Delhi HC: Simultaneous Remedies Under RERA and Section 9 of Arbitration Act Permissible for Distinct Causes of Action - 2025-09-18

Delhi High Court Clarifies: Parallel Remedies Under RERA and Arbitration Act Are Not Mutually Exclusive

In a significant order addressing the rights of commercial property buyers, the Delhi High Court has clarified the boundaries between proceedings under the Real Estate (Regulation and Development) Act (RERA) and applications under Section 9 of the Arbitration and Conciliation Act, 1996. The Division Bench, comprising Justice Prathiba M. Singh and Justice Shail Jain, ruled that allottees are not barred from seeking interim measures of protection through the Arbitration Act simply because they have already approached RERA for relief.

The Conflict at Neo Square Mall

The dispute centers on investment by several appellants in commercial spaces within the Neo Square Mall in Gurugram. According to the appellants, the developer, M/S Neo Developers Pvt. Ltd., failed to provide assured returns, delayed construction, and failed to hand over possession as agreed upon in their Memoranda of Understanding (MoU).

While the Haryana Real Estate Regulatory Authority (HARERA) had previously issued orders favoring the allottees, directing the developer to pay arrears and offer possession, the developer allegedly continued to operate as if they had full ownership rights. The appellants subsequently filed petitions under Section 9 of the Arbitration Act to protect their interests, fearing the developer was creating third-party leasehold rights. These petitions were initially dismissed by lower commercial courts, which cited the Ireo Grace Realtech Private Limited judgment, arguing that an "election of remedies" barred the appellants from approaching the courts.

Arguments from the Allottees and the Developer

The appellants, represented by counsel, contended that their HARERA complaints were filed at a different stage of the project. They argued that their Section 9 petitions were essential to prevent the developer from entering into "sham" lease agreements with proxy entities—specifically Vexto Commercials Private Limited , a firm the appellants alleged was controlled by the developer's promoters.

Conversely, the Respondent maintained that based on the Supreme Court’s ruling in Ireo Grace , once a purchaser elects to file a complaint before a specific forum like RERA, they are "estopped" from pursuing parallel remedies under the Arbitration Act regarding the same cause of action.

The Court’s Analysis: Distinct Causes of Action

The Delhi High Court rejected the developer’s argument of total bar, highlighting a crucial temporal distinction. The Court observed that the RERA proceedings were initiated prior to the issuance of the project’s completion certificate. In contrast, the Section 9 petitions were filed after the certificate was issued, reflecting a developing breach.

Justice Prathiba M. Singh noted that the continued non-performance by the developer, coupled with the unauthorized leasing of properties that rightfully belonged or were destined to be handed over to the appellants, constituted a "continuing cause of action."

Key Observations

The judgment emphasizes the necessity of protecting parties who have waited years for their investments to bear fruit:

• "An allottee may elect or opt for one out of the remedies provided by law for redressal of its injury or grievance... [but] a party cannot simultaneously proceed at avail of different remedies for the same cause of action." (referencing Ireo Grace Realtech Private Limited )
• "The legal issue which has been raised... would not bar the filing of petitions under Section 9 of the Arbitration and Conciliation Act, 1996 as the proceedings before HARERA are not from the same cause of action."
• "The Appellants are running from pillar to post since the last several years... in order 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."
• "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."

Final Decision and Implications

In a move to protect the financial interests of the appellants, the Court ordered: 1. Lease Income Impoundment: The Respondent must deposit the entire rental income received from the units in question with the Registrar General of the Court, starting retroactively from July 1, 2025. 2. Local Commission: A Local Commissioner was appointed to physically inspect the mall, verify the occupancy status, and ensure the identity of current tenants is transparent. 3. Transparency: The developer is required to submit detailed affidavits regarding the current status of all commercial spaces and existing lease arrangements.

This ruling provides a major safeguard for frustrated home and commercial space buyers, ensuring that developers cannot use legal technicalities to indefinitely withhold possession while simultaneously profiting from the assets. The matter is currently listed for further hearing on October 30, 2025.