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The Karnataka High Court has clarified that cooperative societies are not the appropriate legal structure for managing apartment complexes and their common areas. The court cancelled the registration of a cooperative society in Jakkur, noting that the Karnataka Apartment Ownership Act (KAOA) provides a clearer legal framework for ownership, voting, and administration of undivided interests in apartments. It highlighted that cooperative societies are limited by shareholding restrictions, voting constraints, and potential government intervention. The ruling reinforces that under local law and RERA, apartment owners associations under KAOA better safeguard the rights and interests of flat owners.
The Karnataka High Court recently ruled that cooperative societies are inappropriate for managing residential apartment complexes and their shared areas. The judgment cancelled the registration of the Sobha HRC Pristine Apartment Owners Cooperative Society in Jakkur, following a challenge by the builder. The court emphasised that the Karnataka Apartment Ownership Act (KAOA), 1972 is the proper legal framework for ownership, administration, and management of undivided interests in apartments and their common facilities. Advertisement
The court pointed out that the Karnataka Cooperative Societies Act, 1959 does not clearly empower societies to hold or manage undivided property on behalf of apartment owners. It noted that cooperative societies are subject to government control, including potential appointment of external managers, which could compromise the rights of apartment owners.
Justice MG Uma observed that cooperative societies impose restrictions on shareholding, with limits on the percentage of shares any individual can hold, and have voting constraints that do not align with apartment ownership requirements. The court explained that these limitations make cooperative societies unsuitable for apartment management because they prevent owners from exercising full rights over their property and decision-making.
The builder, Sobha Limited, argued that the society's registration was improper because only a small portion of flat owners had consented to its formation, and the society did not meet the statutory requirements of the KAOA. The court agreed, stating that apartment ownership laws and RERA regulations intend for flat owners to have a registered body to manage common areas without government interference or ownership restrictions.
The court also highlighted that under RERA (Real Estate Regulation and Development Act, 2016), developers must facilitate the formation of a legally recognised body of allottees to manage common areas, but such a body must comply with the relevant local laws. In Karnataka, this means that apartment owners associations under the KAOA provide a clear, enforceable, and legally recognised structure, unlike cooperative societies under the cooperative law.
This decision reinforces earlier legal interpretations that for residential apartments, the KAOA offers a structured framework for ownership, management, and governance, covering conveyance, voting, and rights of members. It ensures that apartment owners are fully protected and that the management of common facilities is transparent and aligned with statutory requirements.
The ruling also serves as a reference for developers and apartment associations across Karnataka, clarifying that cooperative societies cannot be used to bypass legal obligations under KAOA and RERA. By adopting the correct legal framework, apartment communities can ensure proper administration and protect homeowners interests in a clear and legally recognised manner.
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