BENGALURU: The high court has declared that a cooperative society is not a suitable method for managing residential apartments and their communal areas on behalf of owners. This ruling led to the cancellation of the registration for the Sobha HRC Pristine Apartment Owners Cooperative Society in Jakkur.
Justice MG Uma issued the order while accepting a petition from Msrs Sobha Limited, nullifying the registration that had been granted by the assistant registrar of cooperative societies in the Bengaluru Urban district on September 6, 2023. Additionally, the court overturned a decision made on February 7, 2024, by the deputy registrar of cooperative societies during an appeal.
“The Karnataka Cooperative Societies Act does not permit members to possess property or maintain and manage shared interests. There is a risk of government intervention in management, potentially appointing an administrator who is an outsider,” the ruling stated.
The court also raised concerns about shareholding and voting limitations within the cooperative society’s structure. “The limit of 5% shareholding is incompatible with the society’s purpose. The bylaws do not clarify which shares are relevant or define ownership entitlements,” it noted.
On the subject of voting rights, the order emphasized: “Restrictions on voting until one year is completed and allowing only one vote per person undermine the intent of the Karnataka Apartment Ownership Act (KAOA), which is designed to protect owners’ interests. Owners can possess more than one apartment and are entitled to one vote per apartment as soon as they join the association,” Justice MG Uma explained.
Addressing options under RERA and local laws in Karnataka, the judge stated: “RERA permits the formation of an association, society, cooperative society, or federation under local regulations. Given that the KAOA robustly addresses the interests of apartment owners and aligns with central legislation, there is no justification for creating a cooperative society like the Sobha HRC Pristine Apartment Owners Association,” the judge concluded.
According to Sobha Limited, the applicable local law for the project is the Karnataka Apartment Ownership Act (KAOA) of 1972, along with the Karnataka Apartment Ownership Rules of 1974.
The company claimed that a deed of declaration, along with bylaws, was submitted to the deputy registrar of cooperative societies on June 21, 2023, as mandated by the KAOA, and was acknowledged. Sobha Limited argued that the management and maintenance of common areas and amenities were conducted by an owners’ association formed through the execution and registration of the deed of declaration.
Sobha Limited accused 1 TK Parasuraman, who claimed to be the chief promoter, of misrepresenting facts and not complying with KAOA provisions to improperly obtain the registration for the cooperative society under the Karnataka Cooperative Societies Act of 1959.
The company asserted that this registration was illegal and contrary to the Karnataka Cooperative Societies Act’s objectives, “thus undermining the goals defined in the association’s bylaws as stated in the deed of declaration.” It classified the issuance of the registration certificate dated September 6, 2023, as erroneous.
Sobha Limited further noted that out of 395 units, only 30 to 40 were members of the cooperative society, with none of the other owners consenting to join.
