Bombay High Court Slams NBFCs for Masking Unilateral Arbitrator Appointments

The Bombay High Court has criticized a growing trend among banks and NBFCs, specifically naming IIFL Finance, for unilaterally appointing arbitrators via algorithms or private institutions.

Justice Somasekhar Sundaresan observed that routing appointments through these platforms is a "modus operandi" designed to "magically cleanse" the inherent illegality of unilateral selection.

The Court noted that lenders often withdraw these proceedings only when challenged, relying on the hope that most parties will simply settle.

Reaffirming that arbitrators must be appointed through mutual consent or Section 11 petitions, the Bench ordered the judgment to be placed before IIFL’s Board to ensure legal compliance.

[DS Textiles v. IIFL Finance Ltd.]