RERA vs Arbitration: The Unresolved Conflict in Indian Real Estate Disputes

A fundamental question in Indian real estate law remains unresolved: can disputes between homebuyers and developers be referred to arbitration, or does the Real Estate (Regulation and Development) Act, 2016 (RERA) create an exclusive jurisdiction that bars arbitration? High Courts across India have taken conflicting positions on this issue. The Bombay High Court has held that disputes under Sections 12 and 18 of RERA are non-arbitrable, while the Gauhati High Court has held that arbitration is not barred because arbitral tribunals are not civil courts within the meaning of Section 79(6) of RERA. This divergence creates uncertainty for developers, homebuyers, and legal practitioners advising on dispute resolution clauses in real estate agreements.

RERA's Adjudicatory Framework

RERA establishes a specialised adjudicatory framework for real estate disputes. The RERA Authority handles complaints relating to violations of the Act, while the Adjudicating Officer handles claims for compensation. Appeals from both lie to the Real Estate Appellate Tribunal, and further appeals go to the High Court. Section 79(6) of RERA provides that no civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Authority or the Adjudicating Officer or the Appellate Tribunal is empowered to determine. This ouster of civil court jurisdiction is the provision at the heart of the arbitrability debate. The question is whether this ouster extends to arbitral tribunals, which are private adjudicatory bodies, or only to civil courts.

The Bombay High Court Position: Non-Arbitrable

The Bombay High Court has held that disputes between allottees and promoters, particularly those arising under Sections 12 (obligations of promoters regarding ongoing projects) and 18 (return of amount and compensation), are non-arbitrable. The reasoning is that RERA creates a comprehensive regulatory and adjudicatory scheme with specific procedures, timelines, and remedies that are designed to protect homebuyers as a class. Allowing these disputes to be diverted to arbitration would defeat the legislative purpose of RERA, which was enacted specifically to address the power imbalance between developers and individual buyers. The Court observed that the specialised knowledge of RERA authorities in real estate matters, the lower cost of RERA proceedings compared to arbitration, and the statutory timelines for adjudication all favour exclusive RERA jurisdiction.

The Gauhati High Court Position: Arbitration Permitted

The Gauhati High Court has taken the opposite view, holding that Section 79(6) of RERA only bars civil courts, not arbitral tribunals. The reasoning follows the established principle that an ouster of civil court jurisdiction does not automatically extend to arbitration unless the statute specifically excludes it. Since RERA does not contain any express provision barring arbitration, and since arbitral tribunals are not civil courts under Indian law, the Gauhati High Court held that parties who have agreed to an arbitration clause in their sale agreement can refer their disputes to arbitration. This position aligns with the pro-arbitration approach adopted by the Supreme Court in cases like Vidya Drolia v Durga Trading Corporation (2021), which laid down a framework for determining arbitrability and held that disputes are non-arbitrable only where they involve rights in rem, are specifically reserved for public fora, or involve actions of sovereign functions.

Practical Takeaways

Until the Supreme Court resolves this conflict, the arbitrability of RERA disputes will depend on the jurisdiction. In Maharashtra, arbitration clauses in real estate agreements are likely unenforceable for RERA-covered disputes. In the northeastern states, arbitration may be available as an alternative. Developers drafting sale agreements should be aware of the jurisdictional risk and consider whether to include arbitration clauses at all for RERA-governed transactions. Homebuyers should understand that filing before the RERA Authority remains the most accessible and cost-effective option in most states regardless of any arbitration clause. Legal counsel should monitor whether the Supreme Court takes up this conflict for resolution and advise clients on interim strategies based on the applicable High Court's position.