Judges highlight massive breach of neutrality as same arbitrator appointed in over 4,000 cases; RBI urged to issue cautionary guidelines to banks
In a landmark judgment dated 30th September 2026, a Division Bench of the Delhi High Court comprising Justices Prathiba M. Singh and Dinesh Bhatt has struck down an arbitral award passed by Axis Bank due to a glaring violation of the Arbitration and Conciliation Act, 1996. The court held that the unilateral appointment of a sole arbitrator-Shri Vikrant Bhardwaj-by the bank in over 4,155 arbitration cases over a span of four to five years raises substantial and justifiable doubts regarding the arbitrator's independence and impartiality. As a result, such awards have been declared void ab initio and unenforceable.
The case arose from a loan dispute where the bank initiated arbitration against borrower Shikha Ghosh for non-repayment of a loan disbursed in 2019. The arbitral award dated 26th May 2023 was passed ex parte after the borrower disputed service of notice. The borrower filed a Section 34 petition challenging the award, but it was dismissed on limitation grounds. On appeal, the High Court directed Axis Bank to disclose details about the arbitrator's appointment and found that the same arbitrator had been appointed unilaterally in thousands of cases by the bank.
The Court noted that the mass unilateral appointments violate the statutory mandates introduced by the Arbitration and Conciliation (Amendment) Act, 2015, which impose strict criteria on the neutrality of arbitrators, especially when an arbitrator is appointed repeatedly by one party. The Fifth Schedule of the Act lists multiple grounds that give rise to justifiable doubts about an arbitrator's independence, including repeated appointments by one party within a short span.
Despite Axis Bank's claim that the arbitrator had submitted required declarations and had no direct connection with the bank, the sheer volume of appointments-over 4,000 cases-and the fact that fees were routed through the bank's legal counsel raised serious questions about impartiality. The Court observed that such practices are "wholly contrary to the statutory mandate of neutrality" and undermine the core principles of arbitration.
The Court also highlighted the larger institutional concern, revealing that approximately 76,000 arbitral awards concerning Axis Bank had been passed by similarly appointed sole arbitrators across India. It directed Axis Bank to file a detailed affidavit explaining the reasons for this practice and the future course of action regarding enforcement and recovery based on such awards.
Importantly, the Court emphasized that banks, as custodians of public money, must recover loans in accordance with law and cannot resort to unlawful means. While the arbitral awards based on unilateral appointments are void, defaulting borrowers cannot be allowed to evade repayment. Axis Bank was thus permitted to initiate fresh recovery proceedings in compliance with legal procedures.
Further, the Reserve Bank of India (RBI), acting as the sector regulator, was directed to issue cautionary advisories to banks and financial institutions to prevent such unilateral appointments and ensure adherence to arbitration laws. The RBI was also asked to file an affidavit by 16th November 2026 detailing steps taken or proposed for regulatory oversight in this matter.
The judgment reflects the Court's strict stance on preserving the neutrality and integrity of arbitration, particularly in banking disputes involving public money. It underscores the judiciary's role in checking institutional practices that compromise fairness and due process.
The appeal filed by Shikha Ghosh was allowed, and the arbitral award dated 26th May 2023 was declared unenforceable against her. The matter was listed for further hearing on 17th November 2026 to monitor compliance and the bank's affidavit.
This judgment sends a strong message to financial institutions about the necessity of impartial arbitrator appointments and may lead to wide-ranging reforms in arbitration practices across the banking sector.
Bottom Line:
Arbitration and Conciliation Act, 1996 - Unilateral appointment of sole arbitrator by bank - Same arbitrator having handled 4155 arbitrations for one bank in 4-5 years - Such repeated appointments strike at neutrality, independence and impartiality of arbitral process - Award held void ab initio and unenforceable - Bank permitted to take fresh steps for recovery in accordance with law - RBI directed to examine and caution banks/financial institutions on unilateral appointments.
Statutory provision(s):
Arbitration and Conciliation Act, 1996 Sections 12, 34, Fifth Schedule, Seventh Schedule; Arbitration and Conciliation (Amendment) Act, 2015
Shikha Ghosh v. Axis Bank Ltd., (Delhi)(DB) : Law Finder Doc Id # 2992083
