Open your loan agreement and look for one small clause. It usually says the bank will appoint a "sole arbitrator" if there is ever a dispute.
Most people never read it. Shikha Ghosh did not either, until an award was passed against her in a case she never got to fight. The arbitrator was chosen by Axis Bank. The same arbitrator had handled 4,155 cases for that bank.
On 6 October 2026, the Delhi High Court said this should not happen. If you have a home loan, personal loan, business loan, credit card or even a vendor contract, this is about you.
What happened to Shikha Ghosh (and why it could happen to you)
In January 2019, Axis Bank gave Shikha Ghosh a loan of ₹16.66 lakh. After an alleged default, the bank started arbitration in January 2023. The loan agreement allowed the bank to name the arbitrator, and it did.
The arbitrator accepted the case on 6 February 2023. By 16 May he had decided to go ahead without Ghosh, and on 26 May 2023 he passed an award against her. From the bank's notice to the final award, it took about four months.
Ghosh challenged the award, but the Commercial Court threw out her petition in January 2025 as filed too late. She went to the Delhi High Court. That is where the real story came out.
The number that shocked the Delhi High Court
The High Court asked Axis Bank a simple question: how many cases has this arbitrator handled for you?
The bank's own affidavit said 4,155 cases in four to five years. It also said that around 76,000 awards have been passed across India by sole arbitrators in cases concerning Axis Bank.
The court also noted that the arbitrator's fees were paid through the lawyer representing the bank.
The bench of Justice Prathiba M. Singh and Justice Dinesh Bhatt called the 4,155 figure the "most shocking aspect" of the affidavit. They said it looked like "the tip of an iceberg."
Why a bank-picked arbitrator is a real problem for you
Arbitration is a private way of settling disputes outside regular courts. It is faster, and most loan, business and service agreements now include an arbitration clause.
It only works if the arbitrator is neutral. The court said that when the same lawyer is appointed again and again in thousands of cases by one party, that neutrality is gone. Since 2015, Indian arbitration law (Section 12(5)) has barred people with certain connections to a party from acting as arbitrator.
Axis Bank's senior counsel told the court that awards coming out of such unilateral appointments are void from the start. The court then declared Ghosh's award unenforceable against her.
The court also said that banks handle public money and cannot use methods the law does not allow to recover it. It described the result as a "double blow": the awards are void, and the bank cannot recover the money through them either.
What the High Court has ordered
- The RBI must caution all banks against unilaterally appointing arbitrators and consider whether to issue guidance to banks and financial institutions.
- Axis Bank must explain why thousands of cases went to one arbitrator and what it plans to do about the awards already passed.
- Both must file affidavits by 16 November 2026. The next hearing is on 17 November, so this is not the final word.
The bank is still free to try to recover the loan again, but it has to follow the law this time.
5 things to do before you sign your next agreement
1. Read the arbitration clause before you sign. Look for wording like "the lender shall appoint a sole arbitrator." Many loan, credit card, NBFC and business agreements have it. After this order, that kind of clause is on shakier ground.
2. Never ignore an arbitration notice. In Ghosh's case, the arbitrator proceeded without her. Replying, appearing and objecting to the appointment early matters, and ignoring the notice usually makes things worse.
3. Mind the deadlines. To challenge an award under Section 34, you generally have three months from receiving it, plus a limited extension of 30 days. Ghosh's first challenge failed because it was filed late. If you receive an award, get it checked immediately.
4. Founders should check their own contracts too. If your agreements with clients, vendors or investors say "one party appoints the arbitrator," the award can be challenged later and neither side benefits. Use a neutral process, such as a named institution or an arbitrator chosen jointly.
5. If you already have an award against you, do not assume it is final. An award from an arbitrator appointed by the other side alone may be open to challenge. It depends on your facts and timelines, so show the documents to a lawyer.
Quick answers
Is every bank arbitration award now void?
No. The court's findings are about unilateral appointments and repeat appointments of the same arbitrator. Each case depends on how the arbitrator was appointed and what links he has to the lender.
Can a bank still use arbitration to recover a loan?
Yes, but through a neutral appointment process. Banks also have other routes, such as the DRT and SARFAESI.
Does this help me if I lost an arbitration earlier?
It may, but time limits apply. Get your award and appointment papers reviewed quickly.
What is Section 12(5) of the Arbitration Act?
It disqualifies a person from being an arbitrator if they have certain connections to a party or the dispute. The parties cannot waive this by contract in advance, only by an express written agreement made after the dispute arises.
The takeaway
A contract is only as fair as the person who decides your dispute. Check who that person is before you sign, not after the notice arrives.
Case: Shikha Ghosh v. Axis Bank Ltd. & Anr., FAO (COMM) 91/2025, Delhi High Court, 6 October 2026. This article is for general information and is not legal advice for any specific situation.
About the author
Sagir Ahmad is an advocate practising at the Delhi High Court and enrolled with the Bar Council of Delhi. He holds an LLB and is the founder of Founders Legal Desk, a legal desk built for every MSME, startup and working professional who needs one place to turn for legal matters, from contracts, notices and trademarks to compliance and disputes.
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