Cooperative society model not fit for managing apartments & common areas: Karnataka high court

Bengaluru: A cooperative society is not an appropriate mechanism for managing residential apartments and their common areas on behalf of owners, the high court has ruled while cancelling the registration of the Sobha HRC Pristine Apartment Owners Co-operative Society in Jakkur.Justice MG Uma passed the order while allowing a petition filed by Msrs Sobha Limited, and cancelled the registration granted by the assistant registrar of cooperative societies, Bengaluru Urban district, to the association, dated Sept 6, 2023. The court also quashed the order dated Feb 7, 2024, passed by the deputy registrar of cooperative societies in appellate proceedings.
"The Karnataka Cooperative Societies Act never enables the members to hold the property and to maintain and manage the undivided share and the facility. There is always a danger of the management being superseded by the govt in a peculiar situation and appointment of an administrator who is an employee appointed by the registrar of cooperative societies, and who is definitely an outsider being put in charge."The court also flagged issues with shareholding and voting restrictions under the cooperative society framework. "The restriction on holding more than 5% of the share capital cannot be reconciled with the object with which the society is formed. Even though the bye-laws pertaining to respondent No 3 refer to the holding of shares, it is not made clear which share is referred to in the bye-law and how much share each owner is entitled to hold, who will quantify the share of each owner, etc."On voting rights, the order stated: "The restriction on voting till completion of 1 year and only 1 vote per person will definitely defeat the object with which KAOA was enacted, where it safeguards the interest of owners where there is no restriction to own more than 1 apartment and can exercise 1 apartment 1 vote and are entitled to vote the moment they become members of the association," Justice MG Uma elaborated in her order.Referring to the options under Rera and the local legal framework in Karnataka, the judge said: "Under the provisions of Rera, an option is given to the parties either to form an association or a society or a cooperative society or a federation under the local laws. In Karnataka, when the Karnataka Apartment Ownership Act (KAOA) is the robust enactment to take care of the interest of the owners of the apartment and when none of its provisions are repugnant to the central legislation, ie, Rera, and that too, when KAOA is the special enactment enacted for the very purpose of dealing with maintenance, administration, and management of the undivided interest in the common areas and facilities in the residential apartment, this court does not find any justification for formation of a cooperative society like respondent No 3, ie, Sobha HRC Pristine Apartment Owners Association," the judge further added.According to Sobha Limited, the petitioner-builder, the local law applicable to the project was the Karnataka Apartment Ownership Act (KAOA) 1972 and the Karnataka Apartment Ownership Rules, 1974.The company said the deed of declaration, along with the bye-laws, was filed with the deputy registrar of cooperative societies via letter dated June 21, 2023, as required under section 13 of KAOA, and was acknowledged. It argued that maintenance, administration and management of common areas, amenities, equipment and facilities in the project was undertaken by forming an association of owners by executing and registering the deed of declaration under the name of the association and executing Form-B as provided in KAOA, submitting their unit to the provisions of the Act, including a few members of respondent No 3 society.Sobha Limited alleged that 1 TK Parasuraman, claiming to be the chief promoter, approached the assistant registrar of cooperative societies with misleading facts, suppressed material facts, did not adhere to KAOA provisions, and obtained the certificate of registration of respondent No 3 as Sobha HRC Pristine Apartment Owners Co-operative Society Limited under the Karnataka Co-operative Societies Act, 1959.It contended that the registration was illegal and contrary to the objectives of the Karnataka Co-operative Societies Act, and "thereby hijacked the objectives of bye-laws of the Association as provided in the deed of declaration". It said the issuance of the registration certificate dated Sept 6, 2023, was erroneous.Sobha Limited further argued out of 395 units, only 30 to 40 were members of respondent No 3 society, and that none of the other owners gave consent to be part of it. Get the latest lifestyle updates on Times of India, along with Women's day wishes, messages and quotes !