RERA vs KAOA: Karnataka High Court rules no conflict between laws for apartment ownership

“The moment this procedure is undertaken by the promoter, the provisions of RERA, for all practical purposes, cease to apply,” said Justice Uma.

Justice Uma added that the registration of an apartment must be under the Karnataka Apartment Ownership Act, a special enactment, and not under the Karnataka Cooperative Societies Act, 1959 (KCS). “The Cooperative Society is not a good vehicle to fulfil the objectives of maintaining, administering, and managing the residential apartments or the common areas on behalf of the owners.”

Sobha Limited vs Cooperative Society

Real estate development company Sobha Limited approached the court challenging an order passed by the registrar of Cooperative Society, dated February 7, 2024, allowing an application made by a few apartment owners in its project, Sobha HRC Pristine, and issuing a Certificate of Registration in the name of Sobha HRC Pristine Apartment Owners Co-operative Society Limited.

The developer argued that, out of 395 units, only 30 to 40 were members of the respondent No 3 Cooperative Society; none of the other owners had given their consent to be part of the society, and they had submitted under the KAOA Act.

The petitioner argued that such registration of the society is illegal and contrary to the objectives of the KCS Act, thereby hijacking the objectives of the owners’ association as set out in the Deed of Declaration. “Functioning of parallel associations will definitely create chaos, and it is not in the interest of the owners or even the allottees,” it said.

On the other hand, the society contended that various provisions of the RERA require a society to be registered under the KCS Act. It referred to Section 17 of RERA, which deals with the transfer of title and the handing over of documents with regard to common areas, to contend that RERA is legislated to protect the interests of owners and is a Central legislation that will prevail over state law.

Provisions under RERA and KAOA

In its order, the Karnataka High Court bench noted that KAOA deals exhaustively with residential apartments constructed in Karnataka, their holding, management, maintenance, and anything incidental thereto.

The bench noted that, despite repeated requests by the court, counsel for the society failed to point to any provisions that, according to him, are repugnant between RERA and KAOA.

“The application of the provisions of RERA will be to projects which are under development till handing over of possession of the apartment to the owners and undivided share of the project in favour of the association of owners formed under the provisions of KAOA. Whereas, provisions of KAOA will be applicable once such handing over is complete and the association is formed in accordance with law,” the bench said.

“The provisions under RERA are applicable to the pre-ownership stage, whereas the provisions under KAOA are applicable to the post-ownership stage.”

The bench said, admittedly, there is an agreement between the petitioner and the allottees or owners to submit the project, ie, the apartment and the common areas, under the provisions of KAOA. Thus, a contractual obligation also lies on all such allottees and owners to comply with the same, said the bench.

“The counsel for the society could not explain as to how the members of respondent No 3, Society, could overcome the contractual obligation which they themselves voluntarily undertook under various agreements to sell and the sale deeds in respect of its members.”

“The project is purely a residential apartment purchased by the owners with the intention of living peacefully by investing their hard-earned money. If there could be two parallel associations, a Cooperative Society and an Owners’ Association with the common object of maintaining, administering and managing the common areas, facilities etc, the very purpose of purchasing the apartment by the owners for their peaceful living will be frustrated.”

The bench in the order emphasised that the object with which the KCS Act came into existence was only to encourage the co-operative movement by adopting cooperative principles. KAOA, on the other hand, was enacted for the specific purpose of providing for the ownership of an individual apartment in a building, making such apartment heritable and transferable property, and providing for matters connected therewith.

“There cannot be two parallel associations in a residential apartment which will be against the interest of the owners and the inmates in the matter of maintenance, administration, management and other incidental functions and also in safeguarding the interest of its members,” the bench said.

“If the allottees or the owners are having any grievance against the petitioner (developer), they are free to approach the competent authority, be it under the provisions of RERA or the Consumer Protection Act, for redressal of their grievance individually or by forming a separate association, in accordance with law,” the bench added.