AnantLaw secures key win in arbitration proceedings against Kotak Mahindra

Delhi International Arbitration Centre (DIAC) has allowed an application under section 16 of the Arbitration Act dismissing the arbitration petition filed by Kotak Mahindra Prime Ltd. on the ground that the tribunal lacked jurisdiction to proceed, as the claims were barred by limitation.

The tribunal found that Kotak's notice under section 21 of the Arbitration Act was issued more than 8 years after the cause of action arose, and that Kotak had failed to plead the exclusion of time under section 14 of the Limitation Act.

The dispute had a protracted procedural history before reaching DIAC including 3 rounds of section 11 proceedings before the Delhi High Court. Kotak's first two section 11 petitions were either withdrawn or dismissed for failing to meet statutory requirements, though liberty was granted each time to proceed in accordance with law. Before initiating the third section 11 petition, Kotak finally served a section 21 notice and sought appointment of an arbitrator.

The Delhi High Court, while recording that "jurisdictional objections raised by the respondents be decided at the outset by the learned sole arbitrator before adjudication of the disputes on merits," appointed a sole arbitrator and referred the matter to DIAC.

Before DIAC, the respondents filed an application under section 16 seeking rejection of Kotak's claims on the grounds that section 21 notice is a mandatory precondition for the commencement of arbitral proceedings; the limitation period for issuing such a notice is 3 years and claims beyond this period are deadwood and cannot be revived; and any exclusion under section 14 of the Limitation Act must be specifically pleaded and established.

Kotak argued that the entire period from 2016 to 2024, spent in the prior arbitration and execution proceedings, ought to be excluded under section 14 of the Limitation Act.

The arbitral tribunal rejected Kotak's arguments on three independent grounds: Kotak failed to plead section 14 or its necessary ingredients in the Statement of Claim; Kotak initiated the 2016 arbitration without serving a section 21 notice, a fundamental statutory requirement; and Kotak continued with execution proceedings before a court lacking jurisdiction even after the respondents raised clear objections in August 2023 citing settled law on the invalidity of unilaterally appointed arbitrators.

The arbitral tribunal allowed the section 16 application, holding that it lacked jurisdiction to proceed as the claims were found to be barred by limitation.

Ms. Anu Monga, partner at AnantLaw, argued the matter before DIAC.