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Remedy Under RERA Act Is Not A Bar For Initiation Of Arbitration: Delhi High Court

Parina Katyal
4 Aug 2022 7:30 AM GMT
Remedy Under RERA Act Is Not A Bar For Initiation Of Arbitration: Delhi High Court
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The Delhi High Court has ruled that the dispute involving refund of payment under the 'Flat Buyer Agreement' from a real estate developer is arbitrable and is not barred by the existence of a concurrent remedy under the Real Estate (Regulation and Development) Act, 2016 (RERA Act).

The Single Bench of Justice Sanjeev Narula held that the remedies available under the RERA Act are in addition to, and not in supersession of, the remedies available under the Arbitration and Conciliation Act, 1996 (A&C Act), and that the application of concurrent remedies under the A&C Act is not barred under the RERA Act.

Applying the 'Doctrine of Election', the Court ruled that since the party had not initiated any proceedings under the RERA Act, therefore, it was not barred from electing to avail the remedy of arbitration.

The respondent- Sunworld Residency Pvt. Ltd. is a real estate developer, who undertook construction of a Group Housing Society in which the petitioner Priyanka Taksh Sood and her late husband were jointly allotted a flat. The parties entered into a 'Flat Buyer Agreement' and a 'Supplementary Agreement'. Thereafter, the petitioners opted to cancel the allotment of the flat and requested the respondent to refund an amount, which the respondent allegedly failed to refund. The petitioner invoked the Arbitration Clause contained in the Flat Buyer Agreement and filed a petition under Section 11(6) of the A&C Act before the Delhi High Court seeking appointment of a Sole Arbitrator.

The respondent Sunworld Residency submitted before the High Court that it is registered with the Real Estate Regulatory Authority (RERA), Uttar Pradesh and therefore, in terms of Sections 88 and 89 of Real Estate (Regulation and Development) Act, 2016 (RERA Act) the jurisdiction for the disputes would lie before the Uttar Pradesh Real Estate Regulatory Authority (UP RERA).

The respondent added that the RERA Act is a special legislation which is enacted for social welfare, wherein the homebuyers are given a specific remedy. Thus, the respondent contended that RERA's jurisdiction cannot be excluded and the dispute cannot be referred to arbitration.

Relying on the provisions of Section 79 of the RERA Act, the respondent averred that the civil court's jurisdiction to entertain a suit or proceeding would be barred in respect of any matter which the RERA is empowered to determine under the RERA Act.

Section 2(3) of the A&C Act provides that Part I of the A&C Act shall not affect any other law for the time being in force by virtue of which certain disputes may not be referred to arbitration. Section 5 of the A&C Act provides that notwithstanding anything contained in any other law for the time being in force, in matters governed by Part I of the A&C Act, no judicial authority shall intervene except where so provided in Part I of the A&C Act.

Ruling that the dispute raised by the petitioner does not fall in the category of cases which have been recognized as non-arbitrable, the Court held that the claim for refund of money, which arises from cancellation of allotment under the Flat Buyer Agreement, relates to rights in personam, which are amenable to arbitration. The Court noted that the Supreme Court in Vidya Drolia and Others versus Durga Trading Corporation (2020) has clarified that disputes relating to subordinate rights in personam that arise from rights in rem are arbitrable.

The Court observed that Section 79 of the RERA Act, which bars the jurisdiction of the Civil Court, is pari materia to Section 41 of the Prevention of Money Laundering Act, 2002; Section 61 of the Information Technology Act, 2000; Section 61 of the Competition Act, 2002; and Section 15Y of the Securities and Exchange Board of India Act, 1992.

The Bench held that if any law provides, either expressly or by necessary implication, that disputes specified therein cannot be submitted to arbitration, then, despite the non obstante provision of Section 5 of the A&C Act, Section 2(3) shall apply and will restrict the overriding effect of the A&C Act.

The Court further noted that the Supreme Court in Imperia Structures versus Anil Patni (2020) had observed that the remedies available under the Consumer Protection Act, 1986 are concurrent and that the bar specified under Section 79 of the RERA Act would not apply to proceedings initiated under the provisions of the Consumer Protection Act, 1986. The Supreme Court had ruled that Section 79 of the RERA Act does not bar the initiation of proceedings before a fora which cannot be called a Civil Court. Noting that Section 18 of the RERA Act itself specifies that the remedy under the said Section is "without prejudice to any other remedy available", the Apex Court had hence ruled that the other remedies which are available to the allottees is acknowledged and saved by the RERA Act, subject to the applicability of Section 79 of the RERA Act.

Therefore, the High Court ruled that the application of concurrent remedies under the A&C Act is not barred under the RERA Act, and thus, there is no clash between the provisions of the RERA Act and the A&C Act, since the remedies available under the RERA Act are in addition to, and not in supersession of, the remedies available under the A&C Act.

The Bench held that the question whether the RERA ousts the jurisdiction of the civil court or a private fora voluntarily chosen by the parties to adjudicate their disputes, has to be determined by applying the 'Doctrine of Election'. The Court observed that the Supreme Court in A.P. State Financial Corporation versus M/s GAR Re-rolling Corporation (1994) had ruled that as per the Doctrine of Election, when two remedies are available for the same relief, the party to whom the said remedies are available has the option to elect either of them; however, the doctrine would not apply to cases where the ambit and scope of the two remedies is essentially different.

The Court further noted that the Supreme Court in Emaar MGF Ltd. and Anr. versus Aftab Singh (2018) had ruled that if a person who is entitled to seek an additional special remedy provided under the statute does not opt for the said additional/special remedy, and he is a party to an arbitration agreement, then, there is no bar in referring the disputes to arbitration. The Apex Court had added that the judicial authority can refuse to refer the parties to arbitration only when the party has opted for the specific/special remedies which are provided for under the statute.

Observing that the parties had not initiated any proceedings under the RERA Act, the Court held that the petitioner was not barred from electing to avail the remedy of arbitration.

"From the foregoing, it is thus clear that the remedy available under the A&C Act is in addition to the remedies available under other special statutes and the availability of alternative remedies is not a bar to the entertaining of a petition filed under the A&C Act. But once elected, then the other remedy will not lie in respect of the same dispute. Hence, once a RERA proceeding is initiated, an application under Section 8 of the Act would not lie. However, in the instant case, Respondent has not initiated any proceeding under RERA, hence election of remedy of arbitration is not barred.", the Court said.

Noting that there is no provision in the RERA Act for the authority to refer a matter to arbitration, the Court ruled that the provisions of the RERA Act are in addition to, and not in derogation of, any other law, and that the RERA Act is not inconsistent with the provisions of the A&C Act. The Court added that the object and purpose of both the statutes is distinct.

Therefore, the Bench ruled that the disputes raised by the petitioner were clearly arbitrable, and were not barred by the existence of a concurrent remedy under the RERA Act.

Thus, the Court allowed the petition, appointed a Sole Arbitrator and referred the parties to arbitration.

Case Title: Priyanka Taksh Sood & Ors. versus Sunworld Residency Pvt. Ltd. & Anr.

Citation: 2022 LiveLaw (Del) 752

Dated: 19.04.2022 (Delhi High Court)

Counsel for the Petitioner: Ms. Mrinalini Sen and Mr. Tanmay Yadav, Advocates

Counsel for the Respondent: Mr. Amol Sinha, Mr. Anshum Jain, Mr. Kshitiz Garg and Mr. Ashvini Kumar, Advocates

Click Here To Read/Download Order

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