A recent (July 2025) judgment by the Bombay High Court raised concerns for financial institutions and other entities using Online Dispute Resolution (ODR) platforms to resolve disputes. In Radiance Galore v Yes Bank Ltd (Radiance Galore), the Bombay High Court set aside the arbitral award in favour of Yes Bank on the ground that the arbitrator was unilaterally appointed, even though the appointment was made by the ODR Platform using an algorithm.

However, Radiance Galore does not prevent financial institutions, or any parties for that matter, from using ODR platforms or arbitral institutions, provided the institution is chosen with the consent of all parties to the agreement. This position becomes clear from a reading of another Bombay High Court judgment, Era International v Aditya Birla Global Trading India Pvt Ltd (Era International).

The attempt is to analyse, through the lens of the two judgments, the circumstances when an Arbitral Tribunal appointed by an arbitration institution is hit by a de jure bar under Section 12(5) read with the Seventh Schedule of the Arbitration and Conciliation Act, 1996 (Arbitration Act).

Radiance Galore v Yes Bank

In Radiance Galore, the Respondent (Yes Bank) selected the ODR Platform after the dispute between the Parties arose. The High Court held that, even though the Tribunal itself was constituted through the Platform's algorithm, the appointment was void since Yes Bank had unilaterally selected the ODR Platform. The Court emphasized that the law recognizes only two methods to appoint an arbitrator—by consent or under Section 11 of the Arbitration Act.

The Court also had a word of caution for ODR Platforms. It emphasized that platforms must code their algorithms to ensure that Tribunals are constituted only when the appointment request is through one of the two recognized methods to constitute an arbitral tribunal.

Era International v Aditya Birla Global

In Era International, the Bombay High Court was seized with a Petition praying for the substitution of an Arbitral Tribunal constituted by the Mumbai Centre for International Arbitration (MCIA).

In this case, the arbitration clause provided that disputes would be resolved through arbitration by the MCIA under its Rules. When disputes arose, Aditya Birla's lawyers requested the MCIA to initiate arbitration, resulting in the MCIA constituting the Arbitral Tribunal consisting of a Sole Arbitrator. Era International sought the substitution of the Arbitrator as the Arbitrator's law firm had represented Aditya Birla's group companies on several occasions. As the MCIA declined to replace the arbitrator, Era International approached the Bombay High Court in a Petition seeking termination of the arbitrator's mandate under Section 14(2) of the Arbitration Act, and the appointment of another Arbitrator under Section 11 of the Arbitration Act.

Although both Aditya Birla and the MCIA, which was also a Respondent before the Court, objected to the maintainability of the Petition since the MCIA had already decided the objection to the Arbitrator's appointment as per its Rules, the Bombay High Court allowed the Petition and directed the MCIA to appoint another arbitrator.

However, although the arbitrator appointed by the institution was de jure ineligible to adjudicate the dispute and hence replaced, the Court categorically held that, where parties consent to institutional arbitration, the constitution of an arbitral tribunal by the institution under its rules is legal and valid. The relevant portion of the judgment is reproduced below;

“29…In a case where they decide to rely upon the institutional arbitration, where it has a set of rules right from selecting and appointing the arbitrator(s) and to be governed by such institutional rules, the proceedings undoubtedly will be governed by the rules framed by the institution.”

In fact, the Court also observed that institutional arbitration has certain benefits over ad-hoc arbitration such as a structured procedure and administrative support.

Analysis:

Read together, the decisions in Radiance Galore and Era International point in the same direction and are in line with the statutory framework of the Arbitration Act.

In Radiance Galore, the Court set aside the award passed by the Tribunal constituted by the ODR Platform because Yes Bank selected the Platform after the dispute had arisen. Therefore, the selection of the institution itself was unilateral and fell foul of the Supreme Court's decisions on unilateral appointments. The Court rightly held that the ODR Platform using an algorithm to appoint the arbitrator would not cure the fundamental defect in the constitution of the Tribunal.

On the other hand, in Era International, the Court upheld the sanctity of the parties' agreement to refer disputes to arbitration to the MCIA while, at the same time, stepping in to ensure that a de jure ineligible arbitrator did not adjudicate the proceedings. Evidence of this lies in the Court's direction to the MCIA to appoint another arbitrator rather than appointing one itself.

The statutory framework of the Arbitration Act supports the ratio of both judgments. Section 2(6) states that parties can appoint an institution to determine any issue, except those under Section 28; Section 2(8) folds referenced rules into the parties' agreement, and Section 11(2) allows parties to agree on a procedure for appointing arbitrators.

A perusal of the applicable law, as applied in Radiance Galore and Era International, makes it clear that parties are free to agree to institutional arbitration. Where parties do so, they are bound by the rules of the institution and the court will not interfere, except to enforce the core principles of the Arbitration Act, i.e., fairness and party autonomy. Therefore, if the arbitration agreement says, “Parties agree to refer disputes to arbitration under the Rules of XYZ institution”, the arbitration will be governed by the institution's rules, including the appointment of the arbitrator. However, if the arbitration agreement says, “arbitration under the Rules of the institution selected by XYZ party” then even if the arbitrator is appointed by the institution and is unconnected with either party, the Tribunal is hit by the bar of Section 12(5) read with the 7^th Schedule of the Arbitration Act. Interestingly, the dispute resolution clause in a template of Yes Bank's 'Facility against Securities' Agreement available online specifies that disputes are to be referred to arbitration by an ODR Platform enlisted by the bank.

The judgments in Radiance Galore and Era International complement each other. In Radiance Galore, the Court rejected a unilateral, post‑dispute reference of a dispute to an ODR Platform and set aside the award passed by the arbitrator appointed by the institution. In Era International, the Court ratified the consensually chosen institution's authority to constitute the Arbitral Tribunal according to its rules but directed it to substitute an arbitrator who was de jure ineligible to adjudicate the dispute.

The judgments provide learnings for parties and arbitration institutions. For parties seeking to avail the many benefits of institutional arbitration, it is to choose the institution before disputes arise, ideally in in the arbitration agreement itself. For ODR Platforms and arbitration institutions, it is to ensure that their rules and processes comply with the Arbitration and Conciliation Act, 1996.

The author is an advocate practising before the Bombay High Court . Views are personal.