Delhi HC: RERA Relief Does Not Bar Arbitration Interim Protection

New Delhi, December 24, 2025 – In a significant ruling for real estate investors and homebuyers, the Delhi High Court has held that seeking relief under the Real Estate (Regulation and Development) Act, 2016 (RERA) does not preclude parties from obtaining interim protection under Section 9 of the Arbitration and Conciliation Act, 1996. A Division Bench comprising Justice Prathiba M. Singh and Justice Shail Jain set aside orders from Commercial Courts that had dismissed such petitions, emphasizing the concurrent and complementary nature of these remedies.

The decision, delivered in a batch of appeals (lead case: FAO (COMM) 210/2025, Rahul Bhargava & Anr. v. M/s Neo Developers Pvt Ltd ), underscores the protective role of courts in preserving the subject matter of arbitration, even after regulatory intervention by bodies like the Haryana Real Estate Regulatory Authority (HARERA). This ruling arrives at a time when real estate disputes are surging, with delays in project delivery and unfulfilled promises of assured returns plaguing investors.

Background: A Tale of Delayed Promises and Multi-Forum Litigation

The disputes trace back to 2015, when several appellants, including individuals like Rahul Bhargava and Harmeet Singh Kapoor, and entity M/s Jagmohan Enterprises LLP, entered into agreements with M/s Neo Developers Pvt Ltd for commercial units in the "Neo Square" project at Sector 109, Gurugram, Haryana. These were not mere purchases but investment opportunities under Builder-Buyer Agreements (BBAs) and Memorandums of Understanding (MoUs), promising assured monthly returns—ranging from Rs. 22,500 to Rs. 64,337 per unit—starting from the agreement dates until the first lease commencement.

The appellants paid full consideration upfront, totaling amounts like Rs. 11.66 lakh for smaller units and up to Rs. 43.53 lakh for larger ones. However, from 2019, the developer unilaterally halted these returns, issued vague demand notices for "fit-out charges" and other dues, and threatened allotment cancellations. Construction delays compounded the woes, with possession nowhere in sight despite obtaining an Occupation Certificate (OC) in early 2025.

Aggrieved, the appellants first approached HARERA, filing complaints that resulted in favorable orders: one on August 14, 2024, setting aside cancellations, directing payment of arrears with 9% interest, and mandating possession within two months of OC; another on May 14, 2025, reiterating these reliefs and prohibiting unauthorized charges. No appeals were filed against these HARERA directives, and execution proceedings remain pending.

Post-HARERA, the developer sent letters in February 2025 offering possession but conditioning it on payment of unexplained demands—e.g., Rs. 5.13 lakh plus Rs. 10.32 lakh in fit-out charges for one unit—while claiming the units had been re-leased to a related entity, M/s Vexto Commercials Pvt Ltd, incorporated suspiciously close to the timeline. This prompted the appellants to invoke the arbitration clauses in their MoUs and seek urgent interim relief under Section 9 before Delhi's Commercial Courts to prevent leasing or cancellation pending arbitration.

The Commercial Courts dismissed these petitions (e.g., OMP (I) (COMM) 470/2025 on June 9, 2025, for lack of jurisdiction due to a hyper-technical distinction between "Delhi" and "New Delhi" as the arbitration seat; others on July 10 and 31, 2025, invoking the doctrine of election of remedies, deeming RERA pursuit as barring arbitration reliefs). The appellants appealed, arguing the remedies were distinct: RERA for substantive regulatory enforcement, Section 9 for preservative interim measures.

The Court's Reasoning: Distinguishing Remedies and Rejecting the Election Doctrine

Delivering the judgment, Justice Shail Jain, speaking for the Bench, opened with a poignant quote from Adhunik Steels Ltd. v. Orissa Manganese and Minerals (P) Ltd. (2007) 7 SCC 125: "The relationship between Courts and Arbitral Tribunals has been said to swing between forced cohabitation and true partnership. The process of arbitration is dependent on the underlying support of the Courts..."

The Court meticulously dissected the reliefs sought. Before HARERA, appellants demanded compliance with timelines, arrears payment, and declarations against arbitrary demands—substantive, adjudicatory reliefs under RERA's regulatory mandate. In contrast, Section 9 petitions sought narrow injunctions: restraining third-party interests (e.g., leasing), preventing allotment cancellations, and status quo maintenance until arbitration commencement. These were "interim and protective," not merits adjudication.

