Institution-Routed, Not Institution-Neutral: Arbitration's Quiet Return To Unilateral Control

For nearly a decade, Indian arbitration jurisprudence has steadily evolved toward one foundational principle: a party interested in the outcome of a dispute cannot control the adjudicatory process. That principle emerged through TRF Ltd. v. Energo Engineering Projects Ltd. [2017 INSC 577], was crystallised in Perkins Eastman Architects DPC v. HSCC (India) Ltd. [2019 INSC 1285], and has been reaffirmed by a Constitution Bench of the Supreme Court in Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV) [2024 INSC 857] ('CORE-II').

The reasoning was simple: - neutrality in arbitration is not confined to the personal impartiality of the individual arbitrator. It extends to ensuring that no party is permitted to control the very process by which the arbitral tribunal is constituted.

That principle, however, is now being reshaped.

New Architecture

The dominant financial institution no longer appoints the arbitrator directly. Instead, it selects a private online arbitral institution or ODR platform, embeds that mechanism within a standard-form loan agreement where the borrower possesses little to no bargaining power, and routes all disputes through that institution. The institution, in turn, appoints the arbitrator from its own panel in accordance with its internal rules.

The architecture has changed. The control has not.

What happens when the institution's own business model becomes substantially dependent upon repeat mandates from the very same class of claimants?

An individual arbitrator's disclosure form cannot cure a conflict that is embedded within the institutional framework itself. The concern is no longer confined to personal bias or individual predisposition. It is one of structural dependence, a form of institutional asymmetry that no disclosure regime under the Arbitration and Conciliation Act, 1996 ('Arbitration Act') was ever designed to meaningfully address.

Conscious Circumvention

What renders this particularly troubling is that this is a calculated pattern.

Several large financial institutions and NBFCs, having recognised that unilateral appointment clauses no longer withstand judicial scrutiny, have now adopted a more sophisticated mechanism. Even where the underlying loan agreement contains a plainly unilateral appointment clause, the notice invoking arbitration under Section 21 of the Arbitration Act now proceeds to unilaterally designate a specific private ODR platform or arbitral institution as the administering body. The institution is selected entirely by the claimant, named in the invocation notice itself, and presented to the respondent as a pre-determined decision before the arbitral process has even formally commenced.

The effectiveness of this strategy lies in its timing. By embedding the institutional selection within the Section 21 notice, rather than within the original arbitration agreement, the dominant party attempts to portray the exercise as a mere procedural arrangement rather than an appointment mechanism, in an attempt to avoid the judicial scrutiny that decisions such as Perkins and CORE-II would otherwise attract.

But the problem still remains the same, the institution has still been chosen unilaterally and the respondent has had no role whatsoever in the selection. And the institution so chosen is, in an overwhelming majority of cases, one whose recurring revenue stream is substantially dependent upon repeat mandates from the very same class of financial institution claimants.

A declaration under Section 12 by the individual arbitrator stating that no prior relationship exists with either party does not, and cannot, resolve this structural concern. The declaration addresses the independence of the arbitrator. The conflict, however, lies within the institutional framework itself. These are fundamentally distinct questions, and treating them as the same issue obscures the real concern.

This is also where the statutory scheme betrays its limit. Section 12(5), read with the Seventh Schedule of the Arbitration and Conciliation Act, 1996, is the very provision that renders an interested person ineligible to act as arbitrator, and it is the foundation on which both TRF and Perkins rest. But the Seventh Schedule is addressed entirely to the relationships of the individual arbitrator, his connection to a party, to counsel, or to the subject matter of the dispute. It says nothing about the structural dependence of the institution that appoints him upon a particular class of repeat claimants. The disqualification regime the legislature enacted in 2015 simply does not reach the institution. That silence was never intended as a licence for institutional dependence; it is a loophole that the present practice has learned to exploit.

And then comes Section 17

This is where the issue becomes most troubling in practice.

