Breaking the Deadlock: Delhi High Court Upholds Right to Interim Relief in Real Estate Arbitration

In a significant ruling aimed at protecting homebuyers and investors, the Delhi High Court has clarified the interplay between remedies under the Real Estate (Regulation and Development) Act, 2016 (RERA) and the Arbitration and Conciliation Act, 1996. The Division Bench of Justice Prathiba M. Singh and Justice Shail Jain held that the pursuit of a remedy before RERA does not act as an automatic bar against filing for interim measures under Section 9 of the Arbitration Act, especially when the latter involves distinct developmental milestones like the issuance of completion certificates.

The Conflict: A Struggle for Possession and Returns

The current dispute involves multiple appellants who booked commercial spaces in the "Neo Square Mall" in Gurugram, managed by M/s Neo Developers Pvt. Ltd. Years of promised assured returns failed to materialize, and construction delays left investors without the promised commercial units.

While the investors successfully obtained favorable orders from the Haryana RERA in August 2024—directing the developer to pay arrears and hand over possession—these directives have faced stiff implementation hurdles. Frustrated by the lack of physical possession and the developer’s move to lease out the units to a third party (Vexto Commercials Private Limited), the appellants approached the Commercial Courts under Section 9 of the Arbitration Act for urgent interim injunctions. The lower courts had initially dismissed these pleas, citing an election of remedies and the potential for overlapping proceedings.

The Developer's Gambit vs. Investor Rights

The appellants alleged that M/s Neo Developers had essentially created a "sham" lease with Vexto Commercials—a company they claimed was an alter ego of the developer’s own promoters—specifically to frustrate the rights of the original investors and syphon off rental income.

The developer defended these actions by pointing to the Supreme Court’s decision in Ireo Grace Realtech Private Limited v. Abhishek Khanna , arguing that an aggrieved party cannot simultaneously agitate the same cause of action in two different forums.

Legal Analysis: Concurrent or Contradictory?

The High Court performed a surgical analysis of the cause of action in both forums. It noted that the appellants’ petition before RERA was filed at an earlier stage of the project. Conversely, the Section 9 petitions were triggered by new developments, including the issuance of the completion certificate and the developer’s unilateral decision to lease out property that rightfully belonged to the appellants.

The Court held that the legal bar under Section 79 of the RERA Act does not act as a blanket prohibition when the grievances involve evolving breaches of contract. The Bench emphasized that the "continued non-adherence of any obligations" by the developer constitutes a continuing cause of action, allowing investors to seek protective measures to secure their investments.

Key Observations

• On the scope of Section 9: "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 'Election of Remedies' doctrine: "An allottee may elect or opt for one out of the remedies provided by law for redressal of its injury or grievance. 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."
• On the Need for Protection: "In all these appeals, the Appellants are running from pillar to post since the last several years... they have made substantial payments to the Respondent and have not enjoyed any fruits of the said payment."

The Verdict: Interim Relief and Accountability

To ensure the subject matter of the arbitration remains protected, the Court issued a stringent directive: 1. Rent Deposits: The Respondent is ordered to deposit all rental income earned from the disputed units into the Registrar General's account at the High Court, to be maintained in an auto-renewal fixed deposit. 2. Independent Inspection: The Court appointed a Local Commissioner to inspect the premises, verify the current occupancy status, and identify if any unauthorized sub-tenants are operating, with the developer bearing all costs.

This decision serves as a crucial precedent for real estate investors, affirming that procedural technicalities and the existence of RERA proceedings cannot be used by developers as a shield to deny access to, or profit from, property that belongs to the allottees. The matter is next listed for October 30, 2025, pending a comprehensive report from the Local Commissioner.