Neo Developers Private Limited v. Rahul Bhargava and Anr. Etc.
Background
Neo Developers sold undivided, un-demarcated commercial space in its "Neo Square" project in Sector 109, Dwarka Expressway, Gurugram, to the respondents under a Builder Buyer Agreement and MoU that promised an assured monthly return. The developer initially paid the assured return but later defaulted, and the project was delayed, so the respondents obtained an enforcement order from the Haryana Real Estate Regulatory Authority (HRERA) and began execution proceedings on it. When the developer later signalled it would lease out the property and raised fresh charges, the respondents also went to the Commercial Court under Section 9 of the Arbitration Act seeking an injunction against leasing, and the High Court (in appeal) restrained the developer from creating third-party interests pending arbitration.
Decision Breakdown
The Supreme Court held that once the respondents had elected to approach HRERA first and obtained a final, unappealed order there, under which execution proceedings were already pending, they could not simultaneously invoke the arbitration clause to seek substantially the same relief before the Commercial Court. Examining the Builder Buyer Agreement, the Court found the purchasers were only entitled to an assured return on an undivided share, not physical possession, so restraining the developer from leasing would derail the project without serving any right the respondents actually held. The High Court's order was set aside and the Commercial Court's order (declining Section 9 relief) was restored, with the parties relegated to pursue their remaining grievances before HRERA, which has ample powers under the RERA Act to address them.
Lesson Learnt
Once a party elects a statutory remedy (such as RERA) and pursues it to a final order, it cannot also invoke a parallel arbitration clause to seek substantially the same relief in a different forum. Courts will hold a litigant to the forum it first chose.