Commencement date governs arbitration law: proceedings begun before 1996 remain under the 1940 Act, not the later statute.

Arbitral proceedings commenced before the Arbitration and Conciliation Act, 1996 are governed by the Arbitration Act, 1940, because Sections 21 and 85 preserve pending proceedings under the earlier statute. A later award or an order directing enforcement does not, by itself, shift the matter to the 1996 Act. An earlier enforcement order also does not bar a challenge under the governing law where it did not decide the applicable statute or extinguish the available remedy, and res judicata cannot prevent such a challenge. The award challenge therefore remains to be examined under the 1940 Act on its merits.

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Issues: (i) Whether the arbitral proceedings and challenge to the award were governed by the Arbitration Act, 1940 or the Arbitration and Conciliation Act, 1996; (ii) Whether the earlier order permitting enforcement of the award barred the appellants from challenging the award under the 1940 Act.

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

Analysis: The reference to arbitration had been made before the 1996 Act came into force. Section 21 and Section 85 of the 1996 Act were read together to determine when arbitral proceedings commence and which enactment applies to pending proceedings. On that basis, the legal position was that proceedings commenced before the new Act are saved by the repeal and savings clause and remain governed by the earlier Act. The Court also noted that a direction to enforce the award could not, by itself, convert the matter into one governed by the 1996 Act.

Conclusion: The proceedings arising from the award were governed by the Arbitration Act, 1940, and not by the Arbitration and Conciliation Act, 1996.

Issue (ii): Whether the earlier order permitting enforcement of the award barred the appellants from challenging the award under the 1940 Act.

Analysis: The Court held that the earlier order did not decide the applicability of the two statutes or deny the appellants any remedy under the governing law. Since the High Court had also declined to examine that question, the prior clarification proceedings did not operate as a bar. The principle of res judicata could not be applied to prevent a challenge based on the correct statutory regime.

Conclusion: The appellants were not barred from invoking the remedies available under the Arbitration Act, 1940.

Final Conclusion: The award challenge had to be examined on merits under the 1940 Act, and the matter was sent back for that purpose.

Ratio Decidendi: For determining the applicable arbitration law, the date of commencement of arbitral proceedings is controlling, and where those proceedings commenced before the 1996 Act, the old Act governs notwithstanding a later award or an incidental direction to enforce it.

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