Asian councillors have alleged that Labour's ruling National Executive Committee (NEC) indulged in "discriminatory practices" when interfering in candidate selections for next year's local elections.
Councillors' Iqbal Singh Padda (Greets Green and Lyng), Mohammad Rouf (Soho and Victoria), Sandwell Mayor Mushtaq Hussain (Oldbury) and Samiya Akhter (St Paul's) are all understood to have been rejected at selection panel interviews.
It comes after Rajbir Singh stunned the authority by quitting as leader and as a councillor, sparking a leadership election which is expected to take place next week.
Former MP Adrian Bailey, who represented West Bromwich West for 19 years and served as a Sandwell councillor,
told the Star: "I spent my parliamentary career fighting for equal opportunities and local constituents.
"I never thought I'd have to criticise the Labour Party for not promoting the interests of our local Asian community.
"The Labour Party needs to backtrack immediately otherwise it is going to lose the goodwill and support of the Asian community in Sandwell."
In recent years Labour's NEC has been accused of meddling in Sandwell candidate selections, while Sir Keir Stamer has repeatedly insisted he will end the chaos that has surrounded the authority since the publication of the Wragge report in 2016.
In her formal complaint, Councillor Akhter, who works as a nurse, accused the NEC of targetting Asian councillors for deselection and called for an investigation.
She said: "Frankly the only conclusion I could describe this as is institutional racism, as not a single person of a non-minority was deselected apart from Muslims or Sikhs."
She added: "What really bothers me is that the Labour Party leader suggests he welcomes key workers and frontline staff to join and become members, to become Labour Party councillors by waving their one year membership rule.
"Just this weekend Keir Stamer launched the 'ask her to stand' campaign, wanting more women to put themselves forward as candidates.
"Yet this doesn’t seem to apply if you are a Muslim nurse who has worked tirelessly through the pandemic and fulfilled her duties as a Labour councillor."
Labour is yet to publish a full list of 24 candidates to contest the May elections, although a number of former councillors are understood to have been selected.
They include Bill Gavan, who quit the party and tried to join the Conservatives in 2020, and Julie Webb, who was expelled in 2019.
Meanwhile Labour sources say next week's leadership election could end up being a one horse race.
Blackheath councillor Kerrie Carmichael – who lost out to Mr Singh in May's leadership contest – is the strong favourite to win, with Friar Park councillor Simon Hackett lined up to serve as her deputy.
Current interim leader Councillor Maria Crompton is said to be undecided over whether to stand for the position.
Prime Minister Boris Johnson has revealed the Government may launch an investigation into the running of Sandwell Council, while Jacob Rees-Mogg referred to the authority as a “totalitarian communist state”.