The Delhi High Court (“High Court”) vide its judgement in Axis Finance Limited v. Pratik Sarkar, ARB. P. 1571/2025., decided on 20.08.2026, dealt with the question of whether parties, through their mutual consent, can change the arbitral institution mentioned in their arbitration agreement.
BRIEF FACTS
Axis Finance Limited (“Petitioner”), a non-banking financial company registered with Reserve Bank of India, sanctioned a personal loan of Rs. 25,27,649/- (Rupees twenty-five lac twenty-seven thousand six hundred and forty-nine) to Mr. Pratik Sarkar (“Respondent No. 1”), carrying interest at the rate of 13.75% ( thirteen point seven five percent) per annum which was repayable in 72 (seventy-two) equal monthly instalments. The parties executed a Personal Loan Agreement dated 25.07.2023 (“Loan Agreement”) after accepting the terms and conditions. The Loan amount was disbursed to the Respondents on 26.07.2023.
The Respondents failed to adhere to their repayment obligation under the Loan Agreement from March 2024. Thereafter, Petitioner approached the Respondents for regularization of the loan account from April 2024 to September 2024, but the default remained unresolved. As per the statement of account maintained by the Petitioner, a sum of Rs. 25,36,373/- (Rupees twenty-five lac thirty-six thousand three hundred and seventy-three) remained due and payable by the Respondents as on 05.09.2024.
Clause 14 of the Loan Agreement contained an arbitration clause wherein all disputes were to be resolved through arbitration by a Sole Arbitrator. The clause further stated that the arbitral proceedings could be administer electronically through an Online Dispute Resolution platform, with the juridical seat of arbitration being Delhi/Mumbai and the proceedings being governed by the Indian Law.
Upon disputes having been arisen between the parties, the Petitioner issued a notice dated 26.09.2024 under Section 21 of the Arbitration and Conciliation Act (“A&C Act”), thereby invoking the arbitration clause in the Loan Agreement. The Respondents neither responded to the notice nor acted in terms of thereof. The Petitioner approached the High Court under Section 11(6) of the A&C Act seeking appointment of a Sole Arbitrator.
The Respondents conveyed their agreement to the appointment of an arbitrator but disputed the stipulation contained in the arbitration clause providing for the arbitral proceedings to be administered through Online Dispute Resolution platform. The Petitioner accordingly proposed that the arbitration can be conducted under the aegis of the Delhi International Arbitration Centre (“DIAC”), which was not controverted by the Respondents.
CONTENTIONS RAISED BY THE PARTIES
In context of above-highlighted facts, the principal issue before the High Court was whether the parties could, by mutual consent, modify the arbitral forum contemplated under the Loan Agreement and agree to the arbitration being conducted by DIAC.
Contentions put forth by the Petitioner
It was submitted by the Petitioner that Sole Arbitrator ought to be appointed for adjudication of the dispute. The Petitioner further proposed that, instead of the arbitral proceedings being administered through the Online Dispute Resolution platform as contemplated under the arbitration clause, the arbitration be conducted under the aegis of the DIAC.
Contentions put forth by the Respondents
The Respondents did not dispute the existence of the arbitration agreement and conveyed their agreement to the appointment of an arbitrator. However, they disputed the stipulation contained in the arbitration clause providing for the arbitral proceedings to be administered through an Online Dispute Resolution platform. The Respondents did not object to the proposal of the Petitioner that the arbitration be conducted under the aegis of DIAC. Accordingly, consensus was arrived at between the parties for the arbitration to be conducted under the aegis of and in accordance with the rules of DIAC.
JUDGEMENT
The High Court considered whether the parties could, by mutual consent, modify the arbitral forum specified in the arbitration agreement and have the arbitration conducted under the aegis of DIAC.
Modification of Arbitration Agreement by mutual consent
The High Court observed that the stipulation in an arbitration agreement as to the institution under whose aegis the arbitration is to be conducted, and as to the manner in which the arbitral tribunal is to be constituted, is a matter of contract between the parties, which is always open to them to vary by mutual consent. The High Court further held that where such consent is arrived at during the course of hearing and is recorded in the order of the Court, the arbitration agreement stands modified pro tanto, i.e., to the extent of the modification agreed upon by the parties.
Reliance on Shaf Broadcast
In support of the aforesaid principle, the High Court relied upon the judgment of the Supreme Court in Shaf Broadcast (Private) Limited v. Doordarshan, (2019) 10 SCC 447., wherein, at the request of counsel for all parties made during the hearing, a Sole Arbitrator was appointed despite the arbitration agreement providing for constitution of a three-member arbitral tribunal. The High Court observed that in the present case, the modification between the parties was of narrower scope as it did not interfere with the agreed number of arbitrators, the juridical seat and the law governing the arbitral proceedings and is only confined to the forum under whose aegis the arbitration is to be conducted.
Appointment of Sole Arbitrator under DIAC
In accordance with the consensus arrived between the parties, the High Court held that there was no impediment in appointing an independent Sole Arbitrator to adjudicate the dispute between the parties. The High Court also recorded the permission of both the parties that arbitration agreement would take place under the aegis of DIAC, thereby modifying the arbitration agreement to that extent only.
The petition was accordingly disposed off in the aforesaid terms.
ARGUS COMMENT
The present judgement reinforces the principle of party autonomy, showcasing it as the cornerstone of arbitration. It further recognizes that parties are free to mutually modify the terms of the arbitration agreement, including the forum or institution of the arbitration. This judgment will be viewed as a progressive step in arbitration law. Building upon the Supreme Court’s decision in Inox Renewables v. Jayesh Electricals Limited, Civil Appeal no. 1556 of 2021., which permitted parties to mutually change the venue, place, or seat of arbitration. This judgment further affirms that the arbitral mechanism being in the nature of a contract and thus can be modified by mutual consent.
The judgment is also significant as it clarifies that a modification to an arbitration agreement need not result in alteration of the agreement as whole. In the present factual matrix, the parties only modified the arbitration agreement to the extent of the arbitral forum from the Online Dispute Resolution Mechanism to DIAC and did not touch upon number of arbitrators, juridical seat and governing law. The High Court accordingly recognized such limited modification as modification pro tanto.
It must be noted that the judgment does not permit unilateral alteration of an agreed arbitral mechanism, thereby emphasizing that mutual consent remains paramount. This was evidenced by the Respondents not controverting the Petitioner’s proposal for arbitration to be conducted under the aegis of DIAC. Viewed within this context of mutual consent, the decision significantly strengthens the principle of party autonomy and contractual integrity by confirming that an arbitration agreement can be modified with the concurrence of both the parties.
Please find attached a copy of the Judgment, here.
This update has been contributed by R. Sudhinder (Senior Partner) and Gargi Bindal (Associate).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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