Crucially, the Bench rejected the Commercial Courts' application of the doctrine of election, drawing from IREO Grace Realtech (P) Ltd. v. Abhishek Khanna (2021) 3 SCC 241. There, the Supreme Court clarified that election applies only to identical, concurrent remedies; where scopes differ, parties may pursue both. Section 88 of RERA explicitly states its provisions are "in addition to, and not in derogation of, any other law," aligning with Arbitration Act's Section 9, which empowers courts for preservation even pre-arbitration.

The Court faulted the lower courts for not comparing reliefs: "In the absence of any analysis of the character, scope, timing, and surrounding circumstances... it was legally impermissible to conclude that the Section 9 petitions were non-maintainable." It also criticized the jurisdictional dismissal in the lead case as "hyper-technical," noting petitions should be returned, not dismissed, under Order VII Rule 10 CPC.

On interim measures, the judgment invoked Section 9's broad powers for preservation, injunctions, and receivership, citing Vijayawa Transport v. A.P. State Civil Supplies Corpn. Ltd. (1982 SCC OnLine AP 256) to affirm pre-arbitration reliefs' necessity. International perspectives from Dr. Peter Binder's International Commercial Arbitration and Mustill & Boyd's treatise reinforced courts' supportive role against asset dissipation.

The Bench appointed a Local Commissioner, whose October 5, 2025, report revealed ongoing construction on the third floor—dark, incomplete lifts, no tenants—undermining the developer's lease claims. Prima facie viewing the lease as a "sham" to defeat rights, the Court directed rent deposits (undeposited by developers) and granted injunctions: no third-party interests or status quo alterations until arbitration.

Legal Implications: Bolstering Investor Confidence in Hybrid Remedies

This ruling is a watershed for real estate arbitration. It clarifies that RERA's statutory framework—aimed at consumer protection and project regulation—operates alongside contractual arbitration, preventing regulatory exhaustion from stripping interim safeguards. Legal practitioners note this aligns with Priyanka Taksh Sood v. Sunworld Residency Pvt. Ltd. (2022 SCC OnLine Del 4717), affirming no bar under RERA Sections 79, 88, and 89 to Arbitration Act pursuits.

For the legal community, the decision tempers the doctrine of election's rigidity, emphasizing remedy scopes over forum multiplicity. It warns against conflating regulatory adjudication with arbitration's preservative jurisdiction, potentially reducing dismissals in multi-forum disputes. In practice, developers must now tread carefully against post-RERA actions like coercive demands, as courts will scrutinize for irreparable harm—e.g., property alienation—under prima facie case, balance of convenience, and irreparable injury tests from Wander Ltd. v. Antox India (P) Ltd. (1990 Supp SCC 727).

Broader impacts ripple through India's real estate sector, valued at over $200 billion, where assured-return schemes have faced scrutiny under the Banning of Unlawful Deposit Schemes Act, 2019. Investors, often retail participants, gain leverage: RERA for quick enforcement, arbitration for nuanced contractual breaches. This fosters "true partnership" between courts and tribunals, as the judgment envisions, deterring sabotage via third-party encroachments.

Critics, including developer lobbies, may argue it invites forum-shopping, but the Court's insistence on distinct purposes mitigates this. With execution pending before HARERA and arbitration imminent, these appellants' saga highlights enforcement gaps; future tribunals may reference this for holistic reliefs, including interest on arrears.

Looking Ahead: Arbitration's Role in Real Estate Evolution

As real estate evolves toward integrated dispute resolution, this judgment signals judicial support for arbitration's efficiency—faster than civil suits, confidential unlike RERA's public proceedings. For legal professionals, it mandates deeper relief-analysis in Section 9 petitions, potentially increasing appeals but refining jurisprudence.

The appellants' counsel, Tanmay Mehta, hailed it as "vindication for investors navigating regulatory mazes," while respondent's advocate Jitender Chaudhary noted ongoing compliance willingness. With no final merits adjudication here, the path to arbitral award—and possible enforcement under Section 36—remains open, but fortified interim shields ensure it's not illusory.

This 43-page verdict (2025:DHC:11842-DB) not only resolves these appeals but recalibrates the interplay of RERA and arbitration, promising fairer terrain for India's realty disputes. As Justice Jain concluded, echoing Adhunik Steels , courts must "rescue the system" when one party sabotages it—here, preserving investments worth crores for beleaguered buyers.