Whether a Party Who First Approached RERA Can Later Invoke an Arbitration Clause for Interim Measures on the Same Cause of Action – Dr. Ananya Pratap Singh

Supreme Court of India: Whether a Party Who First Approached RERA Can Later Invoke an Arbitration Clause for Interim Measures on the Same Cause of Action

In Neo Developers Private Limited v Rahul Bhargava and Anr. Etc., Civil Appeal Nos. 10899-10904 of 2026, the Supreme Court decided the issue of whether the respondents, having first approached the Haryana Real Estate Regulatory Authority (“HRERA”) and obtained orders which were the subject of pending execution proceedings, could subsequently invoke the arbitration clause under the Builder Buyer Agreement to seek interim measures under Section 9 of the Arbitration and Conciliation Act, 1996 restraining the appellant from leasing out or alienating the property.

Factual Matrix

The appellant is the developer of a project titled “Neo Square” at Sector 109, Dwarka Expressway, Gurugram, Haryana, and had entered into commercial agreements for sale of undivided, un-demarcated commercial space with the respondents. Separate Builder Buyer Agreements (“BBA”) and a Memorandum of Understanding (“MoU”) were entered into regulating construction, conveyance and use of the premises.

Under the BBA, an assured return was payable to the purchasers, which was initially paid and then defaulted, and the project also got delayed. The respondents approached the HRERA for enforcement of their rights under the BBA, and the HRERA passed an order. The respondents had initiated execution proceedings in April 2025 for enforcement of the HRERA order dated 14.08.2024, which was pending.

In the meantime, the respondent(s) issued two communications dated 24.02.2025 and 11.03.2025, informing that the property was proposed to be leased out, and demands were raised for development and fit-out charges.

The respondents then approached the Commercial Court under Section 9 of the Arbitration and Conciliation Act, 1996, seeking interim measures against alienation, including leasing out of the premises. The Commercial Court found that the respondents, having first approached HRERA and obtained orders, could not turn around and invoke the arbitration clause.

An appeal under Section 37 led to the impugned order of the High Court, which restrained the appellant from creating third-party interests or rights, including leasing out the property, and directed the respondent to maintain status quo, till commencement of arbitration proceedings, with the request for arbitration pending before the High Court.

Parties’ Contentions

The appellant was concerned with the interim orders passed against it specifically, when numerous other purchasers had already taken conveyance and permitted leasing out of their premises, which, if leased above the assured return, would benefit the purchasers in the agreed proportion under the BBA.

The appellant was also concerned with the parallel proceedings taken up by the respondents before both HRERA and under the arbitration clause.

Learned counsel for the respondents relied on the Constitution Bench decision in In Re: Interplay between Arbitration Agreements under Arbitration and Conciliation Act, 1996 and Stamps Act, 1899, (2024) 6 SCC 1, submitting that the scope of interference where an arbitration clause exists is very limited, and that the Court, at this stage, could only examine whether an arbitration clause exists, leaving the issue of maintainability to the arbitrator.

Issue

Whether the respondents, having elected to first approach the HRERA and obtained orders now under execution, could invoke the arbitration clause in the BBA/MoU to seek interim measures under Section 9 of the Act of 1996 restraining alienation of the property, on the same cause of action.

Findings of the Supreme Court

The Court disagreed with the finding of the High Court that there was a clear distinction between the reliefs sought before the HRERA and those sought before the Commercial Court under Section 9, with the High Court having held that the HRERA complaints were in exercise of statutory rights under the Real Estate (Regulation and Development) Act, 2016, whereas the Section 9 proceedings did not seek adjudication on merits but only sought interim protection of the subject property.

The Court noted that despite the arbitration clause, the respondents had elected to go before the HRERA, where the reliefs sought included directions for completion of construction and handing over of possession in accordance with agreed timelines, compensation and/or interest, payment of assured monthly returns which had been stopped, and a declaration that the development and fit-out charge demands were illegal and arbitrary.

The Court found that the interim measure sought before the Commercial Court i.e., restraining leasing out or creation of third-party interests till commencement of arbitration, was sought to enable enforcement of rights under the BBA and MoU, which was the same attempt made before the HRERA, “which also attained fruition,” and that the interim measures were sought when execution proceedings before the HRERA had already been initiated.

The Court held that it was not convinced that parallel proceedings of arbitration and execution of HRERA orders could be carried out, and that the prayers made before both authorities were “substantially the same.”

The Court held that having first elected to approach the HRERA, the respondents could not, merely on the basis of communications proposing leasing out of the properties and demanding development and fit-out charges, claim a fresh cause of action to be agitated in arbitration, and held the application for arbitration in the facts of the case to be “misplaced.”

The Court then examined the HRERA’s order which had become final in the absence of any appeal, and which had directed, among other things, payment of arrears of assured return till commencement of the first lease of the unit as per the MoU, payment of further arrears within 90 days (failing which with 9% interest), offer of possession within two months of obtaining the occupation certificate, execution of conveyance deed within three months thereafter, and that nothing be charged from the complainants outside the agreement of sale. The Court held that this indicated the HRERA had reckoned that leasing out the properties could result in an enhancement of returns.

Examining the BBA (relating to the Food Court retail space and the specific assured-return scheme availed by the respondents), the Court noted that Clause 3 entitled the allottee to occupy space equivalent to the purchased area, that the assured return plan (at INR 4,500 per sq. ft.) ensured a monthly assured return of ₹22,500, that Clause 7(a) made the developer’s obligation to pay assured return cease on commencement of the first lease, and that Clause 7(b) provided for adjustment of the allottee’s payment (INR 54.55 per sq. ft. increase or INR 109.10 per sq. ft. decrease) depending on whether the monthly rental on leasing exceeded or fell below the assured return. The Court held that these clauses, read with Clause 8(a) to (e), made clear that the scheme contemplated no handing over of separate possession, but only nominal ownership of an undivided, un-demarcated extent, which on lease would generate rental income in lieu of assured return, fluctuating with market conditions.

The Court held that the High Court’s direction restraining leasing out would “put the spanner in the works and impede the project insofar as the Food Court not being commenced.”

Accordingly, the Court held that since the respondents had approached the HRERA and execution proceedings were pending there, having first elected that forum, those proceedings would have to continue there, and there was “no reason” to invoke the arbitration clause. The Court held that the Section 9 proceedings, as held by the Commercial Court, could not be continued.

The Court set aside the impugned order of the High Court and restored the order of the Commercial Court, clarifying that the respondents would be entitled to approach the HRERA to agitate their cause regarding conveyance of the undivided area and the development and fit-out charges claimed by the appellant, with the appellant’s contentions on the balance due under the BBA/MoU also left open before the HRERA.

The Court further clarified that its findings on the assured return scheme were based on the BBA, and that the respondents could not raise any contention in derogation of the specific agreement, with Clause (iii) of the operative portion of the HRERA order standing modified to this extent.

The appeals were allowed, and the parties were relegated to the HRERA, which the Court noted has ample powers under Section 63 of the Real Estate (Regulation and Development) Act, 2016 read with Rule 27 of the Real Estate (Regulation and Development) Rules, 2017.