A symphony of choices: Gauhati High Court confirms that arbitration can be invoked despite availability of an alternate remedy under the provisions of RERA; discretion lies with the allottees to opt for proceedings best suited to them

The Real Estate (Regulation and Development) Act, 2016 (RERA) was established predominantly, to protect the interests of consumers in the real estate sector. In line with this aim, Section 18 of RERA empowers allottees to seek compensation in the event a promoter fails to complete or is unable to give possession of an apartment, plot, or building (i) as per the terms of the agreement for sale; or (ii) due to discontinuation of the promoter’s business upon suspension/revocation of its registration under RERA; or (iii) for any other reasons.

If such an event occurs, an allottee can either (i) withdraw from the project and request a refund with interest or (ii) stay in the project and seek monthly interest compensation (on the amount paid to the promoter) for the delay. Compensation under Section 18 will be determined by the adjudicating officer as per Section 71 of the RERA Act.

However, is approaching the adjudicating authority under RERA the only remedy (or the only note in the allottees’ sonata), or can an allottee seek compensation through arbitration? This question came up before the Gauhati High Court (Court) in Pallab Ghosh and Anr. v Simplex Infrastructures Limited and Anr.[1].

In Pallab Ghosh, the parties (the Petitioners being the allottees and the Respondent No. 1 being the promoter) executed an agreement for sale of an apartment, which contained an arbitration agreement. The allottees paid 95% of the total consideration of the apartment to the promoter, with the remainder 5% to be remitted upon handover of possession.

However, the Respondent No.1-promoter failed to handover the apartment as per the agreement for sale. Consequently, the Petitioners-allottees sought for compensation under Section 18 of RERA and invoked arbitration under the agreement for sale. Upon failure of the Respondents[2] to nominate its arbitrator, the Petitioners approached the Court under Section 11(6) of the Arbitration and Conciliation Act, 1996 (Arbitration Act) for appointment of the Respondents’ nominee arbitrator.

Before the Court, the Respondents inter alia relied on the decision of the Hon’ble Supreme Court (Supreme Court) in the case of Vidya Drolia & Ors. v Durga Trading Corporation[3] to draw a parallel between the Recovery of Debts and Bankruptcy Act, 1993 (DRT Act) and the RERA, to contend that RERA is a complete code in itself and disputes thereinunder are not arbitrable. The Petitioners in turn argued that remedies under RERA and the Arbitration Act are concurrent remedies and they have a choice to opt for either of one of the remedies.

Upon hearing the parties and upon analyzing various precedents in this regard, the Court held that:

• While Section 79 of the RERA[4] bars invoking the jurisdiction of a civil court, an Arbitral Tribunal is not a civil court (but a judicial authority). Hence, recourse under the Arbitration Act is not barred by Section 79.
• There is a difference between the DRT Act and RERA i.e., DRT Act is a complete code and recovery of money under the DRT ACT is automatic[5] once the tribunal/ appellate tribunal passes an order. However, the same is not the case with respect to the RERA Act. The recovery of money under Section 40 of RERA (as land arrears) does not come into play automatically until the appropriate procedure is adopted.
• Akin to RERA, the Arbitration Act provides for a separate application to execute the award and recover the monetary sums payable under the award.
• In case of any conflict of jurisdiction, the plaintiff ought to have the choice to opt for best suited forum, unless there was a rule excluding a forum of his choice [Management Committee of Montfort Senior Secondary School v Shri Vijay Kumar and Ors, (2005) 7 SCC 472].
• There is nothing to show that there is any inconsistency or repugnancy between the provisions of the RERA Act and the Arbitration Act as an alternative. However, if any inconsistency arises between remedies under two statutes, the right of election to choose arbitration should be curtailed and the specific/special remedies should take precedence[6].
• In the present case, both parties have agreed to arbitration under the agreement for sale. Thus, despite the alternative remedy provided under RERA, arbitration can be invoked by a party.

In light of the findings above, the Court submitted the parties to arbitration and appointed a sole arbitrator for resolution of disputes.

The courts have consistently upheld the referral of a dispute to arbitration when the parties have chosen to do so in their Agreements. The Courts have confirmed the position that only if a lis is not specifically arbitrable, the choice of party to refer the dispute to arbitration ought to be denied. The question of whether the remedy provided under RERA is an exclusive modality to raise grievances has been dealt with by many courts since the inception of RERA. Amongst others, the Supreme Court in the decision of Imperia Structures Ltd. Vs. Anil Patni & Anr.[7], has held that the Consumer Protection Act, 2019 and RERA are concurrent remedies; and in the case of Pioneer Urban Land & Infrastructure Ltd. vs. Union of India[8] has held that the provisions of RERA and Insolvency and Bankruptcy Code, 2016 have to be read harmoniously (in so far as they are not inconsistent).

Thus, the position that can be culled out from the decision of various courts is that the remedies under RERA are in harmonious addition to and not in discordant derogation of any other remedies available to an allottee. The baton of discretion to opt for an appropriate remedy lies with the allottee. As such an allottee can opt to submit its disputes to arbitration as opposed to the authority under RERA. However, once a remedy has been opted, the scores remain fixed and an allottee cannot then choose another remedy. The decision of the Court in the present case is in line with the settled legal position and will act as authority for submission of disputes under Section 18 of RERA, to arbitration.

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Ashishchandra Rao, Partner – Email – ashishchandrarao@elp-in.com

Tvisha Desai, Senior Associate – Email – tvishadesai@elp-in.com

[1] Arb. P./21/2023
[2] Guwahati Metropolitan Development Authority was named as Respondent No. 2.
[3] (2021) 2 SCC 1
[4] 79. Bar of jurisdiction.—No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Authority or the adjudicating officer or the Appellate Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act
[5] Vidya Drolia & Ors. v Durga Trading Corporation; (2021) 2 SCC 1
[6] Vidya Drolia (supra)
[7] (2020) 10 SCC 783
[8] (2019) 8 SCC 416