The Real Estate (Regulation & Development) Act, 2016 (RERA Act) has revolutionized the Indian real estate sector by safeguarding the interests of homebuyers. One critical question that often arises is whether disputes between flat buyers and developers can be subjected to arbitration when an arbitration clause is present in the flat-purchase agreement. This article delves into the arbitrability of such disputes under the RERA Act, examining legal provisions, court decisions, and the buyer’s right to choose remedies.
If the flat-purchase agreement has an Arbitration Clause, then as per Section 8 Arbitration becomes mandatory. However, provisions of RERA Act 2016 are said to override it being a Special Statute. The disputes pertain to Developer delaying the Possession of the flat & the claims are for the refund. Section 18 of RERA act provides for expedited refunds but the buyer, if so chooses, can or cannot execute the Arbitration Agreement? – Noteworthy, that Courts have decided in favor of choice of remedies given that the dispute is Arbitrable by applying the tests of Arbitrability laid down in Vidya Drolia Judgment & Booz Allen Judgment.
The Supreme Court in 2021 in IREO Grace Realtech Pvt Ltd. v. Abhishek Khanna [1]held that 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 multiple 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”
It is a clear & settled position of law that the Claimant’s right to execute the arbitration agreement is not foreclosed under RERA Act, 2016 on the ground that no bar to arbitrate exists. Section 79 of the RERA Act ousts the jurisdiction of civil courts. Section 89 provides for an overriding effect, however, it conflicts with S. 8 (1) of A & C, Act that mandates reference to arbitration when a valid arbitration agreement in there in a sale contract. Refunds u/s 18 of RERA Act are to be given without prejudice to any other remedy available except remedy by a civil court u/s 79, RERA.
The Delhi High Court in 2022 in Priyanka Taksh Sood V. Sunworld Residency[2] examined provisions that are “Pari Materia” to section 89 of RERA act; e.g. S. 60 of Competition act, S. 81 of IT Act, IBC, etc. it held “there is no doubt in the mind of this Court that, giving a purposive interpretation to Sections 79, 88 and 89 of the RERA Act, there is no bar under the RERA Act from application of concurrent remedy under the A&C Act, and thus, there is no clash between the provisions of the RERA Act and the A&C Act, as the remedies available under the former are in addition to, and not in supersession of, the remedies available under the A&C Act.”
Remedies that are given to allottees of flats/apartments are therefore concurrent remedies, such allottees of flats/apartments being in a position to avail of remedies under the Consumer Protection Act, 1986, RERA as well as the triggering of the Code.
The Supreme Court in 2020 in Imperia Structures v. Anil Patni[3] held that “The absence of bar under Section 79 to the initiation of proceedings before a fora which cannot be called a Civil Court and express saving under Section 88 of the RERA Act, make the position quite clear. Further, Section 18 itself specifies that the remedy under it is “without prejudice to any other remedy available”. Thus, the parliamentary intent is clear that a choice or discretion is given to the allottee on proceedings.” Therefore, submitted that choice of fora to secure refunds of monies paid for allotment are allowed u/s section 18 of RERA Act.
The SARFAESI act is a special legislation, hence, referring to the opinion of Justice Sanjay Kaul in Supreme Court in 2017 in M.D. Frozen Foods Exports Private Limited v. Hero Fincorp Limited[4], that proceedings both under the Arbitration Act and the SARFAESI Act could continue simultaneously.
Therefore, a flat buyer can choose to ‘opt for’ arbitration given that; 1. A valid Arbitration Agreement exists; 2. Dispute remains arbitrable, 3. No other issues exists that may invalidate the invocation of arbitration.
Conclusion: In summary, the arbitrability of flat-buyer disputes under the RERA Act, 2016, remains a complex issue. While the presence of an arbitration clause in a flat-purchase agreement may make arbitration mandatory as per the Arbitration Act, the RERA Act’s special status complicates matters. However, court rulings, including those from the Supreme Court, affirm the flat buyer’s right to choose remedies, including arbitration, provided certain conditions are met. Ultimately, the choice of whether to opt for arbitration depends on the specific circumstances of the dispute and the parties involved.
[1] (2021) 3 SCC 241.
[2] 2022 SCC OnLine Del 4717
[3] (2020) 10 SCC 783.
[4] (2017) 16 SCC 741
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