Supreme Court Holds Allottees Who Elected RERA Remedy Cannot Subsequently Seek Interim Relief Under Section 9 Arbitration Act

Supreme Court, in a significant ruling delivered on August 11, 2026, held that commercial property purchasers who have already elected to approach the Real Estate Regulatory Authority (RERA) and obtained executable relief cannot subsequently invoke arbitration proceedings or seek interim protective orders under Section 9 of the Arbitration and Conciliation Act, 1996 over the same contractual dispute.

A bench comprising Justice J.B. Pardiwala and Justice K. Vinod Chandran set aside a High Court order that had injuncted a developer from leasing out commercial premises, emphasizing that "the prayers made before both the authorities are substantially the same and the respondents having elected first to approach the HRERA... there cannot be a fresh cause of action plea to be agitated in arbitration."

The dispute arose out of Builder Buyer Agreements (BBA) and Memoranda of Understanding (MoU) executed between the developer, Neo Developers Private Limited, and purchasers for undivided, un-demarcated commercial space in the 'Neo Square' project in Gurugram under an assured return scheme. Following project delays and default on assured returns, the purchasers approached the Haryana Real Estate Regulatory Authority (HRERA), which passed an order in August 2024 directing payment of arrears, execution of conveyance, and possession upon issuance of the occupation certificate. While execution proceedings were pending before HRERA, the developer proposed to lease out the units and demanded fit-out charges, prompting the purchasers to file an application under Section 9 of the Arbitration and Conciliation Act, 1996 before the Commercial Court to restrain third-party alienation. Although the Commercial Court rejected the plea, the High Court in an appeal under Section 37 granted an interim injunction restraining the developer from leasing out the property, against which the developer approached the apex court.

The primary question before the court was whether allottees who had consciously elected their statutory remedy before RERA and initiated execution proceedings could simultaneously invoke the arbitration clause and seek interim measures under Section 9 of the Arbitration and Conciliation Act, 1996. The court was also called upon to determine whether interim orders restraining the leasing of commercial units were legally sustainable under the contractual framework of an assured return scheme.

Doctrine Of Election Precludes Parallel Arbitration Proceedings

The Supreme Court rejected the High Court’s view that the Section 9 proceedings were maintainable merely because they sought protective interim relief rather than a merits adjudication. The bench observed that the reliefs sought before HRERA and the Commercial Court were founded on enforcing the exact same contractual and statutory rights under the BBA and MoU. Having pursued statutory remedies before HRERA to finality, the respondents could not orchestrate a parallel arbitral track merely because the developer issued subsequent leasing communications.

"The relief claimed before the Commercial Court was to pass an interim order of injunction restraining leasing out of the property or creation of third party interests till the commencement of the arbitration. It has to be emphasized that the interim measure was sought to enable arbitration to enforce their rights under the BBA & the MoU; which was the attempt before the HRERA, which also attained fruition."

Rejection Of Scope Under Stamp Act Reference Precedent

The bench addressed the respondents' reliance on the Constitution Bench judgment in In Re: Interplay between Arbitration agreements under Arbitration and Conciliation Act, 1996 and Stamps Act, 1899, which held that judicial interference at the referral stage must be minimal. The court clarified that the respondents' conscious election to exhaustively litigate before HRERA barred the invocation of arbitration on what was substantially the identical subject-matter.

"The prayers made before both the authorities are substantially the same and the respondents having elected first to approach the HRERA, merely based on a communication issued, proposing leasing out of the properties and demanding development and fit out charges, there cannot be a fresh cause of action plea, to be agitated in arbitration. The application for arbitration in the facts of this case is misplaced."

Contractual Scheme Of Assured Return Contemplated Nominal Ownership Without Physical Possession

Scrutinizing the clauses of the BBA, particularly Clauses 3, 7, and 8, the bench noted that the scheme involved undivided fractional commercial space within a designated food court. Under the agreement, the obligation to pay assured returns ceased upon the commencement of the first lease, after which rentals would be shared proportionally based on market conditions. The court noted that the scheme did not contemplate independent physical possession being handed over to individual allottees, but rather nominal ownership of an undivided share meant to generate rental income.

"These terms along with Clause 8(a) to (e) puts it beyond any cavil that the scheme of purchase of the respondents would only give them the assured returns on the undivided portion conveyed and not separate possession. Hence, the direction of the High Court, not to lease out the properties would put the spanner in the works and impede the project insofar as the Food Court not being commenced."

Parties Relegated Exclusively To HRERA Execution Jurisdiction

The Supreme Court held that the proceedings under Section 9 of the Arbitration and Conciliation Act, 1996 could not be sustained and restored the Commercial Court’s order dismissing the interim injunction petition. The bench made it clear that HRERA possesses ample statutory powers to address disputes regarding execution, conveyance deeds, and fit-out charges 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.

"We make it clear that the respondents would be entitled to approach the HRERA and agitate their cause regarding the conveyance of the undivided area and with respect to the development and fit out charges claimed by the developer-appellant. The contentions of the developer-appellant would be left open before the HRERA regarding the balance due as per the BBA & MoU."

The Supreme Court allowed the appeals, set aside the High Court's restraining order, and restored the Commercial Court's dismissal of the Section 9 petition. The ruling firmly establishes that real estate allottees cannot pursue parallel arbitral proceedings after electing and exhausting remedies before RERA, and must agitate subsequent contractual grievances within the statutory framework of the authority.

Date of Decision: August 11, 2026