Delhi HC: Unilateral Appointment of Arbitrator Invalid, but Fresh Arbitration Invocable
- rit arora
- 7 hours ago
- 3 min read
By Lex Horizon
In Capri Global Capital Limited v. Ms. Kiran (ARB.P. 870/2023), the Delhi High Court once again clarified the limited scope of judicial scrutiny in a petition under Section 11 of the Arbitration and Conciliation Act, 1996. Hon'ble Justice Anup Jairam Bhambhani addressed objections relating to alleged faulty invocation, limitation, and the effect of a previously set-aside arbitral award before ultimately appointing a sole arbitrator.
Background of the Case
The dispute arose from a Facility Agreement executed in 2017. After the borrower defaulted, the lender—Capri Global Capital Ltd.—invoked arbitration in 2019. That round of proceedings ended in an ex parte award, which was later set aside by the District Judge, Saket, on the ground that the arbitrator had been unilaterally appointed by the lender—an appointment rendered invalid after the Supreme Court’s landmark ruling in Perkins Eastman Architects DPC v. HSCC (India) Ltd.
Following the setting-aside, the lender issued a fresh invocation notice (01.03.2023) seeking appointment of a sole arbitrator and filed the present Section 11 petition.
Respondent’s Objections
The respondent raised two core objections:
1. The first invocation (2019) was defective
It was argued that because the first invocation did not set out the claims, it was not a valid notice under Section 21, and hence the 2023 notice was barred by limitation.
2. The claim is time-barred
The respondent contended that once the first invocation failed, the second invocation in 2023 was outside the limitation period.
Court’s Findings
1. Fresh Invocation Notice Was Valid
The Court held that the second invocation notice did set out the outstanding amount (Rs. 6,13,562) and expressly invoked arbitration. Therefore, the objection about improper invocation was rejected.
2. Section 43(4) Saves Limitation When an Award Is Set Aside
A crucial aspect of the judgment is the Court’s reliance on Section 43(4), which states that:
When an arbitral award is set aside, the time between commencement of the arbitration and the date of setting-aside shall be excluded for computing limitation.
Thus, even if the first invocation was faulty, the period spent in the earlier arbitration proceedings must be excluded. This significantly weakened the respondent’s limitation objection.
3. Limitation Issues Are for the Arbitrator, Not the Court
The Court reaffirmed the principle laid down in Bharat Sanchar Nigam LTD. & Anr. vs. Nortel Networks India Pvt. Ltd., (2021) 5 SCC 738 that:
If there is any doubt about limitation, the matter should be referred to arbitration and the arbitral tribunal must examine the issue in detail.
Therefore, the Court refused to hold that the claims were “deadwood” at the pre-appointment stage.
4. Valid Arbitration Agreement + Territorial Jurisdiction Found
The Court confirmed:
There is a valid arbitration clause (Clauses 13.14 & 13.15).
The Court has territorial jurisdiction because the clause permitted proceedings in Delhi or Mumbai at the lender’s election.
Key Takeaways
1. Fresh arbitration after a set-aside award is absolutely valid
Section 43(4) ensures that parties are not prejudiced by the time spent in the earlier invalid proceedings.
2. Allegations of “faulty invocation” do not automatically bar a fresh Section 11 petition
If the second invocation is proper, the petition is maintainable.
3. Courts must minimally interfere at the Section 11 stage
Unless claims appear ex facie time-barred, the arbitrator—not the Court—must adjudicate limitation.
4. Unilateral appointment is invalid after Perkins Eastman
But this does not prevent the party from initiating fresh proceedings with a valid process.
Conclusion
This decision reinforces the pro-arbitration approach of Indian courts, emphasizing that:
Technical objections should not derail arbitration.
Limitation questions are best left to the arbitral tribunal.
Setting aside an award does not extinguish the right to arbitrate through a proper appointment process
The ruling is a helpful guide for lenders, borrowers, and arbitration practitioners dealing with re-invocation after an award has been annulled.
Find the judgment here
