Delhi HC: Concurrent Remedies Under RERA and Arbitration Act Permissible When Causes of Action Differ - 2025-09-18

From Pillar to Post: Delhi HC Steps in to Shield Allottees in Neo Square Mall Tussle

In a significant order addressing the intersection of RERA compliance and arbitration, the Delhi High Court has intervened in a protracted dispute involving Neo Developers Pvt. Ltd. and various commercial space allottees. The Division Bench, comprising Justice Prathiba M. Singh and Justice Shail Jain , has issued a directive requiring the developer to deposit rental income into court, effectively protecting the interests of investors who have been left waiting for possession for years.

The Background: A Mall, A Promise, and Perpetual Delays

The dispute centers on "Neo Square Mall" in Sector-109, Gurugram. Appellants had originally booked commercial units, relying on the developer’s promise of "assured returns." However, the project was plagued by severe delays in construction and a failure to hand over possession.

While the allottees initially sought relief through the Haryana Real Estate Regulatory Authority (HARERA), which passed a favourable order on August 14, 2024, the situation remained stagnant. With execution petitions before HARERA dragging on, and the developer subsequently leasing out units to a third party, the allottees filed petitions under Section 9 of the Arbitration and Conciliation Act, 1996 , before the Commercial Courts in Tis Hazari. These were initially dismissed on the grounds that the allottees had already chosen their forum via RERA.

The Legal Tussle: RERA vs. Arbitration

The central legal question before the High Court was whether the election of a remedy under RERA bars a subsequent petition under the Arbitration and Conciliation Act.

The Respondent, citing the Supreme Court’s decision in Ireo Grace Realtech Private Limited v. Abhishek Khanna , argued that allottees cannot "double dip" into different fora for the same cause of action. The Appellants countered that the relief sought under Section 9—specifically, an injunction against the developer leasing out property currently claimed by the allottees—constituted a separate, ongoing cause of action emerging after the issuance of completion certificates.

The Court’s Reasoning

The High Court rejected the notion that the proceedings were barred, noting that the RERA complaints and the Section 9 petitions were filed at distinct stages of the project. The Court highlighted that justice required a practical approach: while the developer enjoyed the fruits of rental income, the original investors, who had parted with their capital nearly a decade ago, were still denied possession.

The Court found the developer’s leasing strategy questionable, particularly the creation of Vexto Commercials Private Limited , which the Court suspected of being an "alter ego" of the developer’s own promoters, created specifically to circumvent the rights of the original allottees.

Key Observations

• On the breadth of Section 9 relief: “The power of the Court under Section 9 of the Arbitration and Conciliation Act, 1996, is quite broad and would permit grant of relief in cases where prima facie case, balance of convenience and irreparable injury is made out.”
• On the ongoing nature of the dispute: “The Appellants are running from pillar to post since the last several years... to secure their units which they have booked. They have made substantial payments to the Respondent and have not enjoyed any fruits of the said payment.”
• On the necessity of interim protection: “On the other hand, Respondent has entered into lease deeds and is earning substantial amounts through rent/lease amounts. The Respondent has not complied with the HARERA order of giving possession to the Appellants as well. Under such circumstances, this Court has no doubt that some protection ought to be extended to the Appellants at this stage.”

The Decision: Protecting the Allottees

In a move aimed at preventing further prejudice to the investors, the Court ordered Neo Developers Pvt. Ltd. to deposit the entire lease rental income earned from the units in question with the Registrar General of the Court, starting July 2025.

Furthermore, the Court appointed a Local Commissioner to visit the Neo Square Mall to ascertain the physical status of the occupied floors and determine if the "lessees" are indeed third parties or merely shell entities set up to frustrate the allottees' rights. This order serves as a stern warning against the use of corporate structures to deny homebuyers and commercial investors their rightful possession and returns. The case is set for further review on October 30, 2025, when the Commissioner’s report is expected to shed light on the reality of the mall’s occupancy.