Shikha Ghosh v. Axis Bank Ltd. & Anr.
An arbitrator appointed repeatedly by one bank in thousands of cases lacks the neutrality required, so awards from such unilateral appointments are void and unenforceable, and the sector regulator can be asked to issue guidance to regulated entities.
By CA Nikhil Gupta · Reviewed against the retained judgment 2026-10-15
A borrower said she never knew of the arbitration in which an award for a ₹16.67 lakh loan was passed ex parte, and the Commercial Court had dismissed her section 34 petition as time-barred. On the bank's own affidavit that the arbitrator handled 4,155 cases for it, the Delhi High Court held that the bank conceded the award was void, declared it unenforceable, and called for affidavits from the bank and the RBI.
What happened
Axis Bank disbursed a loan of ₹16,66,795 to the appellant in January 2019 and, after an alleged default, began arbitration, saying that it had communicated this to her on 18 January 2023, which she disputes. The sole arbitrator accepted the reference on 6 February 2023, the matter proceeded ex parte by order of 16 May 2023, and he made an award on 26 May 2023. The appellant says that she first learnt of the proceedings when she received a copy of the award on 2 June 2023, and filed a petition under section 34, which the District Judge (Commercial Court), Tis Hazari dismissed on 30 January 2025 as time-barred. The appeal was referred to mediation on 5 August 2025 without result. On 3 September 2026 the Court asked the bank to say whether there was proof of service, whether the arbitrator was connected with it, how many arbitrations he handled for it and whether he gave declarations under the Sixth and Seventh Schedules. The bank's affidavit showed no proof of service other than what the award records, that the arbitrator was paid his fees through the bank's lawyer, and that he acted as arbitrator in 4,155 cases concerning the bank in four to five years.
Questions before the court
- Is an award passed by an arbitrator appointed unilaterally by the bank, who sat in thousands of the bank's cases, enforceable against the borrower?
Why the court ruled this way
The Court said that the Fifth Schedule lists 34 circumstances that give rise to justifiable doubts as to independence and impartiality, including that the arbitrator has been appointed on two or more occasions by a party within three years and serves in another arbitration on a related issue involving a party, and that handling thousands of arbitrations in which the same single party appoints him gives rise to justifiable doubts even under the unamended section 12(1) (paragraphs 14–15 and 22). The bank conceded that awards made where it had unilaterally appointed arbitrators are void ab initio, in view of Perkins Eastman Architects v. HSCC (India) and Central Organisation for Railway Electrification v. ECI SPIC SMO MCML (JV), and the Court had set aside similar awards in other cases (paragraphs 17–18). In about 65% of the 4,155 cases settlements had been effected, in 1,264 cases no execution petition or fresh appointment had been made, the bank said that no unilateral appointment had been made after 2023, and it spoke of 76,000 awards by such sole arbitrators concerning it across India; the Court took this to be the tip of an iceberg, and said a solution needs to be carved out centrally to avoid public money going unrecovered and many awards being void (paragraphs 19–21 and 27). Banks, as custodians of public money, cannot use remedies contrary to law to recover loans, though defaulting borrowers cannot go scot-free (paragraph 25).
Controlling point
Repeated unilateral appointment of the same arbitrator by one lender in thousands of cases offends the neutrality required of arbitration, so the resulting awards are void and unenforceable, and the regulator can be called upon to issue guidance.
Order and next steps
The award of 26 May 2023 was declared unenforceable against the appellant and the appeal succeeded. The bank must file a fresh affidavit by 16 November 2026 giving reasons why thousands of cases went to the same arbitrator and stating its future course on such awards, including enforcement and recovery. The Reserve Bank of India, on notice, is to caution banks and file its affidavit by that date. The bank is free to take fresh steps to recover the loan in accordance with law if permissible. The matter was listed on 17 November 2026 and treated as part-heard.
Practical implications
Lenders that used an arbitrator appointed by them under a loan agreement should review their pending awards and enforcement, and a borrower served with an award passed ex parte should check how the arbitrator was appointed and whether declarations were given.
Limits of this ruling
- The Court declared the award unenforceable on the bank's own stand that it was void and left the questions of service and limitation undecided; the directions to the bank and the RBI are continuing, and the Court did not decide the status of the other awards.
Law and judgment source
- Arbitration and Conciliation Act, 1996, sections 12 and 34 and the Fifth, Sixth and Seventh Schedules
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Source checked: 2026-10-15 · Judgment paragraphs: paragraphs 13–35 · Later case history: not verified. Verify appeals, stays and subsequent orders before reliance.
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