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The Bombay High Court ruled that arbitration clauses in contracts cannot override the jurisdiction of RERA tribunals, affirming RERA's authority to resolve disputes between homebuyers and developers under the Real Estate (Regulation and Development) Act, 2016. Justice Madhav Jamdar's decision ensures that disputes under RERA's purview cannot be diverted to private arbitration, a move hailed as a significant step in protecting homebuyers' rights. This ruling came in a case where Rashmi Realty Builders sought arbitration despite a RERA tribunal's order for refunding INR 12 lakh. The decision highlights RERA's role as the exclusive dispute resolution mechanism for real estate conflicts.
The Bombay High Court issued a significant decision addressing the Real Estate Regulatory Authority's (RERA) authority to settle conflicts between individual allottees and promoters. The court ruled that even if the parties' agreement has an arbitration clause, such conflicts cannot be arbitrated. In his ruling, Justice Madhav Jamdar confirmed that arbitration provisions in contracts do not infringe upon RERA's authority under the Real Estate (Regulation and Development) Act, 2016 (RERA). Advertisement
Since it guarantees that conflicts coming under RERA's jurisdiction cannot circumvent the RERA tribunals' power in favour of private arbitration, this decision has been heralded as historic. Due to arbitration's historical use as an alternative dispute resolution (ADR) mechanism, which may have delayed settlement and impacted homebuyers' interests, the ruling has important ramifications for the real estate industry. It reiterates how crucial RERA tribunals are to protecting homebuyers' rights.
The RERA Appellate Tribunal ordered Rashmi Realty Builders Pvt Ltd to reimburse a buyer INR 12 lakh plus interest since the sale agreement was not registered. Based on a 2013 Memorandum of Understanding, the builder attempted to use arbitration; nevertheless, the High Court maintained RERA's authority. This decision relies on earlier court rulings, such as the Supreme Court's 2019 verdict in Nahalchand Laloochand Pvt Ltd v. Panchali Co-operative Housing Society Ltd., which upheld the RERA's applicability to consumer issues even when arbitration clauses were included.
Justice Jamdar pointed out that RERA tribunals, not arbitration, are required to enforce the specific rights under the law. As seen in this instance, the court stressed that arbitration could not be employed in situations when it clashes with the law.
The Bombay High Court's decision upholds RERA's function as the exclusive dispute resolution body for the real estate industry, guaranteeing that the rights of homebuyers are given top priority. The court's ruling that RERA disputes cannot be arbitrated further solidified the legislative objective to preserve RERA's efficacy and provide improved protection for homebuyers. Now, disputes between builders and buyers must be settled under RERA's purview, ensuring a more open and consumer-friendly dispute resolution procedure. A larger trend in Indian law towards bolstering consumer protection in the real estate industry is also reflected in this ruling.
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