RERA vs. Arbitration: Bombay HC Draws a Clear Line

When a homebuyer’s flat is delayed and the developer points to an arbitration clause to block RERA proceedings, who wins? The Bombay High Court has finally given a decisive answer — RERA prevails.

In Rashmi Realty Builders Pvt. Ltd. v. Rahul Pagariya & Ors. (2024), the Court held that disputes covered under the Real Estate (Regulation and Development) Act, 2016 (RERA) cannot be diverted to arbitration, even if the agreement between the parties contains an arbitration clause. This ruling reshapes how real estate disputes in Maharashtra will be resolved and underscores RERA’s position as a powerful consumer protection statute.

The Clash: Private Contracts vs. Public Safeguards

For years, arbitration clauses in builder–buyer agreements were treated as sacred. Developers favoured arbitration for being private, faster, and less formal than litigation. The Arbitration and Conciliation Act, 1996 entrenches this principle of party autonomy, giving contracting parties wide freedom to determine their dispute resolution mechanism.

But RERA changed the game. It was enacted not just to regulate builders but to protect homebuyers, ensuring accountability, transparency, and timely delivery of projects. RERA gives buyers access to a specialised authority that can impose penalties, order refunds, and even direct developers to complete delayed projects.

This created a fundamental question: can a private contract between a builder and a buyer override a law enacted in the public interest?

The Rashmi Realty Ruling: RERA Has the Final Word

The Bombay High Court answered this question with clarity. It held that RERA’s statutory jurisdiction overrides private arbitration agreements.

The Court reasoned that disputes under RERA are not just private disagreements, they involve broader public interest. For instance, when one homebuyer complains about delay or quality issues, the RERA Authority’s decision often impacts all buyers in that project. This kind of collective impact, the Court said, makes such matters unsuitable for private arbitration.

Relying on landmark Supreme Court decisions like Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd. and Vidya Drolia v. Durga Trading Corporation, the Court reaffirmed that not all disputes can be arbitrated.
Disputes that involve public rights or statutory remedies, or those governed by specialised regulatory frameworks, must stay within the domain of the designated authority, in this case, RERA.

Why RERA Takes Priority

The judgment rests firmly on RERA’s own provisions, which make its authority exclusive and overriding:

1. Section 79 — Bars civil courts from entertaining cases that RERA can decide.
2. Section 88 — Clarifies that RERA’s remedies are in addition to, but not inconsistent with, other laws.
3. Section 89 — Gives RERA’s provisions overriding effect if they conflict with any other law, including the Arbitration Act.

Together, these sections make it clear that Parliament intended RERA disputes to be decided by RERA authorities, not private arbitrators.

Impact Across the Real Estate Ecosystem

For Developers:
Arbitration clauses in sale agreements can no longer be used to bypass RERA when disputes relate to project delays, refunds, possession, or other statutory duties. Developers must now treat RERA as the primary dispute resolution forum.

For Homebuyers:
This ruling is a major win. It gives buyers direct access to a transparent and cost-effective forum without being forced into arbitration proceedings they never truly negotiated.

For Lawyers and Advisors:
This decision calls for a careful relook at how builder–buyer agreements are drafted. Lawyers must distinguish between commercial disputes (which may still go to arbitration) and statutory grievances (which fall exclusively under RERA).

A Turning Point for Real Estate Dispute Resolution

The Rashmi Realty judgment is more than just a procedural clarification. It’s a reaffirmation of RERA’s core mission, to protect homebuyers and restore balance in the real estate market.

It also signals a larger judicial trend: when a conflict arises between private contracts and public-interest legislation, statutory protections will prevail. Arbitration remains vital in commercial matters, but when it comes to laws designed to protect consumers, the courts are drawing a clear line.

For homebuyers in Maharashtra, the message is now unambiguous — when statutory rights are at stake, RERA holds the final authority.