Delhi High Court Asks RBI To Caution Banks After Axis Bank's Unilaterally Appointed Arbitrator Handles 4,155 Cases

The Delhi High Court has directed the Reserve Bank of India to caution banks against unilateral appointments of arbitrators and consider remedial measures or guidance for banks and financial institutions on the issue.

The direction came after the Court was informed that an arbitrator appointed by Axis Bank had handled 4,155 arbitrations concerning the Bank over four to five years. The Bank also informed the Court that around 76,000 awards had been passed pan-India by such sole arbitrators concerning Axis Bank.

A Division Bench of Justice Prathiba M. Singh and Justice Dinesh Bhatt said Bhardwaj's handling of 4,155 cases was the “most shocking aspect” emerging from Axis Bank's affidavit.

“The most shocking aspect uncovered from the affidavit of the Respondent Bank is that in a span of four to five years the said Arbitrator - Shri Vikrant Bhardwaj has acted as an arbitrator in a whopping 4155 cases concerning the Respondent Bank.”

The dispute arose from a ₹16.66 lakh loan disbursed by Axis Bank to Shikha Ghosh in January 2019. After the alleged default, the Bank initiated arbitration after communicating this to Ghosh on January 18, 2023.

Bhardwaj accepted the reference on February 6, 2023, and proceeded ex parte against Ghosh on May 16. He passed the arbitral award on May 26, 2023.

Ghosh challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996. The Commercial Court dismissed her petition as time-barred on January 30, 2025, following which she approached the High Court.

During the appeal, the High Court sought information from Axis Bank about Bhardwaj's connection with the Bank and the number of arbitrations he had handled for it.

The Bank said Bhardwaj had no relationship with it of the kind contemplated under the Seventh Schedule to the Arbitration and Conciliation Act. It disclosed that he had conducted 4,155 arbitrations for the Bank over four to five years.

The Court also noted that Bhardwaj's fees had been paid through the lawyer representing Axis Bank. It further recorded that unilateral appointments by the Bank had continued until 2023, despite the 2015 amendments to the arbitration law.

Axis Bank's senior counsel Dayan Krishnan conceded that arbitral awards arising from unilateral appointments by the Bank were void ab initio in view of the requirement of neutrality in arbitration.

Of the 4,155 cases handled by Bhardwaj, settlements had been reached in almost 65%, or around 2,700 cases. In about 1,264 cases, no execution petition had been filed and no fresh arbitral appointment had been made.

The Bank further informed the Court that around 76,000 awards had been passed pan-India by such sole arbitrators concerning Axis Bank.

Reacting to the disclosures, the Court observed:

“The clear impression that the Court gathers from the above is that this is nothing but the tip of an iceberg.”

The Court then held that arbitrators appointed in thousands of matters without filing proper declarations could not be said to be independent and impartial. It observed:

“Clearly, such lawyers who are appointed as arbitrators cannot be considered as lacking bias. 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 noted.

The Bench directed Axis Bank to explain why thousands of arbitration cases had been assigned to the same arbitrator. It also sought details of the Bank's future course regarding awards passed through unilateral appointments, including enforcement and recovery of loan amounts.

The Court observed that banks, as custodians of public money, could not avail remedies contrary to law to recover loans. It said the route adopted by Axis Bank had resulted in a “double blow”: awards arising from unilateral appointments were void and unenforceable, while the Bank could not enforce those awards or recover the amounts.

The Court observed, “A solution would need to be carved at an institutional level in a centralised manner by the Respondent Bank failing which substantial amounts of public money will go unrecovered and a significant number of awards would be rendered void and unenforceable.”

The RBI, as a sector regulator, was directed to caution all banks on unilateral appointments and consider whether remedial measures or guidance were required for banks and financial institutions.

Coming to Ghosh's case, the Court noted Axis Bank's stance that the award was void ab initio. It therefore declared the May 26, 2023 award unenforceable against her.

The Bank was left free to take fresh steps to recover the loan in accordance with law, if permissible.

Axis Bank and RBI must file affidavits by November 16, 2026. The matter is listed for November 17 and will remain part-heard.

For the Appellant: Advocates Vishal Gupta, Ratneswar Das, Barnali Deka Das and Swati Singh.

For Axis Bank Ltd.: Senior Advocate Dayan Krishnan with Advocate Sanjay Kumar.

For Reserve Bank of India: Senior Advocate Ramesh Babu with Advocate Manisha Singh.