RERA disputes between homebuyers and builders are non-arbitrable, Bombay High Court reiterates

The Applicants booked Flat No. 3903 in the Respondent-promoter’s project, “Ruparel Skygreens,” under a 5:90:5 subvention scheme involving DHFL.

A Tripartite Agreement was executed in 2017, followed by a registered Agreement for Sale dated 11 March 2022.

The Applicants alleged that the Respondent failed to pay the pre-interest EMI to DHFL, compelling them to pay Rs. 12,99,557/- towards interest.

They also alleged that possession, expected by December 2022, was not delivered.

The Respondent issued a Termination Notice dated 3 January 2026.

Relying on Clause 86 of the Agreement for Sale, which contained an arbitration clause, the Applicants invoked arbitration and filed an application under Section 11(6) of the Arbitration and Conciliation Act, 1996.

They also filed a petition under Section 9 seeking interim relief.

Whether the existence of Clause 86 of the Agreement for Sale required the Court to appoint an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996?

Whether disputes concerning possession, payment of consideration, subvention obligations, interest and termination between an individual allottee and a promoter in a RERA-covered project are arbitrable?

Whether the Applicants’ Section 9 petition for interim measures could be entertained when the underlying disputes were held to be non-arbitrable?

The Court applied Sections 11(6), 16 and 9 of the Arbitration and Conciliation Act, 1996, holding that although the Section 11 enquiry is ordinarily limited and principally concerns the existence and validity of an arbitration agreement, the Court may undertake a prima facie examination of whether the subject matter is non-arbitrable.

Following Rashmi Realty Builders Pvt. Ltd. v. Rahul Rajendrakumar Pagariya, the Court held that disputes between an individual allottee and a promoter covered by RERA are, by necessary implication, non-arbitrable because RERA creates a statutory and public regulatory framework whose operation may affect the project, other allottees and the association of allottees.

Sections 79, 88 and 89 of RERA were read together to preserve the statutory mechanism and its overriding effect in case of inconsistency.

The Court distinguished the contrary approach in Priyanka Tak Sood v. Sunworld Residency Pvt. Ltd., which treated certain individual refund claims as arbitrable, and held that judicial discipline required following the applicable Bombay High Court decision in Rashmi Realty.

It relied on Interplay between Arbitration Agreements under the Arbitration and Conciliation Act, 1996 and the Indian Stamp Act, 1899 and Motilal Oswal Financial Services Ltd. v. Santosh Cordeiro for the limited nature of Section 11 scrutiny, and on Arif Azim Company Ltd. v. Aptech Ltd. for the proposition that a court may refuse reference where the dispute is non-arbitrable.

The Court accepted that Clause 86 constituted a valid arbitration agreement and that the Applicants had raised a genuine dispute, rather than a sham claim.

However, it distinguished the existence of an arbitration agreement from the arbitrability of the particular dispute.

The Applicants’ claims were not merely ordinary contractual claims for money; they concerned delayed possession, payment of consideration, the promoter’s alleged subvention obligations, interest, reconciliation of accounts and termination of the allotment.

These matters arose directly from the statutory relationship between a promoter and an allottee in respect of a registered real estate project and corresponded to rights and obligations regulated by RERA, including the consequences of delayed possession under Section 18.

The Applicants’ alleged payment to DHFL and asserted readiness to pay the balance did not alter the legal character of the dispute or take it outside RERA.

In light of Rashmi Realty, the Court held that the private arbitration clause could not override the statutory exclusion of arbitral adjudication.

The principle of kompetenz-kompetenz under Section 16 did not require reference where the Court found, on a prima facie basis, that the dispute was legally non-arbitrable.

The Section 11 application was dismissed and no arbitrator was appointed.

Since the underlying dispute was non-arbitrable, the Section 9 Arbitration Petition was also dismissed.

The Applicants were nevertheless granted liberty to pursue any appropriate remedy available in law, with all merits of the parties’ claims and defences left open for determination by the competent forum.