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CS Professional · Arbitration, Mediation and Conciliation · Preparation and Execution of Arbitral Award

In an arbitration, the tribunal fixed a deposit of Rs 4,00,000 for the claim, payable in equal shares by Nair Ltd and Iyer Ltd. Nair Ltd paid Rs 2,00,000. Iyer Ltd did not pay its share, and Nair Ltd also declined to pay Iyer's share. Which is correct under Section 38?

The tribunal may suspend or terminate the arbitral proceedings in respect of the claim. Section 38(2) lets the other party pay a defaulter's share, but where neither party pays that share, suspension or termination becomes available. On termination, unspent deposits must be accounted for and returned.

  1. AThe tribunal may suspend or terminate the proceedings in respect of the claim, since neither party paid the unpaid shareCorrect
  2. BThe tribunal must proceed and recover Iyer's share from the award
  3. CThe proceedings terminate automatically with no tribunal decision
  4. DThe tribunal may only refund Nair's Rs 2,00,000 and has no power to suspend

Explanation

Section 38(2) makes the deposit payable in equal shares, and the other party may pay a defaulting party's share. If the other party also does not pay, the tribunal may suspend or terminate the proceedings for that claim or counter-claim. Termination is discretionary, not automatic. On termination the tribunal must account for deposits and return any unexpended balance.

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