RERA Remedies No Bar to Arbitration Relief: Delhi High Court

In a pivotal ruling, the High Court of Delhi has clarified the interplay between statutory consumer remedies and private arbitration, holding that initiating proceedings under the Real Estate (Regulation and Development) Act (RERA) does not automatically preclude an aggrieved party from seeking interim protections under Section 9 of the Arbitration and Conciliation Act, 1996 .

The Division Bench, comprising Justice Prathiba M. Singh and Justice Shail Jain, addressed a cluster of appeals challenging the dismissal of petitions by Commercial Courts , which had wrongly invoked the "Doctrine of Election of Remedies" to reject arbitration-related interim relief.

A Long-Standing Conflict

The dispute arises from a commercial transaction in the "Neo Square" project in Gurugram, initiated in 2015. Several investors, including Rahul Bhargava and M/s Jagmohan Enterprises LLP, executed Builder Buyer Agreements (BBA) and Memorandums of Understanding (MoU) with M/s Neo Developers Pvt. Ltd. The deal promised "assured monthly returns" of Rs. 22,500.

By 2019, defaults in payments and construction delays soured the relationship, leading the investors to seek recourse through the Economic Offences Wing of the Delhi Police and subsequently through the Haryana Real Estate Regulatory Authority (HARERA) . While HARERA ruled in favor of several allottees, the developers failed to comply, prompting investors to initiate arbitration proceedings. To protect their units from being leased out or canceled during the initiation of this arbitration, the appellants sought interim injunctions under Section 9, which the lower Commercial Courts dismissed, arguing that the investors could not seek simultaneous remedies.

Balancing the Scales

The High Court’s intervention centers on whether the investors’ pursuit of statutory relief under RERA bars them from accessing the supportive protection of the Arbitration Act. Justice Shail Jain, writing for the Court, noted that HARERA proceedings provide substantive adjudication, while Section 9 petitions serve an ancillary, protective function.

"The approach that at the initial stage, only the existence of an arbitration clause need be considered is not justified," the Court noted, citing Adhunik Steels Ltd. v. Orissa Manganese and Minerals (P) Ltd.

The Court clarified that the two remedies are not concurrent in the sense that they are not identical. The investors were not asking the Commercial Court to sit in appeal over HARERA’s decisions, but rather to preserve the status quo—preventing the developers from leasing the property to third parties or canceling allotments pending the formal commencement of arbitration.

Key Observations

The judgment clarifies that legal protections under RERA are cumulative rather than exclusionary.

• Distinct Legal Terrain: "The proceedings before HARERA and those under Section 9 of the Act of 1996 occupy distinct legal terrains and were invoked for different and well-defined purposes."
• Preventive Nature of Section 9: "The Courts exercising such jurisdiction under Section 9 of the Act do not determine the merits of the underlying dispute, but intervene to ensure that the arbitral process is not rendered futile by unilateral or irreversible acts of one party."
• Prevention of Irreparable Harm: "The importance of injunctions in this context also flows from the principle that equity intervenes to prevent irreparable injury."

The Final Order

Finding that the lower courts erred by failing to analyze the nature of the reliefs sought, the Delhi High Court allowed the appeals. It has issued an order restraining M/s Neo Developers Pvt. Ltd. from creating any third-party interests in the properties, including leasing them out, until the arbitral proceedings officially commence. The Court also ordered the status quo until the constitution of an Arbitral Tribunal, emphasizing that the developer's move to lease units through a newly incorporated entity (M/s Vexto Commercials Pvt. Ltd.) appeared, prima facie, to be a "sham transaction."

This ruling serves as a vital safeguard for investors, affirming that regulatory protection does not strip them of their contractual right to pursue arbitration or the protective support offered by the mainstream court system.