises. This is so, because such
clauses require the parties to arrive at a further agreement to go to
arbitration, as and when disputes arise. Therefore, any agreement,
or clause in an agreement, requiring or contemplating a further
consent or consensus before a reference to arbitration, is not an
arbitration agreement.
27. Now, the question which arises for our consideration is whether
Clause 13 constitutes an arbitration agreement or it is just an enabling
provision for parties to agree to refer the dispute(s) for settlement
through arbitration.
28. Clause 13 in its first paragraph sets out intent to avoid litigation
and advises the contractor to make effort to settle the dispute at
the company level. Second paragraph sets out the procedure for
raising the dispute/ claim for settlement at the company level. It
provides that the contractor should make request in writing to the
Engineer-in-charge for settlement of disputes/ claims within 30 days
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of arising of the cause of dispute/ claim failing which it shall not be
entertained by the company. Thereafter, clause 13 provides for a
two-stage procedure for resolution of the dispute. In the first stage,
dispute is to be referred to Area CGM, GM. If difference persists, the
dispute is to be referred to a committee constituted by the owner. If
difference continues to persist, the second stage procedure becomes
applicable. According to which, if the dispute or difference relates
to the interpretation and application of the provisions of commercial
contracts between Central Public Sector Enterprises CPSEs /Port
Trusts inter se, or is between CPSEs and Government Departments/
Organizations (excluding disputes concerning railways, income tax,
Customs and Excise departments), such dispute or difference shall be
taken up by either party for resolution through AMRCD as mentioned
in DPE OM No.4(1)/2013-DPE (GM)/FTS -1835 dated 22-05-2018.
However, in case of parties other than Govt. Agencies, the redressal
of the dispute may be sought through arbitration as per 1996 Act.
29. The High Court opined that use of the words “may be sought through
Arbitration…” indicate that at the stage of entering the contract,
parties were not ad idem that inter se dispute shall be resolved
through arbitration, therefore the said clause would not constitute
an arbitration agreement.
30. The argument of the learned counsel for the appellant is that clause
13 provides option to the parties, which include any of one of the
parties, to seek dispute resolution through arbitration and, therefore,
it is nothing but an arbitration clause. According to him, use of the
word “may” in clause 13 does not provide choice to the parties to
agree, or not to agree, for arbitration, rather it is a choice given to
either of the parties to seek a settlement through arbitration and,
therefore, when one party exercises the option, the other party cannot
resile from the agreement. In that sense, according to him, clause
13 is an arbitration agreement.
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
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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.

Issue (iii)
33. Having decided issue (ii) in the negative, deciding issue (iii) is of
no consequence. However, we may observe that clause 32 does
not exclude resolution of disputes through arbitration agreement. It
only fixes jurisdiction and in the event of there being an arbitration
agreement could determine the juridical seat. However, since we
have held that there is no arbitration agreement between the parties,
decision of issue (iii) is of no consequence.
34. In the light of our conclusion on the issues discussed above, the
appeal fails and is, accordingly, dismissed.
35. There is no order as to costs.
36. Pending application(s), if any, shall stand disposed of.

Result of the case: Appeal Dismissed.

†
Headnotes prepared by: Ankit Gyan