The Delhi High Court allowed a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 for appointment of a sole arbitrator in a dispute between Flemingo (DFS) Private Limited and the Airports Authority of India arising from a licence agreement for duty-free shops at Amritsar Airport. The court held that preliminary correspondence from 2017-2018 did not constitute valid invocation of arbitration under Section 21, that the limitation period commenced only upon the respondent's rejection of claims on 11.10.2021, and that the 147-day mediation period must be excluded from limitation computation, rendering the 2025 petition timely.
Background & Facts
The Dispute
The petitioner, Flemingo (DFS) Private Limited, a company engaged in operating duty-free shops at airports, entered into a Licence Agreement dated 30.09.2011 with the respondent, Airports Authority of India (AAI), a body corporate constituted under the Airports Authority of India Act, 1994. The agreement granted the petitioner the licence to develop and operate duty-free shops at Amritsar Airport for a duration of five years from 10.06.2009 to 09.06.2014. The allotted spaces comprised 66.64 square metres in the Arrival area and 46.58 square metres in the Departure area. Clause 57 of the agreement contained an arbitration clause providing for referral of disputes to a sole arbitrator on agreed terms, failing which a three-member tribunal would be constituted. The venue of arbitration was designated as New Delhi.
Key Facts
- The petitioner was awarded the licence vide Letter of Award dated 10.06.2009.
- Possession of the duty-free shops was handed over on 21.07.2009 (Arrival side) and 26.10.2009 (Departure side).
- Disputes arose concerning excess rent and concession fee charged by the respondent.
- The petitioner sent multiple correspondences raising disputes, which were summarily rejected by the respondent on 28.09.2021 and 11.10.2021.
- The term of the Licence Agreement expired, and a new Concession Agreement dated 18.04.2016 was entered into between the parties.
- The petitioner invoked arbitration vide legal notice dated 14.03.2022.
- The respondent suggested mediation under the AAI Mediation Policy, 2022, and Mrs. Manisha Nanda (Retd. Addl. Chief Secretary, Government of HP) was appointed as mediator.
- Mediation proceedings were conducted from 30.06.2023 to 23.11.2023 (147 days) and failed.
- The petitioner, apprehending encashment of bank guarantees, filed a Section 9 petition and subsequently the present Section 11(6) petition.
Procedural History
- 05.07.2017, 16.11.2017, 10.01.2018, 09.04.2018: Petitioner sent four communications to the Chairman, AAI, seeking refund of excess licence fees and incorrect annual escalation, requesting intervention and proposing arbitration only if issues remained unresolved.
- 18.10.2016: Respondent informed petitioner that its case was under consideration.
- 28.09.2021: Respondent discussed the petitioner's claims internally for the first time.
- 11.10.2021: Respondent formally rejected the petitioner's claims.
- 14.03.2022: Petitioner issued legal notice invoking arbitration under Section 21 of the 1996 Act.
- 06.02.2023: Respondent acknowledged the arbitration notice and suggested mediation under AAI Mediation Policy, 2022.
- 30.06.2023 to 23.11.2023: Mediation proceedings conducted (147 days).
- 22.02.2024: Petitioner urged respondent to appoint a sole arbitrator.
- 22.05.2025: Present petition under Section 11(6) filed (ARB.P. 853/2025).
- 13.08.2026: Judgment reserved.
- 07.09.2026: Judgment pronounced.
The Parties' Positions
The petitioner contended that the 2017-2018 communications were not notices invoking arbitration but mere requests for amicable resolution, that the cause of action arose only upon rejection of claims on 11.10.2021, that the Section 21 notice dated 14.03.2022 was valid and timely, and that the mediation period must be excluded from limitation. The respondent argued that the 2017-2018 notices were valid Section 21 invocations, that limitation expired in 2020, that the 2022 notice could not revive expired limitation, and that the MAG/concession fee claims fell outside the Licence Agreement's arbitration clause.
Relief Sought
The petitioner sought appointment of a sole arbitrator to adjudicate disputes arising from the Licence Agreement dated 30.09.2011, including claims for refund of excess licence fees, incorrect annual escalation, and excess Minimum Annual Guarantee (MAG) charges for the period 03.11.2015 to 31.03.2016.
The Legal Issue
The central questions were: (1) Whether the communications dated 05.07.2017, 16.11.2017, 10.01.2018, and 09.04.2018 constituted valid notices invoking arbitration under Section 21 of the Arbitration and Conciliation Act, 1996; (2) Whether the petition under Section 11(6) filed in 2025 was barred by limitation under Article 137 of the Limitation Act, 1963; (3) Whether the period spent in court-annexed mediation at the respondent's instance must be excluded from limitation computation; and (4) Whether the referral court can determine arbitrability of specific claims (MAG/concession fee) at the Section 11 stage.
Arguments Presented
For the Petitioner
Mr. Achint Singh Gyani submitted that the existence of a valid arbitration agreement was undisputed. The 2017-2018 communications merely sought amicable resolution and proposed arbitration only as a future contingency, not as an immediate invocation. The respondent rejected claims for the first time on 11.10.2021, making that the breaking point for limitation. The Section 21 notice dated 14.03.2022 was issued within three years of the breaking point, per Arif Azim Co. Ltd. v. Aptech Ltd. The parties then engaged in bona fide mediation from 30.06.2023 to 23.11.2023 at the respondent's suggestion, and this 147-day period must be excluded under Geo Miller & Co. (P) Ltd. v. Rajasthan Vidyut Utpadan Nigam Ltd., Shree Ram Mills Ltd. v. Utility Premises (P.) Ltd., and M/s Unisys Infosolutions Pvt. Ltd. v. Gurbani Media Pvt. Ltd. The issue of limitation on the merits is for the arbitrator under the Kompetenz-Kompetenz principle, as affirmed in Aslam Ismail Khan Deshmukh v. ASAP Fluids Private Limited and Bakhtawar Ahmad Rather v. Airport Authority of India.
