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

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 dates, the allottee has the right to demand a return of the amount paid, with interest, or to receive interest for every month of delay until possession is handed over. The allottee can proceed under either Section 18(1) or the proviso to Section 18(1) of the RERA Act.

The Supreme Court in this case also discussed the interplay between the RERA Act and other legal provisions. Section 79 of the RERA Act bars civil courts from entertaining suits on matters the Authority can determine, but it does not bar the Consumer Forum from addressing issues under Section 18. Moreover, the express savings clause in Section 88 and the absence of a bar in Section 79 make it clear that an allottee can choose to proceed under the RERA Act or the Consumer Protection Act, as outlined in Imperia Structures Ltd.

In Pioneer Urban Land & Infrastructure Ltd., the Supreme Court held that the RERA Act should be read harmoniously with the Insolvency and Bankruptcy Code. Only in cases of conflict does the Code prevail over the RERA Act. Thus, remedies for allottees are concurrent, allowing them to seek redress under the Consumer Protection Act, RERA Act, or the Insolvency and Bankruptcy Code.

The Supreme Court in the Management Committee of Montfort Senior Secondary School held that in cases of jurisdictional conflict, the plaintiff's choice of forum should be respected unless explicitly excluded by law. Similarly, in M. D. Frozen Foods Exports Pvt. Ltd. vs. Hero Fincorp Ltd., the Supreme Court allowed simultaneous proceedings under the Arbitration Act and the SARFAESI Act.

The High Court also referred to Sections 18, 71, and 88 of the RERA Act, which collectively indicate that the RERA Act's provisions are supplementary to other legal remedies, not exclusive or overriding them. Section 18 provides for compensation and interest in case of delay, Section 71 outlines the power to adjudicate compensation, and Section 88 ensures that the RERA Act does not negate other laws.

In National Seeds Corporation Limited vs. M. Madhusudhan Reddy, the Supreme Court held that the Consumer Protection Act provides an additional remedy, not an exclusive one, allowing for arbitration or consumer complaints. Similarly, in Emaar MGF Land Ltd. vs. Aftab Singh, the Supreme Court confirmed that the availability of special remedies under one statute does not preclude arbitration unless those remedies are specifically chosen by the aggrieved party.

The High Court also considered the Doctrine of Election, which allows a party to choose between remedies if both are available for the same relief, provided the scope and ambit of the remedies differ. It held that the RERA Act, while barring civil court jurisdiction, does not exclude other fora such as arbitration or consumer protection mechanisms.

The High Court held that there exists a distinction in the mode of recovery of money as envisaged under the DRT Act and the RERA Act. It held that for money recovery under the Arbitration Act, an execution case must be filed in accordance with its provisions before the District Judge, which is somewhat analogous to the appropriate procedure prescribed under the RERA Act for money recovery.

It referred to the Supreme Court in Paragraph 55 of Vidya Drolia where the SC held that the doctrine of election to select arbitration as a dispute resolution mechanism by mutual agreement is available only if the law permits the existence of arbitration as an alternative remedy and freedom of choice is present. It further clarified that there should be no inconsistency or repugnancy between the provisions of the mandatory law and arbitration as an alternative. Conversely, where there is repugnancy and inconsistency, the right to choose arbitration is denied. It held that when arbitration cannot enforce such rights or the award cannot be implemented in the manner provided by law, the right to elect arbitration in preference to courts or other public forums is either completely denied or curtailed.

The High Court held that if additional specific or special remedies are available, the right to choose arbitration over a public forum should be denied or curtailed. However, it held that there is no indication of any inconsistency or repugnancy between the provisions of the RERA Act and arbitration as an alternative. Additionally, it noted that both parties agreed to include an arbitration clause in their contract for the settlement of their disputes. Although it appeared that the dispute should not be referred to arbitration per paragraph 55 of the Vidya Drolia judgment, the High Court held that the enforceability of an award passed under the Arbitration Act cannot be denied.

Enforcement under the DRT Act is automatic, unlike under the RERA Act, which necessitates following the proper procedure for enforcement of an award or order under Section 40 of the RERA Act. There is a notable difference in how enforcement is carried out under the Arbitration Act and the RERA Act compared to the Consumer Protection Act.

While the Supreme Court in Paragraph 55 of Vidya Drolia acknowledged that the doctrine of election to select arbitration is conditional, the High Court held that SC propounded a fourfold test for determining the arbitrability of the subject matter of a dispute in an arbitration agreement. This test, detailed in Paragraph 76 of the judgment, states that a dispute is not arbitrable if: (1) it pertains to actions in rem not related to subordinate rights in personam arising from rights in rem; (2) it affects third-party rights, has erga omnes effect, requires centralized adjudication and mutual adjudication would not be appropriate or enforceable; (3) it relates to inalienable sovereign and public interest functions of the State, making mutual adjudication unenforceable; or (4) it is expressly or by necessary implication non-arbitrable under mandatory statutes.

Applying this fourfold test, the High Court held that the dispute didn't meet the criteria for non-arbitrability. It noted that SC in various judgments held that arbitration is not the only remedy available to consumers, who may also file complaints under the Consumer Protection Act. The Supreme Court in National Seeds Corporation Limited and Emaar MGF Land Ltd. allowed parties to choose between public or private forums. In Emaar MGF Land Ltd., the Supreme Court held that if a person entitled to a special statutory remedy opts not to pursue it, and if they are a party to an arbitration agreement, arbitration can proceed.

The High Court noted that the Petitioners opted for arbitration as per the agreed clause to settle their dispute. Consequently, the High Court found that the arbitration clause agreed upon by the parties can be utilized to resolve the current dispute instead of resorting to the RERA Act.

Therefore, the High Court appointed Justice (Retired) H.N. Sarma as the sole Arbitrator to resolve the dispute.

Case Title: Pallab Ghosh And Anr Vs Simplex Infrastructures Limited And Anr

Case Number: Arb.P./21/2023

Citation: 2024 LiveLaw (Gau) 39

Advocate for the Petitioner:: Mr. S. Mitra

Advocate for the Respondent: Mr. R.J. Das

Date of Judgment: 13.06.2024

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