Pre-default arbitration remains maintainable, and section 34(4) remission cannot be conditioned on depositing the award amount.

Exchange bye-laws can preserve arbitration for transactions entered into before a trading member is declared a defaulter, and that pre-default claims remain maintainable despite the defaulter regime; the arbitrator's proceeds may still be dealt with under the applicable recovery framework. A court exercising power under section 34(4) may remit an award to the tribunal to consider an omitted material issue, but that power is limited to curing the defect and does not extend to imposing a deposit of the entire award amount. Such a condition would exceed the remit under section 34(4) and risk prejudging the unresolved defence.

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Issues: (i) whether arbitral proceedings initiated by a trading member after declaration as a defaulter remained maintainable in respect of transactions entered into before such declaration; (ii) whether, while directing the arbitral tribunal to resume proceedings under section 34(4) of the Arbitration and Conciliation Act, 1996, the Court could impose a condition requiring deposit of the entire award amount.

Issue (i): whether arbitral proceedings initiated by a trading member after declaration as a defaulter remained maintainable in respect of transactions entered into before such declaration.

Analysis: The relevant exchange bye-laws provided for arbitration of disputes arising out of dealings, contracts and transactions made subject to the bye-laws, and clause (1C) continued that mechanism for transactions entered into before the trading member was declared a defaulter. The rules and bye-laws dealt separately with vesting of membership rights in the Exchange and with the powers of the Defaulters' Committee to recover and deal with the assets of the defaulter. Those provisions did not take away the right of a trading member, in respect of pre-default transactions, to invoke arbitration against a constituent. The proceeds recovered in arbitration would, however, be available to the Defaulters' Committee in accordance with the governing regime.

Conclusion: The arbitral proceedings were maintainable and the objection to locus standi failed.

Issue (ii): whether, while directing the arbitral tribunal to resume proceedings under section 34(4) of the Arbitration and Conciliation Act, 1996, the Court could impose a condition requiring deposit of the entire award amount.

Analysis: Once the Court found that a material defence had not been considered by the arbitral tribunal, the appropriate course under section 34(4) was to allow the tribunal to resume proceedings and address that ground. The power under that provision is confined to enabling the tribunal to eliminate the ground for setting aside the award. Imposing a deposit condition for the amount awarded would go beyond that jurisdiction and would also risk prejudging the merits of the defence that the tribunal had yet to decide.

Conclusion: The deposit condition was unwarranted and was set aside; the remand direction under section 34(4) was otherwise sustained.

Final Conclusion: The appeal succeeded only to the limited extent of deleting the direction to deposit the awarded sum. The findings upholding maintainability of the arbitration and directing reconsideration by the arbitral tribunal were affirmed, and the tribunal was directed to proceed without being influenced by the impugned observations on merits.

Ratio Decidendi: A court acting under section 34(4) may remit the matter to the arbitral tribunal for consideration of an omitted issue, but it cannot impose a condition that effectively prejudges the dispute or requires deposit of the award amount as a price for such remission; pre-default disputes remain arbitrable where the governing bye-laws so provide.

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