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CS Professional · Arbitration, Mediation and Conciliation · Commercial Transactions

Under a distribution agreement governed by Indian law, with the seat in Mumbai, an arbitral tribunal hears a purely domestic dispute between two Indian firms about unpaid dues. The distribution trade has a settled usage on credit periods. What must the tribunal do under Section 28 of the Arbitration and Conciliation Act, 1996?

The tribunal must decide in accordance with the substantive law in force in India and, in all cases, take into account the terms of the contract and trade usages applicable to the transaction. It cannot decide ex aequo et bono unless parties expressly authorise it.

  1. ADecide under the substantive law in force in India and, in all cases, take into account contract terms and applicable trade usagesCorrect
  2. BDecide ex aequo et bono without any authorisation from parties
  3. CIgnore trade usages since only statute matters
  4. DApply rules of law it considers appropriate, as in international arbitration

Explanation

For a non-international arbitration seated in India, Section 28(1)(a) requires decision under Indian substantive law. Section 28(3) requires the tribunal in all cases to consider contract terms and trade usages. Ex aequo et bono needs express authorisation.

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