Is a builder-buyer arbitration clause worth anything after RERA? The question goes to a larger Bench rather than to a thirty-eighth answer

Justice Amit Borkar declined to decide a Section 11 application either way, holding that an authoritative answer is better than another judgment which may itself lead to another reference.

An agreement for sale of a flat, registered with the Sub-Registrar of Assurances, Mumbai City-2, in 2021, contains an arbitration clause. When the dispute came, the developer applied under Section 11 of the Arbitration and Conciliation Act, 1996 for appointment of a sole arbitrator. The purchasers objected that the dispute is not arbitrable at all, because the relationship and the transaction are governed by the Real Estate (Regulation and Development) Act, 2016.

On 7 October 2026 the Bombay High Court did not appoint an arbitrator and did not refuse to. It held that the objection raises a substantial question of law requiring authoritative consideration by a larger Bench of the Court, framed the question, deferred the Section 11 proceedings until the larger Bench answers it, and directed the papers to be placed before the Chief Justice on the administrative side.

The two positions the Judge refused to adopt

What gives the order its force is the symmetry of what it declines to hold. “In the present Section 11 proceedings, I do not hold that every dispute between a promoter and individual allottee under an Agreement for Sale governed by RERA is non-arbitrable. At the same time, I do not hold that every such contractual dispute is arbitrable only because the Agreement contains an arbitration clause.”

Those are the two blunt rules a judge deciding the application one way or the other would have had to adopt, and the judgment identifies the difficulty with each. A general rule of non-arbitrability would mean that an arbitration clause in a registered agreement for sale is a dead letter from the moment RERA applies, whatever the dispute is about. A general rule of arbitrability would mean that a clause in a standard-form agreement, drafted by the promoter, can remove from the statutory authorities matters that the legislature gave them.

Why a reference rather than a decision

The reason given for referring is about the function of the proceeding rather than the merits of the dispute. The Section 11 application is not proposed for deciding the applicant's damages or contractual rights; it is only for settling an important question which affects the existence of arbitral jurisdiction in a category of disputes.

In those circumstances, the Judge held, some delay for getting an authoritative answer would be better than passing another judgment which may lead to another reference. That is a candid statement of where the law stands: the point has been decided more than once at single-judge level and the decisions do not sit comfortably together, so a further single-judge decision adds a data point rather than an answer.

The question as framed

The question referred is set out in full in the order, and its structure matters because it is drafted to produce a usable rule rather than a yes or no.

It asks whether, having regard to Sections 79, 88 and 89 and the other relevant provisions of the Real Estate (Regulation and Development) Act, 2016, a dispute arising between an individual promoter and allottee under an agreement for sale containing an arbitration clause is, merely because the relationship and transaction are governed by RERA, non-arbitrable as a class — or whether arbitrability must instead be examined by reference to the subject matter, the nature of the relief sought, and the matters which the statutory authorities under RERA are empowered to determine.

The three sections named are the ones that do the work in this area. Section 79 bars the jurisdiction of civil courts in respect of matters which the Authority or the adjudicating officer or the Appellate Tribunal is empowered to determine. Section 88 provides that the Act's provisions are in addition to and not in derogation of other laws. Section 89 gives the Act overriding effect notwithstanding anything inconsistent in any other law. The tension between the second and the third of those is a good part of the reason the question is hard.

The second limb of the reference asks what is to be made of the existing authority: whether the conclusion in paragraph 63(i) of Rashmi Realty Builders Pvt. Ltd. v. Rahul Rajendrakumar Pagariya is to be understood as a general rule of non-arbitrability of all such disputes, notwithstanding the reasoning in Abhay Damodar Kanhere v. Morya Infraconstruct Pvt. Ltd. and the principles governing limited scrutiny at the Section 11 stage laid down by the Supreme Court in Arif Azim Co. Ltd. v. Aptech Ltd., Vidya Drolia v. Durga Trading Corporation and NTPC Ltd. v. SPML Infra Ltd.

Why the existing authority will not settle it

Paragraph 63 of Rashmi Realty has two parts, and the judgment separates them. The second answers the question actually framed in that case — that the jurisdiction of the Real Estate Regulatory Authority is not ousted merely because the agreement between promoter and allottee contains an arbitration clause. The first says, more broadly, that a dispute between an individual allottee and a promoter covered by RERA is non-arbitral in nature. “That part cannot be ignored as if it is not there.”

At the same time, the Judge recorded, the reasoning in Abhay Kanhere cannot be ignored either: that judgment considered the question framed before it and understood the effect of Rashmi Realty in a different manner.

