After glitch, Bombay High Court quizzes ODR platforms on how they deal with appointment of arbitrators

The Bombay High Court has issued notice to online dispute resolution (ODR) platforms Presolv360 and AdresNow, directing them to submit statements on how they ensure compliance with Indian arbitration law and, specifically, the prohibition on unilateral appointment of arbitrators. [Radiance Galore v. Yes Bank]

The direction came in an order passed by Justice Somasekhar Sundaresan which allowed a Section 37 challenge filed by Radiance Galore against an interim arbitral award obtained by Yes Bank. The Court held that the award was legally unsustainable, as the arbitrator had been appointed unilaterally through an ODR platform, despite clear precedent from the Supreme Court invalidating such appointments.

“There are only two known methods of appointing an arbitrator – either by mutual consent of the parties or pursuant to Section 11 of the [Arbitration and Conciliation] Act,” Justice Sundaresan held. He added,

“Although the online platform is an independent one, and follows a randomized process...the process of appointment ought to be compliant with the two methods of appointment known to law.”

The dispute arose from arbitral proceedings initiated by Yes Bank against Radiance Galore. The arbitrator in the case had been appointed by an independent ODR institution that relied on a randomised algorithm. However, the Court found that this appointment process was invalid as it was triggered unilaterally by Yes Bank, despite the Supreme Court having previously ruled against such procedures.

Appearing for Yes Bank, Advocate Vishal Tambat informed the Court that the Bank had instructions to withdraw the arbitration. Justice Sundaresan recorded this as consistent with recent conduct by lenders in similar cases before the Court.

The award was quashed by consent, with liberty granted to the parties to reinitiate arbitration through a valid procedure.

The Court also took the opportunity to raise broader concerns regarding the functioning of algorithm-based ODR platforms, directing the Bombay High Court Registry to issue formal notices to Presolv360 and AdresNow. The platforms have been asked to explain whether their arbitrator appointment processes contain safeguards to ensure compliance with the law and, in particular, whether they verify if the appointment request is made with mutual consent or through a Section 11 court order.

“It would be important to ascertain whether the online dispute resolution institutions have coded their algorithms to take care to ensure... the request is not pursuant to clauses permitting unilateral appointment of an arbitrator,” the Court observed.

The platforms have been directed to submit their responses within four weeks of the upload of the order.

Radiance Galore was represented by a team from Optimus Legal comprising Advocates Archit Virmani (Partner), Atul Gupta (Senior Associate) and Saurabh Srivastava (Associate).

[Read Order]