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Informist, Tuesday, Oct. 6, 2026

 

NEW DELHI – The Delhi High Court has asked the Reserve Bank of India to caution all banks on unilateral appointment of arbitrators by banks and consider remedial measures for the same. The court has pulled up Axis Bank Ltd. for unilaterally appointing Vikrant Bhardwaj, who had acted as an arbitrator in a "whopping" 4,155 cases. Banks, being the custodians of public money, cannot avail remedies which are contrary to the law to recover loans, the court said.

 

The court asked Axis Bank to give reasons as to why thousands of arbitration cases were being given to the same arbitrator. The lender shall also file an affidavit as to what is the future course of action that the bank wishes to adopt in respect of such arbitral awards which have been passed by unilaterally appointed arbitrators, including enforcement of such awards and steps taken for recovery of loan amounts, the court said. 

 

There can be no doubt that the defaulting borrowers also cannot be allowed to go scot-free, the court said. Notwithstanding the public interest in recovery of the loans, the route adopted by Axis Bank, which is in complete lack of adherence to statutory provisions, has come as a double blow to it, the court said. On the one hand, arbitral awards which are passed in unilateral appointments are void and unenforceable, while on the other hand, Axis Bank's hands are tied as it cannot enforce such awards or recover such monies, the court said.

 

The bench of Justice Prathiba M. Singh and Justice Dinesh Bhatt said Axis Bank is totally in a fix as to how to recover the monies or even invoke fresh arbitration. A solution would need to be carved at an institutional level in a centralised manner by Axis Bank, failing which substantial amounts of public money will go unrecovered and a significant number of awards would be rendered void and unenforceable, it said. 

 

The high court noted that of the 4,155 cases where Bhardwaj was an arbitrator, in almost 65% of the arbitral awards, settlements have been effected. Further, in about 1,264 cases, no execution petition has been filed by Axis Bank and no fresh arbitral appointment has also been made, it noted. From 2023, no unilateral appointment has been made by Axis Bank and there are a total of 76,000 awards which have been passed by such sole arbitrators across India concerning the bank, the court noted.

 

The clear impression that the court gathers from the data is that this is nothing but the "tip of an iceberg", the bench said. Arbitrators who were appointed in thousands of matters like this without filing proper declarations cannot be said to be independent and impartial arbitrators, the court said. Even judging by the unamended Section 12(1) of the Arbitration and Conciliation Act, 1996, handling thousands of arbitrations by the very same arbitrator appointed by one single party would give rise to justifiable doubts as to independence and impartiality, the court said. Clearly, such lawyers who are appointed as arbitrators cannot be considered as lacking bias, it said. Repeated appointments of the same arbitrators in thousands of cases goes against the core of neutrality, which is at the soul of any arbitral process, it added.

 

Under the 1996 Act, there are 34 grounds which would give rise to a justifiable doubt regarding the independence or impartiality of the arbitrator. One of the grounds is the arbitrator's previous services for one of the parties or other involvement in the case. 

 

The high court noted the stand of Axis Bank that the arbitral award against Shikha Ghosh is "void ab initio", which means invalid from the start. Therefore, it is declared that the arbitral award in 2023 ruling in favour of the bank is unenforceable as there was unilateral appointment of the arbitrator by the bank and the arbitrator had presided over a bunch of bank's arbitration cases already. In respect of recovery of the loan disbursed to Ghosh, Axis Bank is free to take steps afresh, in accordance with law, if so permissible, it said.

 

The case has its genesis from Ghosh availing a loan of INR 1.7 million from Axis Bank in January 2019. The loan was allegedly not repaid and accordingly, the bank initiated arbitration proceedings and appointed Bhardwaj as the sole arbitrator.

 

Tuesday, shares of Axis Bank ended at INR 1,248 apiece on the National Stock Exchange, up 2.1% from Monday.  End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Surya Tripathi

Edited by Shubhayan Bhattacharya

 

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