A Statement of Claim and an interim application are filed simultaneously. Within days, sometimes before the respondent has had any genuine opportunity to fully comprehend the pleadings, arrange legal representation, or formulate even a preliminary response, ex parte orders are passed. Email delivery reports, WhatsApp blue ticks, and electronic transmission logs are increasingly treated as though they are synonymous with procedural fairness.

Electronic receipt is not the same thing as a meaningful opportunity to be heard.

Sections 18 and 24 of the Arbitration Act require far more than just formal compliance. They incorporate the foundational principles of natural justice, equal treatment, procedural fairness, and a genuine opportunity to present one's case. These are not procedural technicalities. They are the basic foundations of any legitimate adjudicatory process.

Section 17 was never intended to operate as an instrument of first resort. Yet, in a growing number of financial services arbitrations, it is increasingly being used in that manner, not because any extraordinary urgency genuinely exists, but because procedural acceleration itself has become part of the recovery strategy.

The timeline is not compressed by necessity but very intentionally structured.

Bombay High Court's Signal

The Bombay High Court's observations in Radiance Galore v. Yes Bank [2025: BHC-OS: 10788] are therefore particularly significant. The Court recognised that an algorithmic or institution-routed appointment process cannot automatically cure a fundamentally unilateral architecture, particularly where the institution itself is selected by one party and remains structurally aligned with a category of repeat claimants whose volume sustains its business model.

The order is interim, and its observations must be read as such. But the question it raises is not interim at all.

A Necessary Distinction

Institutional arbitration is neither illegitimate nor undesirable. On the contrary, genuine institutional arbitration, backed by independent governance structures, transparent appointment procedures, and diversified caseloads, represents one of the most significant reforms in the evolution of dispute resolution in India. I say this as a practitioner who firmly believes in the promise and necessity of institutional arbitration.

The most serious defence of these mechanisms must also be met head-on. It is said that online dispute resolution exists precisely because neither the courts nor ad hoc arbitration can economically resolve the sheer volume of small-value recovery disputes that financial institutions generate, and that standard-form designation is simply the price of access to justice at scale. That efficiency is real, and it ought not to be dismissed. But efficiency cannot be purchased at the price of structural neutrality. A forum that disposes of matters swiftly is worth nothing if it is not, in substance, neutral. However, speed should not come at the cost of fairness and the answer to this is an institution that is both bilaterally chosen and efficient, not one that is unilaterally chosen and merely fast.

But that promise is precisely what now stands at risk.

Recent judicial decisions have rightly recognised the distinction between genuine institutional appointments and institutional camouflage. While upholding an appointment mechanism involving the Madras Chamber of Commerce and Industry, the Hon'ble Rajasthan High Court in Sundaram Finance Limited v. Hanuman Prasad and Anr. [2026: RJ-JP:17337] correctly clarified that an institutional appointment mechanism is not, by itself, synonymous with unilateral appointment, and acknowledged the legitimacy of established arbitral institutions functioning under recognised procedural frameworks.

The broader judicial trend, however, equally demands vigilance. Courts must remain alert to the risk of institutional mechanisms being used as indirect devices to achieve what the law prohibits directly.

This distinction is critical. The issue is not institutional arbitration. The issue is institutional camouflage.

Systemic Question

The practical consequence is that arbitration risks transforming from a consensual adjudicatory mechanism into a privately administered debt-enforcement system operating disproportionately in favour of repeat institutional claimants.

Where hundreds or thousands of similar disputes are routed through the same institutional ecosystem, the concern is no longer confined to one arbitrator or one case. The question becomes systemic:

Can an institution remain meaningfully neutral where its economic survival substantially depends on recurring appointments from the same category of dominant parties?

For true impartiality to exist, not merely formal compliance with it, both parties must have an equal say in the selection of the arbitral institution itself, not merely the arbitrator. An institution chosen unilaterally, whether embedded in the original agreement or inserted through the Section 21 notice, is not a neutral forum. It is an extension of the party that chose it. And where that institution's financial survival depends on the continued patronage of that very party, the neutrality of the proceeding is compromised at its foundation, long before the first hearing, long before any disclosure form is signed.

