Step 1: Identify the provision.
This is about Section 25(b) of the Arbitration and Conciliation Act, 1996, which deals with default of a party, meaning when a party does not do what it should.
Step 2: Understand the situation.
The respondent fails to submit his statement of defence without any good reason. The question asks what the arbitral tribunal must do.
Step 3: See what the section says.
Section 25(b) says that in such a case the tribunal shall continue the proceedings. It does not stop or terminate the matter just because the defence is missing.
Step 4: Note the important safeguard.
Crucially, the tribunal must not treat the missing defence as an admission of the claimant's allegations. The claimant still has to prove his own case.
Step 5: Reject the wrong options.
Terminating the proceedings is wrong. Treating the claimant's case as uncontroverted or treating the allegations as admitted is wrong, because the law says the failure is not an admission. So the correct option is to continue without treating it as admission.
Step 6: State the answer.
The tribunal shall continue the proceedings without treating the failure as an admission.
\[ \boxed{\text{Continue the proceedings without treating such failure as admission.}} \]