A clause making arbitration subject to future mutual agreement is not a binding arbitration agreement.

The parties entered into a Call Centre Services Agreement dated 9 December 2021, which provided for mutual resolution of disputes and stated that, if unresolved within 30 days, a dispute would “if mutually agreed upon by the parties” be submitted to arbitration.

The clause also provided for a mutually appointed sole arbitrator and specified the governing law, place, and language of arbitration.

After disputes arose, the petitioner issued a notice invoking arbitration under Section 21 of the Arbitration and Conciliation Act, 1996.

The respondent rejected the proposal to arbitrate, and the petitioner applied to the High Court under Section 11(6) for appointment of an arbitrator.

1. Whether the stipulation that the dispute would be submitted to arbitration “if mutually agreed upon by the parties” constitutes a valid and binding arbitration agreement under Section 7 of the Arbitration and Conciliation Act, 1996.

Section 7 of the Arbitration and Conciliation Act, 1996 requires an agreement by the parties to submit disputes to arbitration.

Under Jagdish Chander v. Ramesh Chander [(2007) 5 SCC 719], an arbitration agreement must disclose a present determination and obligation to arbitrate; a clause requiring further consent after a dispute arises is only an agreement to enter into an arbitration agreement in the future.

This principle was reiterated in Mahanadi Coalfields Ltd. v. IVRCL AMR Joint Venture [(2022) 20 SCC 636], BGM and M-RPL-JMCT (JV) v. Eastern Coalfields Ltd. [2025 INSC 874], and Nagreeka Indcon Products Pvt. Ltd. v. Cargocare Logistics (India) Pvt. Ltd. [2026 SCC OnLine SC 630].

Although no prescribed form is required, the clause must manifest a binding intention to arbitrate; the Court cannot impose an obligation the parties did not undertake.

The Court read the clause as establishing two stages: an initial 30-day period for mutual resolution, followed by arbitration only if the parties mutually agreed to submit the dispute.

The words “if mutually agreed upon by the parties” qualified the submission itself, not merely the appointment of the arbitrator, and could not be disregarded or rewritten.

The provisions specifying a sole arbitrator, a final and binding award, governing law, place, and language set out the framework for a possible arbitration but did not remove the requirement for further mutual consent.

As no subsequent agreement to arbitrate was established, the unilateral invocation could not create a binding arbitration agreement.

The Court therefore held that the clause did not satisfy Section 7, notwithstanding the limited scope of the Section 11 referral inquiry.

In the absence of an arbitration agreement, the Court declined to appoint an arbitrator and dismissed the Section 11(6) petition.