Guwahati High Court: There’s No Bar On Invoking Arbitration Despite Alternative Remedy Under RERA Act

Guwahati High Court: There’s No Bar On Invoking Arbitration Despite Alternative Remedy Under RERA Act

Cites the judgments of the Supreme Court, The Patna High Court and the Delhi High Court in similar cases

The Guwahati High Court has ruled that arbitration can be invoked to settle a real estate dispute, despite the existence of an alternative legal remedy under the Real Estate (Regulation and Development) Act, 2016.

The bench of Justice Michael Zothankhuma held that there was no inherent conflict or repugnancy between the Real Estate Regulatory Authority (RERA) Act and the Arbitration and Conciliation (A&C) Act, 1996.

It explained that while the RERA Act provided a specific mechanism for resolving real estate disputes, the presence of an arbitration agreement between the parties allowed the invocation of arbitration.

The bench stated, “There is nothing to show any inconsistency or repugnancy between the provisions of the RERA Act and arbitration as an alternative. Even otherwise, the parties have both agreed to the arbitration clause being provided in the contract agreement for settlement of their disputes including the issue raised by the petitioners herein.”

The court referred to paragraph 55 in the Supreme Court judgment in the Vidya Drolia vs Durga Trading Corporation, discussing the ‘doctrine of election’, which allowed the parties to select arbitration as a dispute resolution method by mutual agreement. This could happen in absence of inconsistency with mandatory statutory provisions.

The bench applied the four-fold test propounded by the top court to determine the arbitrability.

The test included examining whether the subject matter of the dispute involved the rights in rem, affected third-party rights, pertained to sovereign functions, or was explicitly non-arbitrable by statute. The court held that it did not fall into any of these categories.

The case:

The claim of the petitioners Pallab Ghosh and Kakali Roy pertained to the interest on the amount they paid for their apartment from 21 December 2020, until the possession was handed over.

An agreement for sale of the apartment was executed on 24 January 2017, stipulating that Simplex Infrastructures Ltd (respondent No.1) was to deliver the possession by 20 December 2020.

The petitioners paid 95 percent of the total consideration, with the remaining 5 percent due upon possession. Since the possession did not happen, the petitioners sought an interest under Section 18 of the RERA Act and Clause 11.3 of the Agreement.

They appointed an arbitrator but the respondent despite receiving the arbitration notice did not appoint its arbitrator.

Thereafter, the petitioners approached the court under Section 11(6) of the A&C Act for the arbitrator’s appointment.

The petitioners referred to the decision of the Delhi High Court in the Priyanka Taksh Sood & Ors vs Sunworld Residency case. They argued that arbitration was not precluded by the existence of concurrent remedies under the RERA Act.

They also referred to the judgment of the apex court in the Smt. M. Hemalatha Devi & Ors. vs B. Udayasri case, wherein it was stated that a party could choose between public and private forums for dispute resolution.

The petitioners further cited the top court’s ruling in the Imperia Structures Ltd vs Anil Patni & Anr case, wherein it was clarified that entitlement to action under Section 18 of the RERA Act was based on the agreement's terms and not the project's RERA registration validity.

The petitioners explained that the absence of a bar under Section 79 of the RERA Act allowed for arbitration, supported by the judgment of the Patna High Court in the Bihar Home Developers and Builders vs. Narendra Prasad Gupta case, wherein it found the Arbitration Act consistent with the RERA Act. Additionally, the Supreme Court's decision in the Vidya Drolia case distinguished between non-arbitral disputes under the Debt Recovery Tribunal (DRT) Act and those under the RERA Act, where arbitration was permissible for interest claims due to delayed possession.

On the other hand, the respondent referred to the judgment of the apex court in the Vidya Drolia case, arguing that arbitration was viable only if the law recognized it as an alternative remedy. Akin to the DRT Act, the RERA Act provided a complete code for resolving disputes which made the dispute non-arbitrable.

The respondent cited the NTPC Ltd. vs SPML Infra Ltd case, emphasizing the necessity to first ascertain the existence and validity of the arbitration agreement and whether the dispute was arbitrable. It added that under Section 35 of the RERA Act, the authority could conduct investigations and enforce compliance.

Justice Zothankhuma referred to the Priyanka Taksh Sood case, wherein the Delhi High Court held that the existence of a concurrent remedy under the RERA Act did not preclude the adjudication of a dispute through an arbitration clause.

The judge also noted the Supreme Court decision in the Imperia Structures case, wherein it was clarified that if a promoter failed to give possession of an apartment by the specified date, the allottee had the right to demand a return of the amount paid, with interest, or to receive interest for every month’s delay until the possession. The allottee could proceed under either Section 18(1) or the proviso to Section 18(1) of the RERA Act.

The top court had discussed the interplay between the RERA Act and other legal provisions. Section 79 of the RERA Act barred civil courts from entertaining suits on matters the authority could determine, but it did not bar the consumer forum from addressing the issues under Section 18. Moreover, the express savings clause in Section 88 and the absence of a bar in Section 79 made it clear that an allottee could choose to proceed under the RERA Act or the Consumer Protection Act, as outlined in the Imperia Structures case.

In the Pioneer Urban Land & Infrastructure Ltd case, the Supreme Court held that the RERA Act should be read with the Insolvency and Bankruptcy Code (IBC). However, in case of conflict, the IBC prevailed over the RERA Act. Therefore, remedies for the allottees were concurrent, allowing them to seek redress under the Consumer Protection Act, the RERA Act, or the IBC.

In the Management Committee of Montfort Senior Secondary School case, the apex court had held that in cases of jurisdictional conflict, the plaintiff's choice of forum should be respected unless explicitly excluded by law. Similarly, in the M. D. Frozen Foods Exports Pvt. Ltd. vs Hero Fincorp Ltd case, the top court had allowed simultaneous proceedings under the A&C Act and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002.

The Guwahati High Court bench also referred to Sections 18, 71, and 88 of the RERA Act, which collectively indicate that the provisions were supplementary to other legal remedies, not exclusive or overriding them. Section 18 provided compensation and interest in case of delay, Section 71 outlined the power to adjudicate compensation, and Section 88 ensured that the RERA Act did not negate other laws.

In the National Seeds Corporation Limited vs. M. Madhusudhan Reddy case, the Supreme Court had held that the Consumer Protection Act provided an additional remedy, not an exclusive one, allowing for arbitration or consumer complaints.

Similarly, in the Emaar MGF Land Ltd. vs Aftab Singh case, the top court confirmed that the availability of special remedies under one statute did not preclude arbitration unless the aggrieved party chose the same.

The bench also considered the Doctrine of Election, which allowed a party to choose between remedies if both were available for the same relief, provided the scope and ambit of the remedies differed. It held that the RERA Act, while barring civil court jurisdiction, did not exclude other fora such as arbitration or consumer protection mechanisms.

The judge stated there was a distinction in the mode of recovery of money as envisaged under the DRT Act and the RERA Act. He added that for money recovery under the A&C Act, an execution case must be filed under its provisions before the district judge. This was similar to the appropriate procedure prescribed for money recovery under the RERA Act.

The court noted that the petitioners opted for arbitration as per the agreed clause to settle their dispute. Therefore, it could be utilized to resolve the current dispute instead of resorting to the RERA Act.

To resolve the dispute, the court appointed Justice (Retired) H.N. Sarma as the sole arbitrator.