Way Forward

The problem identified in this article is not without a solution. But the solution requires intervention at multiple levels simultaneously, judicial, legislative, and contractual.

If the law is unequivocal that neither party may unilaterally control the constitution of the tribunal, the same principle must apply, with equal force, to the selection of the institution that constitutes that tribunal. The choice of arbitral institution is not a procedural formality. It is the foundational decision that determines the architecture of the entire proceeding, the panel from which arbitrators are drawn, the rules under which the dispute is conducted, and the institutional ecosystem within which the award is generated. To permit one party to make that choice unilaterally, while prohibiting unilateral arbitrator appointment, is to protect the symptom while leaving the disease untreated.

True party autonomy demands equal participation, not the autonomy of the dominant party dressed as the autonomy of both.

Courts exercising jurisdiction under Sections 11, 14, and 34 of the Arbitration Act already possess the tools to address this. When examining appointment mechanisms, whether arising from arbitration agreements or Section 21 notices, courts should apply a functional test: does the institutional selection process, traced back to the basics, give one party disproportionate control over the constitution of the tribunal and the conduct of the proceedings?

Where the answer is yes, the institutional label provides no immunity. The Radiance Galore proceedings before the Bombay High Court represent precisely this kind of scrutiny, and they must be followed, not ignored.

Additionally, courts entertaining Section 34 challenges to awards arising from ODR administered proceedings should be willing to examine the institutional appointment architecture as a ground going to the root of the tribunal's constitution, and therefore to the validity of the award itself.

The Arbitration Act in its current form does not expressly regulate the selection of arbitral institutions. This gap must be addressed. A targeted amendment, modelled on the equal treatment mandate already embedded in Section 18, should expressly provide that:

1.The selection of an arbitral institution must be made by agreement of both parties, either at the pre-dispute stage with genuine bilateral negotiation or at the post-dispute stage after the dispute has arisen;

2. A unilateral designation of an arbitral institution, whether in a standard-form agreement or in a Section 21 notice, shall be subject to the same scrutiny as a unilateral arbitrator appointment; and

3. Arbitral institutions administering high-volume disputes for a single category of repeat claimants must make periodic public disclosures of their caseload composition, revenue sources, and panel appointment statistics, enabling courts and parties to assess structural dependence objectively rather than indirectly.

4. Lawyers advising borrowers, guarantors, and smaller counterparties must begin reviewing arbitration clauses at the contracting stage with the same rigour applied to jurisdiction and limitation clauses. An arbitration clause that embeds a specific ODR platform chosen by the dominant party, without any mechanism for bilateral selection, should be flagged, negotiated, and where possible, resisted.

5. Where standard-form agreements leave no room for negotiation, the Bar must be prepared to raise the institutional selection challenge at the earliest stage of the arbitral proceedings, before submission on merits, before any Section 17 order is acted upon, and certainly before the award is made.

The challenge is available. It needs to be used.

The trend described in this article has one destination, if left uncorrected, i.e. the systematic conversion of institutional arbitration into a privately administered enforcement mechanism, legitimate in label, unilateral in substance.

If this is not course-corrected soon, by courts willing to look through institutional form to structural substance, and by a Bar that refuses to normalise what it recognises as evasion, the promise of genuine institutional arbitration in India will be quietly and irreversibly weakened.

When one party controls the forum, funds the institution, engineers the timeline, and secures the order before the other side has had a meaningful opportunity to respond, what has taken place is not arbitration in any sense that the law recognises or that justice requires.

It is enforcement dressed as adjudication.

The same principle applies even when control is exercised through an algorithm, a digital platform, or a Section 21 notice.

The vice has changed its address. It has not changed its nature. And if we do not name it clearly, it will find a new one.

The author acknowledges, with thanks, the assistance of Keerthi Anil, a fourth-year student of Government Law College, Thiruvananthapuram, in formatting and preparing this article for publication.

Author is an Advocate practicing at Supreme Court of India, Delhi High Court and various other High Courts, Tribunals. Views are personal.