The Real Estate (Regulation and Development Act), 2016 (RER Act) establishes an adjudicatory mechanism for efficient resolution of home buyers’ disputes. Since its enactment, the question of whether this adjudicatory mechanism is to the exclusion of arbitration has arisen repeatedly. Deep diving into this controversy, this article examines the overlap between arbitration under the Arbitration and Conciliation Act, 1996 (Arbitration Act) and the mechanism under the RER Act through an analysis of the emerging case law on the subject.
Jurisdiction of the Real Estate Regulatory Authority vis-à-vis arbitration under the Arbitration Act
This issue first came up for consideration in 2017 before the Maharashtra Real Estate Regulatory Authority (MahaRERA) in Ganesh Lonkar v. D S Kulkarni Developers. 1 In the said case, the respondents took the plea that the dispute was to be arbitrated as per the agreement for sale and contended that the MahaRERA would therefore have no jurisdiction to adjudicate upon the dispute. The MahaRERA held firstly, that the respondents had not satisfied the requirements of Section 8 of the Arbitration Act by inter alia not submitting a separate application for reference to arbitration and the original agreement/certified copy. Secondly, in view of Section 89 of the RER Act, which was enacted after the Arbitration Act, the provisions of the RER Act would have “overriding effect” over the provisions of the Arbitration Act and the MahaRERA would have jurisdiction over the dispute.
Similarly, in Anil Kumar Arya v. SVS Buildcon Private Limited, 2 the Madhya Pradesh Real Estate Regulatory Authority (MP RERA) in 2017 held that its jurisdiction would not be ousted by the presence of an arbitration clause in the agreement. The MP RERA, in this decision, observed that the RER Act would prevail over the Arbitration Act by application of the principle that a special law prevails over a general law and the later law overrides the previous law.
More recently, the MahaRERA has, in the case of Ayyaz Khan and Saba Khan v. Era Realtors3 taken a contrary view. The agreement out of which the dispute arose in this case was entered into prior to the enactment of the RER Act. The MahaRERA held that where the agreement for sale was entered into prior to the enactment of the RER Act, the arbitration clause specifically provided therein would apply. The parties could not now take recourse to the mechanism under the RER Act, as the MahaRERA would not have the power to rewrite the terms of the agreement between the parties.
Notably, the Delhi High Court recently had occasion to consider this issue in Priyanka Taksh Sood and Others v. Sunworld Residency Private Limited and Another4 (Priyanka Taksh), while deciding an application for appointment of arbitrator under Section 11(6) of the Arbitration Act. The parties’ dispute pertained to a claim for refund of amounts arising out of cancellation of allotment under a flat buyers agreement. The maintainability of the application was objected to on the ground that the Real Estate Regulatory Authority would have exclusive jurisdiction under Section 79 of the RER Act.
Applying the test of arbitrability laid down in Booz Allen and Hamilton Inc. v. SBI Home Finance5 and Vidya Drolia v. Durga Trading Corporation, 6 the Delhi High Court found that the dispute was arbitrable as it pertained to a right in personam. The Court then held that where the dispute is clearly arbitrable, the existence of a concurrent remedy under the RER Act would not bar reference to arbitration. The Court further referred to the decision of the Supreme Court in Emaar MGF Ltd. v. Aftab Singh7 (which was in the context of the Consumer Protection Act, 1986) to hold that the doctrine of election would apply, and arbitration would be barred only when the specialized remedy under the RER Act had already been opted for by a party.
The Delhi High Court observed that a purposive interpretation of Sections 79, 88 and 89 of the RER Act reveal that the remedies under the RER Act are in addition to, and not in supersession of, the remedies available under the Arbitration Act. In this context, it took note of the following decisions:
i. Fair Air Engineers v. NK Modi., 8 where the Supreme Court held that the remedies under the later special law in the form of the Consumer Protection Act, 1986 would be in addition to the general remedy under the Arbitration Act, 1940.
ii. Imperia Structures v. Anil Patni,9 where the Supreme Court considered the availability of distinct mechanisms of adjudication under the RER Act and the Consumer Protection Act, 1986 to hold that the remedies available to flat buyers under the two legislations are in addition to each other and Section 79 of the RER Act would not act as a bar.
iii. National Seeds Corporation Limited v. M. Madhusudhan Reddy10 , where the Supreme Court had addressed the interplay of the Seeds Act, 1966 and the Consumer Protection Act, 1986, as well as the Arbitration Act; to hold that the remedies are in addition to one another.
The judgment in Priyanka Taksh further took note of the decision passed by the Patna High Court in Bihar Home Developers v. Shri Narendra Prasad Gupta11 which had also held that the existence of an alternate remedy under the RER Act would not bar reference to arbitration.
Significantly, in a recent decision in Ashok Palav Cooperative Housing Society Limited v. Pankaj Bhagubhai Desai, 12 the Bombay High Court found that an arbitral tribunal would not amount to a “court or other authority” under Section 79 of the RER Act, and hence, Section 79 of the RER Act would not bar the arbitral tribunal from granting interim relief under Section 17 of the Arbitration Act. The principle of law laid down in this decision is in consonance with the view taken in Priyanka Taksh.
By allowing parties to have the option to elect from the remedies available, that is, either the remedy under the RER Act or arbitration, the Delhi High Court has harmoniously interpreted the law in this regard and sought to bring clarity to the issue. Such an interpretation is also in line with the larger objective of RER Act, which is to protect the rights of homebuyers. As opposed to this, the decisions of the MahaRERA and MP RERA analysed above seem to exclude/curb concurrent remedy of arbitration by holding that the RER Act would have overriding effect or prevail over the Arbitration Act. As such, the view taken by the Delhi High Court currently holds the field and it will be interesting to see how this issue evolves further.