Concurrent or exclusive? The need to settle the RERA-arbitration debate

The Bombay High Court recently held in Rashmi Realty Builders Private Limited v. Rahul Rajendrakumar Pagariya that disputes between flat allottees and promoters governed where remedies exist under the Real Estate (Regulation and Development) Act, 2016 (RERA), particularly Section 18 of RERA, are not arbitrable. .However, the Delhi, Patna and Gauhati High Courts have held that the mere fact that a concurrent remedy exists under the RERA would not render the dispute incapable of resolution through arbitration.This article examines the issue through the lens of Rashmi Realty and the judgment of the Gauhati High Court in Pallab Ghosh v. Simplex Infrastructures Limited to argue that the differing judgments by various High Courts highlights the need for the Supreme Court to provide a final resolution..In Rashmi Realty, the Bombay High Court was deciding a second appeal challenging the order of the Real Estate Appellate Tribunal directing the appellant to refund the respondent’s money in terms of Section 18(1) of the RERA. While the appellant raised several grounds, one of them was that the dispute was required to be adjudicated by an arbitrator, given the arbitration clause contained in the Memorandum of Understanding executed between the parties. The Court, therefore, framed the following substantial question of law:“Whether the jurisdiction of Real Estate Regulatory Authority established under Section 20 of the Real Estate Regulation and Development Act, 2016 is ousted, if the agreement between the promoter and the allottee contains arbitration clause?” To decide the matter, the Court extensively discussed the legislative intention and provisions of the RERA, particularly Sections 18, 40, 79, 88, and 89. The Court also relied on the four-fold test of arbitrability prescribed in Vidya Drolia & Others v. Durga Trading Corporation.The Court held that RERA was a special statute enacted to protect flat purchasers, the most vulnerable stakeholders in the real estate ecosystem. It also relied on Section 79 of the RERA, which bars the jurisdiction of civil courts over disputes covered under the Act, to hold that this bar would also apply to arbitration. The Court emphasised on consumer protection, swift redressal mechanisms and public interest considerations inherent in RERA, opining that arbitration could undermine these statutory safeguards. In fact, the Court held that the rights of flat purchasers under RERA are rights in rem and not rights in personam. For these reasons, the Court answered the question of law in the negative..Conversely, in Pallab Ghosh, the Gauhati High Court affirmed the validity of parties’ arbitration agreements, maintaining that the existence of remedies under a special statute like RERA does not automatically negate the arbitrability of the disputes.In this case, the Gauhati High Court held that a dispute related to interest on delayed possession was arbitrable. The Court relied on judgments of the Delhi High Court in Priyanka Taksh Sood v. Sunworld Realty Private Limited and the Patna High Court in Bihar Home Developers and Builders v. Narendra Prasad Gupta, both of which held that even if a dispute was amenable to the jurisdiction of RERA, it could be adjudicated through arbitration.The Court also relied on the decision of the Supreme Court in Emaar MGF Land Limited v. Aftab Singh, where it was held that while the consumer forum’s jurisdiction remained unaffected, there was no bar on a party entitled to avail remedies under a special statute from invoking arbitration if an arbitration agreement exists. The relevant paragraph of the judgment is below:“We may, however, hasten to add that in the event a person entitled to seek an additional/special remedy and he is a party to an arbitration agreement there is no inhibition in disputes being proceeded in arbitration. It is only the case where specific/special remedies were provided for and which are opted by an aggrieved person that judicial authority can refuse to relegate the parties to the arbitration.”Another decision relied upon by the Gauhati High Court was the Supreme Court’s judgment in Imperia Structures Limited v. Anil Patni, in which it was explicitly held that the bar of jurisdiction contained in Section 79 of RERA would not prevent the consumer forum dealing with a complaint where remedies existed under Section 18 of RERA, since the consumer forum is not a ‘civil court’. The apex court also specifically noted that Section 18 of RERA itself states that the remedies contained therein are “without prejudice to any other remedy available”..As several High Courts have taken differing views on the arbitrability of allottee-promoter disputes, it is necessary for the Supreme Court to decide the issue conclusively. A situation where disputes covered by RERA are arbitrable in some states and not in others is not desirable, as it leads to uncertainty and conflicting judgments. An unclear legal position only hurts litigants, especially flat purchasers who deserve clarity on their options when their homes are not delivered on time or not at all..In this author's opinion, the view taken by the Gauhati High Court is correct. It has correctly observed that the remedies under RERA, a special statute, are in addition to a general remedy, such as arbitration. The Court has analysed the principles enunciated in Emaar MGF and Imperia Structures, where the Supreme Court held that the Consumer Protection Act is a beneficial legislation that aims to provide an additional remedy to consumers, and it is for the consumer to decide which forum to approach. The Gauhati High Court has correctly drawn a parallel between the Consumer Protection Act and RERA and held that the same principles apply to disputes where remedies exist under RERA but there is an arbitration agreement between the parties.Furthermore, Section 88 of RERA explicitly recognises its provisions as additional and not derogatory to other existing legal remedies. In the opinion of this author, a harmonious interpretation of Section 79 and Section 88 of the RERA would be that, while a civil court would not have jurisdiction to adjudicate the dispute, allottee-promoter disputes are arbitrable as an arbitral tribunal is not a court. Arbitration, therefore, should not be automatically displaced by RERA’s jurisdiction..Another aspect to consider is that it is almost exclusively the flat purchaser who takes legal action against a developer due to delays in the project. In these circumstances, it should be open to the allottee to choose the forum he or she feels is appropriate. The Gauhati High Court has correctly considered this factor, while the Bombay High Court has not.For these reasons, the correct interpretation of the law is that allottee-developer disputes covered by RERA are also amenable to resolution through arbitration..Dushyant Krishnan is a lawyer based in Mumbai.