Simultaneous Recourse to RERA and Section 9 of Arbitration Act Permissible When Causes of Action Differ: Delhi High Court - 2025-09-18

Bridging the Gap: Delhi High Court Clarifies Arbitration vs. RERA Remedies

In a significant ruling for real estate investors, the Delhi High Court has clarified the interplay between remedies under the Real Estate (Regulation and Development) Act (RERA) and the Arbitration and Conciliation Act, 1996 . Addressing a batch of appeals, the division bench of Justice Prathiba M. Singh and Justice Shail Jain ruled that the mere existence of proceedings before the RERA authority does not automatically bar a party from seeking interim protections under Section 9 of the Arbitration Act, provided the triggers for relief are distinct.

The Backdrop: A Decade of Stalled Promises

The litigation concerns long-standing disputes between various appellants and the respondent, M/s Neo Developers Pvt. Ltd. , regarding commercial space bookings in Gurugram’s Neo Square Mall. Despite substantial payments made by investors since 2015, possession remained elusive.

While the appellants previously secured orders from HARERA in August 2024—mandating payment of assured returns and future handover of units—the developer allegedly bypassed these obligations. The core of the present challenge arose when the appellants sought interim injunctions under Section 9 of the Arbitration Act to prevent the respondent from leasing out the properties to third parties, fearing these actions would further dilute their rights.

Arguments: The Battle of Estoppel

The respondent, drawing upon the Supreme Court’s decision in Ireo Grace Realtech Private Limited v. Abhishek Khanna , argued that the appellants were "electing" remedies. They contended that once a party chooses the RERA forum, they are estopped from subsequently invoking the Arbitration Act for the same grievance.

Conversely, the appellants countered that the RERA orders were obtained at a pre-completion stage. The Section 9 petitions were reactive filings triggered only after the issuance of completion certificates, when the respondent allegedly created "sham" lease agreements with newly incorporated, connected entities to strip the investors of their rightful possession.

Legal Analysis: Distinct Causes of Action

The Court rejected the "blanket ban" approach on simultaneous remedies, noting that RERA and the Arbitration Act serve different, yet complementary, purposes.

The Court emphasized that the relief sought before HARERA related to historical grievances and assured returns, whereas the petitions under Section 9 were necessitated by post-completion developments—namely, the risk of third-party interests being created. Because the latter sought to preserve the specific subject matter of the dispute after the occupation certificate was issued, the causes of action were found to be legally distinct.

Key Observations

The judgment offers a firm stance on protecting investors who are "running from pillar to post," stating:

• "An election of remedies arises when two concurrent remedies are available, and the aggrieved party chooses to exercise one, in which event he loses the right to simultaneously exercise the other for the same cause of action."
• "The Section 9 petitions have been filed after completion certificates have been issued. Moreover, the continued non-adherence of any obligations by the Respondent, constitutes a continuing cause of action in favour of the Appellants."
• "Under Section 9 of the Arbitration and Conciliation Act, 1996 the Court can pass various interim measures of protection including ... such other interim measures of protection as appear to the Court to be just and convenient."

Court's Decision: A Shield for Investors

In a move to ensure transparency and preserve the value of the disputed commercial spaces, the Delhi High Court issued stringent interim orders:

1. Rental Escrow: The respondent must deposit all lease rentals earned from the units with the Registrar General of the High Court, to be held in interest-bearing fixed deposits.

2. Independent Oversight: The Court appointed a Local Commissioner to inspect the premises, verify the current occupancy status, and report on the existence of any sub-tenants.

3. Status Quo: Further proceedings before commercial courts on this matter are paused to prevent a multiplicity of litigation, while the current interim protections remain in effect until the next hearing on October 30, 2025.

This ruling provides a critical roadmap for investors, affirming that while RERA provides a regulatory framework for grievances, it does not strip them of the right to preserve their assets through arbitration when new, distinct threats to their property rights emerge.