HC Holds: The use of word ‘May’ in the arbitration clause denotes discretion and is typically non binding, Read Judgment

Arbitration and Conciliation Act, 1996.png

05 May 2025

By : Prerna Pahwa

Recently, the single judge bench of the Calcutta High Court held that the use of the expression “may” in the clause clearly indicates that the parties had not decided to refer their disputes to arbitration, but had kept an option open that in case of disputes not being settled, the parties would have an opportunity to approach an arbitrator for adjudication of the disputes. This is not a binding arbitration clause. The use of word ‘may’ denotes a discretion and is typically non-binding.

Brief facts:

The factual matrix of the case is that the lease deed was entered into between the predecessor of the respondent (husband) and the petitioner. The lease had come to an end on August 15, 2022, the respondent allegedly started to create disturbance and wanted to evict the petitioner. The lease deed contains a renewal clause and the Petitioner invoked the renewal clause. However, the Respondent denied the right of renewal. Therefore, dispute arose. The lease deed also contained an arbitration clause and the Petitioner invoked an arbitration clause.

Observations of the court:

The Hon’ble Court observed that the arbitration clause provides that the lessor will be bound to renew the lease for subsequent periods of the same tenure, if such option is exercised by the lessee, and the rent and terms otherwise shall be mutually agreed upon. In case of failure to agree upon the same, it may be decided by an arbitrator to be appointed by the parties.

The court furthermore observed that the use of the expression “may” indicates that the parties had agreed that, in future, the parties may approach the arbitrator for the settlement of disputes. The use of the expression “may” is a possibility and not a binding agreement. The meeting of minds of the parties to refer such a dispute to arbitration is not available from the clause itself. Not only must an arbitration clause indicate that the parties had agreed that they ‘shall’ refer the disputes to arbitration, but the clause should also indicate that the parties agreed to refer the dispute to a private tribunal and would be bound by the decision of the said Tribunal.

The court noted that the use of word ‘may’ denotes a discretion and is typically non-binding.

The court relied upon the judgments titled Wellington Associates Ltd vs. Kirit Mehta (2000), Jagdish Chander vs. Ramesh Chander and Ors. (2007), GTL Infrastructure Ltd. vs. Vodafone India Ltd. (VIL) (2021), and M/S Linde Heavy Truck Division Ltd vs. Container Corporation of India Ltd & Anr (2012).