Breaking the Deadlock: Delhi High Court Clarifies Overlap Between RERA and Arbitration

In a significant order addressing the intersection of property law and alternative dispute resolution, the High Court of Delhi has ruled that investors are not necessarily barred from seeking interim measures under Section 9 of the Arbitration and Conciliation Act, 1996 , even if they have previously approached the Haryana Real Estate Regulatory Authority (HARERA) .

The division bench comprising Justice Prathiba M. Singh and Justice Shail Jain observed that the legal remedy invoked under RERA does not act as a permanent estoppel against subsequent arbitration petitions, provided the cause of action and the project stage are distinct.

The Long-Standing Dispute

The case involves multiple appellants who booked commercial spaces in the "Neo Square Mall" in Gurugram, developed by M/s Neo Developers Pvt. Ltd. Over the years, the project faced significant delays, leading to disputes over possession and promised "assured returns."

While the appellants successfully obtained favorable orders from HARERA on August 14, 2024, directing the real estate developer to pay arrears and hand over possession, the developer failed to comply. Simultaneously, the developer moved to lease out the properties to a third entity, Vexto Commercials Private Limited , fueling allegations by the appellants that this was a "sham" transaction designed to defeat their rights.

The Legal Tug-of-War

The commercial courts had previously dismissed the appellants' petitions under Section 9, citing the Supreme Court’s decision in Ireo Grace Realtech Private Limited v. Abhishek Khanna and Ors. , which suggests that once a party elects a forum, they cannot pursue concurrent litigation.

However, the appellants, represented by counsel, argued that they were forced to approach the court because the "completion certificate" had been issued after the initial HARERA proceedings. They maintained that this created a fresh, continuing cause of action, distinct from the initial complaints filed when the project was incomplete.

The Court’s Reasoning

The High Court emphasized that the power under Section 9 of the Arbitration Act is broad, intended to ensure the "preservation of the subject matter" of a dispute. The court noted:

> "The continued non-adherence of any obligations by the Respondent, constitutes a continuing cause of action in favour of the Appellants. Thus, the Appellants are well within their rights to seek further relief from the appropriate forum for securing their interest."

Addressing the developer's reliance on the Ireo Grace judgment, the Court distinguished the cases, clarifying that the bar on choosing multiple remedies applies only when a party attempts to pursue the same cause of action simultaneously, not when they are forced to adapt their legal strategy as a project evolves.

Key Observations

• On the Nature of Relief : The Court observed that "persons like the Appellants are forced to avail of remedies at different stages before different authorities," recognizing the practical reality of real estate litigation.
• On the Alleged Sham Lease : Expressing concern over the developer's conduct, the Court noted: "The 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."
• On Section 9 Mandate : The Court reiterated: "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."

Interim Directions and Future Implications

To protect the interests of the investors while the legal proceedings continue, the Delhi High Court issued stringent interim directions: 1. Rental Deposits : The respondent company must deposit all rental income earned from the disputed spaces with the Registrar General of the Court , starting from July 1, 2025, to be maintained in an auto-renewal fixed deposit. 2. Independent Inspection : The Court appointed a Local Commissioner to inspect the ground and third floors of Neo Square Mall to verify the current occupancy status, including identifying tenants and obtaining copies of lease deeds.

This ruling provides much-needed clarity for homebuyers and commercial investors who often find themselves trapped between regulatory delays and the limited efficacy of existing administrative orders. By permitting the Section 9 route in these circumstances, the Court has signaled that a party’s attempt to seek recovery under RERA will not be weaponized by developers to avoid subsequent arbitration-backed safeguards.

The matter is set to be heard again on October 30, 2025 .