Bona fide mediation periods must be excluded when computing limitation for Section 11 arbitration petitions.

The petitioner was granted a licence by the Airports Authority of India (“AAI”) to develop and operate duty-free shops at Amritsar Airport under a Licence Agreement dated 30 September 2011, valid from 10 June 2009 to 9 June 2014. The Agreement contained an arbitration clause, Clause 57, providing for reference of disputes to arbitration.

Disputes arose concerning excess licence fees, incorrect annual escalation and Minimum Annual Guarantee (“MAG”)/concession charges. The petitioner sent several communications between 2017 and 2020 seeking resolution and stating that the disputes would be referred to arbitration if unresolved. The Court held that these communications were conditional requests for amicable resolution and did not constitute valid notices invoking arbitration.

AAI discussed the claims on 28 September 2021 and rejected them on 11 October 2021. The petitioner thereafter issued a notice invoking arbitration on 14 March 2022. AAI suggested mediation under the AAI Mediation Policy, 2022, and the parties participated in mediation from 30 June 2023 to 23 November 2023, which ultimately failed.

As AAI failed to appoint an arbitrator, the petitioner filed the present petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 (“1996 Act”). AAI opposed the petition, contending that the claims and the Section 11 petition were barred by limitation and that the MAG/concession-fee dispute fell outside the Licence Agreement.

Whether the petitioner’s 2017–2018 communications constituted valid notices invoking arbitration, thereby rendering the Section 11 petition time-barred?

Whether the Section 11(6) petition was filed within the prescribed limitation period under Article 137 of the Limitation Act, 1963?

Whether the dispute concerning MAG/concession charges was outside the scope of the arbitration clause in the Licence Agreement?

Whether the Court, at the referral stage under Section 11, could adjudicate the limitation and arbitrability of the underlying claims?

The Court applied Section 11 of the 1996 Act, under which the referral court’s enquiry is confined principally to the prima facie existence of a valid arbitration agreement.

Relying on In Re: Interplay Between Arbitration Agreements under the Arbitration and Conciliation Act, 1996 and the Indian Stamp Act, 1899, SBI General Insurance Co. Ltd. v. Krish Spinning and Aslam Ismail Khan Deshmukh v. ASAP Fluids (P) Ltd., the Court held that the Section 11 court may examine whether the Section 11 petition itself is filed within the three-year period prescribed by Article 137 of the Limitation Act, 1963, but should ordinarily leave the limitation of the substantive claims and their arbitrability to the arbitral tribunal.

A valid Section 21 notice must identify the dispute, demand resolution under the arbitration clause and clearly express the intention to commence arbitration if the dispute is not resolved, as stated in Prasar Bharti v. Visual Technologies India Pvt. Ltd.

The Court further relied on Arif Azim Co. Ltd. v. Aptech Ltd. for the principle that arbitration must be invoked within three years of the cause of action or “breaking point,” and on Unisys Infosolutions Pvt. Ltd. v. Gurbani Media Pvt. Ltd. for excluding the period spent in bona fide settlement negotiations from computation of limitation.

Under the kompetenz-kompetenz principle, questions concerning the limitation of claims and arbitrability were left to the arbitrator.

The Court held that the 2017–2018 communications merely sought amicable resolution and stated that arbitration might be invoked if those efforts failed; they did not clearly invoke arbitration under Section 21 because they were conditional and lacked a concluded demand for commencement of arbitral proceedings.

The relevant breaking point was therefore AAI’s rejection of the claims on 11 October 2021, after which the petitioner issued its arbitration notice on 14 March 2022, within three years.

For the Section 11 limitation period, the Court calculated that the period commenced after expiry of 30 days from the arbitration notice, namely on 13 April 2022, and would ordinarily expire on 12 April 2025. However, the parties’ bona fide mediation from 30 June 2023 to 23 November 2023, covering 147 days, was excluded. The Court consequently found the petition to be within limitation.

As to MAG/concession charges, the Court noted that the dispute appeared in the arbitration notice, AAI’s response and the mediation report. Whether such charges arose under the Licence Agreement required examination of the Agreement, the parties’ conduct and evidence, and therefore could not be conclusively decided under Section 11.

The petition was allowed and Ms. Justice Shalinder Kaur (Retd.), former Judge of the Delhi High Court, was appointed as the Sole Arbitrator. The arbitration was directed to be conducted under the aegis and rules of the Delhi International Arbitration Centre, with fees governed by the DIAC Rules, 2018. The arbitrator was directed to furnish the declaration required under Section 12 of the 1996 Act, and all rights and contentions, including preliminary objections, arbitrability, claims, counterclaims and merits, were expressly kept open.