RERA And Karnataka Apartment Ownership Act Operate At Different Stages, Not Repugnant: Karnataka High Court

The Karnataka High Court has recently held that the Real Estate (Regulation and Development) Act, 2016 is not repugnant to the Karnataka Apartment Ownership Act, 1972, observing that the two statutes govern different stages in the life of a real estate project.

The finding came in a petition filed by Sobha Limited concerning the Sobha HRC Pristine residential development in Bengaluru.

Justice M.G. Uma allowed the plea and set aside the registration of a cooperative society that had been formed by a group of purchasers in the project.

The Court held that the regulatory framework under RERA applies during the development stage of a project, whereas the Karnataka Apartment Ownership Act governs the project after ownership of apartments is transferred and an association of owners is formed.

The court observed,

“Under such circumstances, it is to be held that there is no repugnancy between the provisions of RERA and KAOA. Moreover, 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 the undivided share of the project in favour of the association of owners formed under the provisions of KAOA, whereas, the provisions of KAOA will be applicable once such handing over is complete and the association is formed in accordance with law. In other words, the provisions under RERA are applicable to the pre-ownership stage, whereas the provisions under KAOA are applicable to the post-ownership.”

The dispute arose in relation to Sobha HRC Pristine, a residential project developed by Sobha Limited at Jakkur in Bengaluru North. The project comprises 395 units including 381 apartments and 14 row houses along with a clubhouse and other common amenities.

According to the developer, construction of the project was completed and an Occupancy Certificate was issued by the Bruhat Bengaluru Mahanagara Palike on May 26, 2023.

Following completion of the project, sale deeds began to be executed in favour of apartment purchasers.

Shortly thereafter, on June 12, 2023, the developer executed a Deed of Declaration under the Karnataka Apartment Ownership Act. An owners' association was constituted under the statute to take charge of the administration of the residential complex and the maintenance of its common areas.

The situation changed a few months later. Around 30 to 40 purchasers registered a cooperative society under the Karnataka Cooperative Societies Act, 1959 in September 2023. According to the group, the society was intended to represent residents and address issues concerning the project.

Sobha Limited questioned the move and approached the authorities. Its challenge was rejected by the Deputy Registrar of Cooperative Societies on February 7, 2024. The developer then moved the High Court under Articles 226 and 227 of the Constitution, seeking to set aside the appellate order as well as the registration certificate issued to the cooperative society on September 6, 2023.

Before the Court, Sobha Limited argued that the project was purely residential and therefore governed by the Karnataka Apartment Ownership Act. An association of apartment owners had already been formed after execution of sale deeds. In such circumstances, the developer contended, the cooperative society effectively created a parallel body claiming authority over the same residential project.

The cooperative society, however, argued conversely. Relying on provisions of the Real Estate (Regulation and Development) Act, 2016, it argued that a society of allottees could be formed under local laws to represent the interests of purchasers.

The High Court did not accept that submission. It held that once apartments had been transferred and an association had been formed under the Apartment Ownership Act, the management and administration of the residential complex must operate within that statutory framework.

The Court then turned to the question of cooperative societies in such projects. It observed:

“The Cooperative Society is not a good vehicle to fulfill the objectives of maintaining, administering, managing the residential apartments or the common areas on behalf of the owners. Hence, I am of the opinion that registration of respondent No.3 - Society is to be cancelled.”

Allowing the petition, the High Court set aside the order dated February 7, 2024 passed by the Deputy Registrar of Cooperative Societies and quashed the registration certificate dated September 6, 2023 granted to the cooperative society.

The Court clarified that apartment purchasers remain free to pursue remedies available under law if they have grievances relating to the project.

For petitioner (M/s Sobha Limited): Advocate Madhukar M. Deshpande.

For Respondent Nos.1, 2 & 4 – Additional Government Advocate Yogesh D. Naik.

For Respondent No.3 (Sobha HRC Pristine Apartment Owners Co-operative Society Ltd.) : Advocate P.K. Pradeep Kumar.

For Respondent No.5 (Sobha HRC Pristine Owners Association): Advocate Sneha Nagaraj.

Amicus Curiae: Advocate G. Sridhar