For the Respondent
Mr. Digvijay Rai contended that the 2017-2018 notices were valid Section 21 invocations, making the breaking point 2017-2018 and limitation expired by 2020. The 2022 notice could not revive time-barred claims. Even treating 14.03.2022 as the first valid notice, the petition filed on 22.05.2025 exceeded the three-year period from 13.04.2022 (30 days post-notice). The respondent relied on Aslam Ismail Khan Deshmukh, Geo Miller, and M/s B and T AG v. Ministry of Defence for the principle that intervening correspondence cannot extend limitation. The MAG/concession fee claims did not arise from the Licence Agreement dated 30.09.2011, which contained no concept of concession fee, placing them outside Clause 57's scope.
The Court's Analysis
The court began by delineating the limited scope of a Section 11 referral court. Citing In Re: Interplay Between Arbitration Agreements under Arbitration, 1996 & Stamp Act, 1899 and SBI General Insurance Co Ltd. v. Krish Spinning, it held that the court's enquiry is circumscribed to: (i) prima facie existence of an arbitration agreement, and (ii) whether the Section 11(6) petition was filed within three years of the Section 21 notice. Aslam Ismail Khan Deshmukh reiterated that a detailed examination of whether claims are time-barred is improper at this stage and belongs to the arbitrator.
On the validity of the 2017-2018 notices, the court applied the test from Prasar Bharti v. Visual Technologies India Pvt. Ltd., which requires a Section 21 notice to clearly state the dispute, demand resolution per the arbitration clause, express intention to resort to arbitration if unresolved, and be sent to the respondent. The court found that the 2017-2018 communications "show that the petitioner is seeking resolution of its grievances and specifically states that in the event the grievances of the petitioner remain unresolved, the petitioner will resort to arbitration and had not invoked Arbitration at that point." They contained no quantification of demand and no rejection by the respondent. Thus, they were not valid invocations.
The breaking point was 11.10.2021, when the respondent first rejected the claims. The court distinguished Geo Miller and M/s B and T AG on facts: in those cases, claims had been culminated and decided (bills sent or claims rejected) before the invocation notices. Here, the respondent's 18.10.2016 letter stated the case was under consideration, and no decision was conveyed until 28.09.2021 (discussion) and 11.10.2021 (rejection).
The Section 21 notice dated 14.03.2022 was therefore within three years of the breaking point. The respondent's email of 06.02.2023 acknowledged this notice as a reference to arbitration and proposed mediation under the AAI Mediation Policy, 2022. Mediation proceeded from 30.06.2023 to 23.11.2023 (147 days). Following Unisys InfoSolutions, the court held this bona fide mediation period must be excluded from limitation. The three-year period from 13.04.2022 (30 days post-invocation) would expire on 12.04.2025; adding 147 days extended the deadline to 06.09.2025. The petition filed on 22.05.2025 was well within limitation.
On arbitrability of MAG/concession fee claims, the court cited Krish Spinning and Office for Alternative Architecture v. Ircon Infrastructure and Services Ltd.: the referral court's scope is limited to prima facie existence of the arbitration agreement; arbitrability of specific claims is for the arbitrator. The mediation report included both disputes without excluding the MAG claim on jurisdictional grounds. The court declined to bifurcate claims, leaving all rights and contentions open for the arbitrator.
The Verdict
The petition was allowed. The court appointed Ms. Justice Shalinder Kaur (Retd. Judge, Delhi High Court) as Sole Arbitrator to adjudicate the disputes. The arbitration will be conducted under the aegis and rules of the Delhi International Arbitration Centre (DIAC), with remuneration per DIAC (Administrative Cost and Arbitrators' Fees) Rules, 2018. The arbitrator is directed to furnish a Section 12 declaration before entering the reference. All rights and contentions of the parties, including arbitrability of claims, preliminary objections, and merits, are left open for the arbitrator. The parties are directed to approach the arbitrator within two weeks from 07.09.2026. The court's observations are only for deciding the petition and do not bind the arbitrator.
What This Means For Similar Cases
Preliminary Correspondence Does Not Trigger Limitation
Communications that seek amicable resolution and propose arbitration only as a future contingency - without quantifying demands or expressing an immediate intention to invoke the arbitral process - do not constitute valid Section 21 notices. Practitioners must ensure that invocation notices clearly and unequivocally demand arbitration as a present step, not a conditional future possibility. The breaking point for limitation is the date when the respondent definitively rejects the claims, not the date of preliminary grievance letters.
Mediation Period Excluded From Limitation Computation
Where parties engage in bona fide mediation at the instance of one party (especially pursuant to a statutory policy), the period of mediation must be excluded from the limitation period for filing a Section 11 petition. This applies even if mediation is suggested after the Section 21 notice. Lawyers should meticulously document mediation timelines and ensure the exclusion argument is raised at the referral stage.
Arbitrability Determined by Arbitrator, Not Referral Court
The referral court cannot bifurcate claims into arbitrable and non-arbitrable at the Section 11 stage. Once a prima facie arbitration agreement is found, all disputes - including those touching on the scope of the agreement itself - must be referred to the arbitrator. This reinforces party autonomy and the Kompetenz-Kompetenz principle. Practitioners should resist attempts to have courts pre-judge arbitrability and instead argue for referral of all contested issues.
