You may have connection pool issue - what is your pega version? Check this link (specifically the dynamic system settings there: https://docs-previous.pega.com/troubleshooting-soap-connection-errors-many-tcp-sockets-closewait-state-red-hat-enterprise-linux)

Caused by: com.pega.apache.commons.httpclient.ConnectionPoolTimeoutException: Timeout waiting for connection
	at com.pega.apache.commons.httpclient.MultiThreadedHttpConnectionManager.doGetConnection(MultiThreadedHttpConnectionManager.java:491)
	at com.pega.apache.commons.httpclient.MultiThreadedHttpConnectionManager.getConnectionWithTimeout(MultiThreadedHttpConnectionManager.java:395)
	at com.pega.apache.commons.httpclient.HttpMethodDirector.executeMethod(HttpMethodDirector.java:153)
	at com.pega.apache.commons.httpclient.HttpClient.executeMethod(HttpClient.java:397)

We are using PEGA 7.2. I had referred to the link also. But not sure if this is the root cause for this issue or not.

We don't have any explicit limit set in the form of DSS. it should be taking the default value.

I check the INIT step in InvokeAxis2 activity and found that

  int maxHostConnections = 100;
                        String maxHostConnectionString = tools
                                .getSystemSettings().getDynamic(
                                        "Pega-IntegrationEngine",
                                        "Axis2_Max_HostConnections");

                        oLog.infoForced("------------"
                                + maxHostConnectionString + "-------");

                        if (maxHostConnectionString != null) {
                            try {
                                maxHostConnections = java.lang.Integer
                                        .parseInt(maxHostConnectionString);
                            } catch (NumberFormatException nfe) {
                                //Ignore them as the default value is already set.
                            }
                        }

So if we don't have any explicit DSS set then it should take the default value i.e. 100.

This is as per my understanding. Any thoughts?

Please add the debug logger for the InvokeAxis2 activity and attach the log.