A later decision, Laxman Mura Vaid, made the position harder rather than easier. There the Court considered Rashmi Realty and the contrary view of the Delhi High Court, and held that Rashmi Realty had not been set aside and continues to operate. It accepted the argument that dismissal of a special leave petition does not mean the Supreme Court has declared any ratio, and still held that Rashmi Realty remains a judgment of the Court and cannot be ignored. On the facts there, a claim for balance consideration under an agreement for sale was not treated as a simple money dispute between two people with no other relationship: the Court looked at where the claim came from, between whom it was made and which real estate transaction it arose from, and held that merely describing a claim as contractual does not take it outside the promoter-allottee relationship.

The applicant argued that Laxman Mura Vaid should be distinguished because Abhay Kanhere had not been brought to that Court's notice. The Judge accepted that the submission has some force, and then set out the principle that makes the reference necessary: a judgment which was not considered by a later coordinate Bench does not for that reason disappear, and merely because a judgment is delivered later it does not become a judgment of a larger Bench. “The law of precedent does not depend only upon which judgment is later in date. The strength of the Bench and the exact issue which was decided are important.” That is a single judge explaining, accurately, that he cannot choose between two coordinate decisions.

The claims, and why describing them differently does not help

The applicant's claims are for ₹92,45,590 said to have become payable towards additional area when amended sanctioned plans were completed in October 2022, and ₹41,59,726 towards balance consideration, with part-payments in August 2023 relied on under Section 19 of the Limitation Act.

The Judge held these cannot be called sham claims merely because the respondents dispute them; on the face of the record there are actual claims requiring consideration. But the manner in which a claimant describes a claim cannot decide whether it is arbitrable. The balance consideration is payable under the agreement for sale concerning the flat; the claim for additional area comes from the same real estate transaction; the persons against whom the claims are made are the allottees and the person making them is the promoter. The dispute therefore has a clear connection with the promoter-allottee relationship — the very connection Rashmi Realty and Laxman Mura Vaid treated as important, the latter having refused to separate a sale consideration claim from the allotment transaction by calling it a money claim.

The respondents relied on Sections 19(6) and 19(7) of RERA, under which the allottee's duty to pay under the agreement and interest for delayed payment fall within the statutory field. The Judge found substance in that for understanding the nature of the relationship, while expressly declining to decide the amount payable, whether the calculation is correct, what payments or adjustments were made or what defence may exist. For the present it was enough to say that the dispute cannot be treated as having no connection with RERA.

A Kerala High Court decision was relied on for the proposition that RERA creates no substantive right in a promoter to claim compensation from an allottee, so that a right under the general law of damages may survive outside the Act. That helps only to a limited extent, the Judge held: it may show that every compensation claim by a promoter is not a compensation claim under RERA, but that is a different question from arbitrability. “A claim being outside one particular remedy under RERA does not give a party a right to choose arbitration.”

The Section 11 problem underneath

Part of what makes the question awkward is the limited scrutiny a court is permitted at the referral stage. Vidya Drolia set out when a subject matter is not arbitrable, including where the dispute relates to inalienable sovereign and public interest functions or where a statute has created a specialised forum with exclusive jurisdiction; NTPC v. SPML Infra and Arif Azim then confined what the referral court may examine, on the principle that the arbitral tribunal is ordinarily the first forum to rule on its own jurisdiction.

A referral judge faced with a RERA objection is therefore caught between two instructions: do not decide arbitrability at this stage unless the case is one of manifest non-arbitrability, and do not refer a dispute that a statute has taken out of arbitration altogether. Which of those applies depends on the very question that is now referred.

The practical consequence of leaving it unsettled is wide. Agreements for sale of flats in Maharashtra are registered documents in standard form, and a great many of them carry arbitration clauses. Whether those clauses are enforceable, enforceable only for some kinds of dispute, or not enforceable at all against an allottee, determines where every one of those disputes begins.

The order

The Judge found that the objection of the first and second respondents regarding non-arbitrability raises a substantial question of law requiring authoritative consideration by a larger Bench of the Court.

The papers of the arbitration application are to be placed before the Chief Justice on the administrative side for the constitution of an appropriate larger Bench, to consider the question as formulated or such other or modified question as the Chief Justice or the larger Bench considers appropriate. The proceedings under Section 11 remain deferred for consideration in accordance with the decision of the larger Bench.

Mr Zaid Ansari appeared for the applicant; Mr Rohan Sawant with Mr Aagam Mehta and Mr Pratik K. Shah for the first and second respondents. The application was reserved on 1 October 2026 and pronounced on 7 October 2026.