No Bar On Invoking Arbitration Despite Alternative Remedy Under RERA Act: Gauhati High Court

The Gauhati High Court bench of Justice Michael Zothankhuma has held 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 (RERA Act). The High Court held that there was there is no inherent conflict or repugnancy between the RERA Act and the Arbitration Act. It held that while the RERA Act provides a specific mechanism for resolving real estate disputes, the presence of an arbitration agreement between the parties allows for the invocation of arbitration. “…..there is nothing to show that there is 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 High Court referred to paragraph 55 of the Supreme Court's judgment in Vidya Drolia v. Durga Trading Corporation, which discusses the doctrine of election. This doctrine allows parties to select arbitration as a dispute resolution method by mutual agreement, provided there is no inconsistency with mandatory statutory provisions. Justice Zothankhuma applied the fourfold test propounded by the Supreme Court in Vidya Drolia to determine the arbitrability of the dispute. The test includes examining whether the subject matter of the dispute involves rights in rem, affects third-party rights, pertains to sovereign functions, or is explicitly non-arbitrable by statute. The High Court held that the subject matter of the dispute did not fall into any of these non-arbitrable categories. Brief Facts: Pallab Ghosh's and Kakali Roy's (Petitioners) claim pertained to the interest on the amount they paid for their apartment from December 21, 2020, until possession is handed over. An agreement for the sale of an apartment was executed on January 24, 2017, stipulating that Simplex Infrastructures Limited (Respondent No. 1) was to deliver possession by December 20, 2020. The Petitioners paid 95% of the total consideration, with the remaining 5% due upon possession. Since possession was not delivered, the Petitioners sought interest under Section 18 of the Real Estate (Regulation and Development) Act (RERA Act) and Clause 11.3 of the Agreement. The Petitioners appointed an arbitrator but the Respondent despite receiving the arbitration notice didn't appoint its arbitrator. The Petitioners approached the High Court under Section 11(6) of the Arbitration and Conciliation Act, 1996 (Arbitration Act) for the appointment of an arbitrator. The Petitioners referred to the decision of the Delhi High Court in Priyanka Taksh Sood & Ors. Vs. Sunworld Residency Pvt. Ltd., and argued that arbitration is not precluded by the existence of concurrent remedies under the RERA Act. They also referred to the Supreme Court judgment in Smt. M. Hemalatha Devi & Ors. Vs. B. Udayasri, which states that a party can choose between public and private forums for dispute resolution. Further, they referred to the Supreme Court ruling in Imperia Structures Ltd. Vs. Anil Patni & Anr., which clarified that entitlement to action under Section 18 of the RERA Act is based on the agreement's terms, not the project's RERA registration validity. They argued that the absence of a bar under Section 79 of the RERA Act allows for arbitration, supported by the Patna High Court's judgment in Bihar Home Developers and Builders vs. Narendra Prasad Gupta, which found the Arbitration Act consistent with the RERA Act. Additionally, the Supreme Court's decision in Vidya Drolia distinguished between non-arbitral disputes under the DRT Act and those under the RERA Act, where arbitration is permissible for interest claims due to delayed possession. In contrast, the Respondent referred to the Supreme Court's Vidya Droliaand argued that arbitration is viable only if the law recognizes it as an alternative remedy. It argued that akin to the DRT Act, the RERA Act provides a complete code for resolving disputes which makes the dispute non-arbitrable. Citing NTPC Ltd. Vs. SPML Infra Ltd., it emphasized the necessity to first ascertain the existence and validity of the arbitration agreement and whether the dispute is arbitrable. It argued that under Section 35 of the RERA Act, the authority can conduct investigations and enforce compliance, capabilities absent in arbitral proceedings. Observations by the High Court: The High Court referred to Priyanka Taksh Sood where the Delhi High Court held that the existence of a concurrent remedy under the RERA Act does not preclude the adjudication of a dispute through an arbitration clause. Additionally, the Supreme Court in Imperia Structures Ltd. clarified that if a promoter fails to give possession of an apartment by the specified...

No Bar On Invoking Arbitration Despite Alternative Remedy Under RERA Act: Gauhati High Court

Rajesh Kumar

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