Arbitration Act transition: parties' conduct and the award showed the 1996 Act governed the proceedings, not the 1940 Act.

An arbitration clause referring to the Arbitration Act, 1940 or any statutory modification or re-enactment did not prevent the parties from being governed by the Arbitration and Conciliation Act, 1996 where the arbitrator was appointed after the 1996 Act came into force and both sides conducted the proceedings on that basis. The award was also made by reference to the 1996 Act, including the provision on future interest. Section 85(2) recognises that parties may agree to apply the new law to their arbitration. On these facts, the arbitral proceedings and the challenge to the award were governed by the 1996 Act, and the objection based on continued application of the 1940 Act failed.

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Issues: Whether the arbitral proceedings and challenge to the award were governed by the Arbitration Act, 1940 or by the Arbitration and Conciliation Act, 1996.

Analysis: The agreement contained an arbitration clause stating that the provisions of the Arbitration Act, 1940 or any statutory modification or re-enactment thereof and the rules then in force would apply. The arbitrator was appointed after the Arbitration and Conciliation Act, 1996 had come into force, and the parties participated in the proceedings on the footing that the new Act governed the arbitration. The award itself was made by reference to the 1996 Act, including the provision relating to future interest. Section 85(2) of the Arbitration and Conciliation Act, 1996 recognizes that parties may agree that the new law will govern their relationship and arbitral process. In these circumstances, the arbitral proceedings were rightly treated as governed by the 1996 Act.

Conclusion: The proceedings were governed by the Arbitration and Conciliation Act, 1996, and the objection based on the continued applicability of the Arbitration Act, 1940 failed.

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