Question

According to Section 25(b) of the Arbitration and Conciliation Act, 1996, where the respondent fails to submit his statement of defence without sufficient cause, the arbitral tribunal shall:

• A. Terminate the proceedings.
• B. Proceed to decide the dispute treating the claimant's case as uncontroverted.
• C. Continue the proceedings without treating such failure as admission.
• D. Treat the claimant's allegations as admitted.

Hint:

Remember: Default in arbitration does not equal admission. The tribunal must "continue the proceedings" and the claimant must still prove their claim on its own merits!

Answer 1

The Correct Option is C

Arbitration is supposed to give both sides a fair hearing, but it also cannot be allowed to grind to a halt simply because one party decides not to cooperate. Section 25 of the Arbitration and Conciliation Act, 1996 addresses exactly this problem under the heading of default of a party, and it treats the claimant's default and the respondent's default differently depending on what each default would otherwise achieve for the defaulting side.

If a respondent could simply refuse to file a defence and thereby force the tribunal to either shut down the case or accept the claimant's story automatically, that respondent would have every incentive to stay silent whenever the claim was weak on paper but strong on the pleadings alone. Section 25(b) closes that loophole. It tells the tribunal to keep going with the proceedings, so the case still gets decided, but it also says the tribunal must not read the missing defence as an admission of what the claimant has alleged.

That means the claimant is not let off the hook of proving its case; it still has to establish its claim on the evidence before the tribunal, just as it would if the respondent had shown up and contested every point. The respondent's absence changes nothing about that burden.

So under Section 25(b), when the respondent fails without sufficient cause to submit a statement of defence, the tribunal must continue the proceedings without treating that failure as an admission of the claimant's allegations.

Answer 2

Another way to answer this is to compare what would happen under each option if a claimant with a genuinely weak or fabricated case faced a silent respondent, since the correct rule should not let a party win purely because the other side stayed quiet.

1. Terminate the proceedings: If silence ended the case, a respondent facing a strong claim would deliberately default just to force a termination, defeating the entire point of arbitration as a mechanism to resolve disputes on their merits.
2. Treating the claimant's case as uncontroverted: If default alone made the claimant's version go unchallenged as a matter of course, even a poorly supported claim would sail through untested, which is not a sound way to run an adjudicatory process and is not what the section directs.
3. Treating the claimant's allegations as admitted: This goes even further than treating the case as uncontroverted, since it would convert the respondent's silence into a positive admission of every fact alleged, handing the claimant an automatic and complete victory without any scrutiny of the underlying evidence.
4. Continuing the proceedings without treating the failure as admission: This is the only option under which a weak or unsupported claim cannot succeed just because the respondent stayed away, since the claimant must still prove its case before the tribunal, and it is also the only option that keeps the arbitration moving instead of collapsing over the respondent's non-participation.

Testing the options against a hypothetical weak claim shows that only continuing without an inference of admission avoids rewarding either party for the respondent's default, which is exactly what Section 25(b) intends.

Therefore, the correct answer is Continue the proceedings without treating such failure as admission.