By Deepika Kinhal | CORD
In arbitrations involving loan default disputes, a well-designed process is a must. While lenders face pressure to recover dues across a large number of claims, often involving relatively modest amounts, borrowers may have fewer resources and less familiarity with the proceedings. The parties therefore approach the process from different positions of experience and influence. The need for timely and cost-effective resolution has made arbitration a practical option, while difficulties securing participation make careful process design particularly important.
Against this backdrop, both lenders and borrowers share an interest in resolving disputes fairly and moving forward with certainty. Independent appointments and a fair opportunity for each side to present its case give both parties confidence in the proceedings and the outcome.
The Delhi High Court’s decision in Shikha Ghosh v. Axis Bank Ltd. & Anr., dated 30 September 2026, and the RBI’s subsequent communication to banks and NBFCs on 12 November 2026 offer an opportunity to consider how the financial services sector can strengthen these foundations. For CORD, these developments reinforce the value of safeguards already built into its approach and the importance of applying them consistently as arbitration involving loan disputes grows.
The Court’s Findings on Appointment and Notice
The case arose from a dispute over repayment of a loan of approximately ₹16.67 lakh, which the Bank referred to arbitration. The borrower disputed receiving notice of the commencement of arbitration or the subsequent proceedings. The arbitration proceeded in her absence, resulting in an award against her in May 2023. After the Commercial Court dismissed her challenge, she appealed to the Delhi High Court.
The High Court examined both the evidence of notice and the arbitrator’s appointment. The Bank maintained that service was sufficient, relying on the award’s record that notices had been sent to her last-known address. On reviewing the Bank’s affidavit, however, the Court observed that there was no proof of service beyond what the arbitrator had recorded in the award. This highlights the importance of maintaining evidence that supports a finding of sufficient service, particularly when proceedings continue in a party’s absence.
The Bank also disclosed that the same arbitrator had handled 4,155 matters concerning it over four to five years. Although the Bank denied any relationship of the kind contemplated by the Seventh Schedule, the Court held that thousands of appointments by a single party would give rise to justifiable doubts about the arbitrator’s independence and impartiality. It emphasised that repeated appointments on this scale went against the neutrality at the core of arbitration.
The Court also referred to precedents rejecting unilateral appointments by an interested party because they compromise arbitral neutrality. Following the Bank’s concession that such awards were invalid from the outset, it declared the award against Shikha Ghosh unenforceable, while leaving the Bank free to pursue fresh recovery steps if permitted by law.
The RBI’s Response: Action Across Banks and NBFCs
The proceedings also revealed a wider issue. The Bank informed the Court that approximately 76,000 awards concerning it across India had been made by unilaterally appointed sole arbitrators, while stating that it had discontinued the practice from 2023. The Court directed the RBI to caution banks about such appointments so that the need for remedial measures could be examined and appropriate guidance issued.
Following these directions, the RBI issued a communication on 12 November 2026 to all banks and NBFCs. It advised them to ensure that arbitrator appointments comply with the Arbitration and Conciliation Act, 1996 and applicable judicial pronouncements governing independence, impartiality and neutrality. The communication also drew attention to the Court’s call to examine remedial measures, bringing both past appointment practices and future compliance into focus.
The RBI’s response extends the significance of the case across the financial services sector, encouraging stronger appointment practices that support fair proceedings and reliable outcomes.
Building Confidence in Arbitrator Appointments
An arbitrator’s independence is central to the credibility of the decision. Institutional arbitration can build this confidence through clear appointment procedures and checks for potential conflicts of interest. Its value, however, depends on how those procedures operate in practice. An institution must exercise independent judgment even where one party brings a substantial number of disputes.
At CORD, these safeguards begin with the criteria for joining the panel of arbitrators, which are vetted by the Appointments Council. This establishes a framework for assessing who is qualified and suitable to take on disputes. At the appointment stage, conflict checks help identify relationships or circumstances that could affect an arbitrator’s independence or impartiality, alongside safeguards for confidentiality.
CORD also reviews an arbitrator’s previous appointments, including how often they have been appointed in disputes involving the same party. This helps identify concerns about independence or impartiality under the Fifth Schedule. The broader conflict review also checks for relationships that would make an arbitrator ineligible under the Seventh Schedule.
For lenders and borrowers, this means knowing that whoever brings the claim, the arbitrator is chosen through an independent process. Both parties can approach the proceedings with confidence that their case will be considered on its merits by someone whose role is to decide fairly between them.
Making Notice Clear and Reliable
Confidence in the appointment process must be matched by a fair opportunity to participate. Clear notices help both parties understand what requires a response, how to respond and when it is due. CORD’s platform sends notices through multiple communication channels to help parties receive information about the proceedings and understand what they need to do next.
Every dispatch and delivery status is tracked and recorded. This makes unsuccessful delivery attempts visible and allows problems to be followed up. Where a party does not participate, the tribunal has a documented record to assess whether notice requirements have been met and decide how proceedings should continue under the applicable law and rules.
This is the practical value of combining institutional administration with a digital-first approach. Even across large volumes of financial disputes, communication records remain available for review in each case. Both parties benefit from a clear record of the steps taken to notify them and give them an opportunity to participate.
A Digital-First Approach to Loan Disputes
As arbitration in this sector develops, institutions have an opportunity to broaden how they assess performance. Time taken and cases concluded are useful measures, but they tell only part of the story. Growth must be supported by a process that preserves arbitrator independence and gives both parties a fair opportunity to be heard.
The volume and geographic reach of financial disputes make a digital-first approach essential to achieving this consistently. This means designing the process around digital access, from filing and exchanging documents to participating in hearings and receiving the award. It allows institutional safeguards to operate across thousands of cases while making participation practical for parties wherever they are located.
For CORD, institutional arbitration and digital administration therefore belong together. Independent oversight protects the integrity of the process, while a digital-first approach allows it to serve growing numbers of parties. This is the way forward where greater capacity is built on a dependable process that lenders and borrowers can trust.
This article is for general information only and does not constitute legal or financial advice.
References
- Shikha Ghosh v. Axis Bank Ltd. & Anr., FAO (COMM) 91/2025 & CM APPL. 20542/2025, Delhi High Court.
- Reserve Bank of India, Appointment of Arbitrators for Resolution of Disputes, communication No. DoR.CO.BCG(MCS).No.S6464/01.01.008/2026-27, dated 12 November 2026.
- Arbitration and Conciliation Act, 1996, ss 3, 12, 18, 24 and 25; the Fifth Schedule, entries 22 and 24; and the Seventh Schedule.
- CORD, How CORD Works <https://www.resolveoncord.com/how-it-works>
- Centre for Online Resolution of Disputes, CORD Rules of Arbitration, version in force from 4 September 2026, rr 3, 5, 6, 10–12 and 37 <https://www.resolveoncord.com/resources/institution-rules>.