Executive Summary

In a landmark judgment addressing a critical gap in India’s real estate regulatory framework, the Karnataka High Court has delivered a comprehensive 92-page order clarifying the interplay between three distinct legislative regimes: the Karnataka Apartment Ownership Act, 1972 (KAOA), the Karnataka Ownership Flats Act, 1972 (KOFA), and the Real Estate (Regulation and Development) Act, 2016 (RERA).

Key Holdings

1. An “Association of Allottees” under RERA is distinct from an “Association of Apartment Owners” under KAOA
2. KAOA Associations can only be formed post-conveyance by registered owners
3. Co-operative Societies under Karnataka Co-operative Societies Act, 1959 can be formed for purely residential projects under RERA
4. RERA overrides KOFA in matters of developer-allottee disputes
5. Societies registered under Karnataka Societies Registration Act, 1960 cannot maintain apartment complexes
6. Developers must convey common areas to associations within 120 days of registration
7. KAOA Associations lack locus standi under RERA Section 31 as they are not “voluntary consumer associations”

I. Background and Context

The dispute arose from “Commune 1,” a residential apartment complex in Bengaluru comprising 384 apartments across five towers (A to E). The project presented a scenario common in phased developments: Towers B, C, and D were substantially completed with registered sale deeds executed, while Towers A and E remained under construction, significantly delayed beyond the contracted completion date.

Multiple entities emerged claiming authority over the project: a Society under the Karnataka Societies Registration Act (KSRA) formed by apartment owners, another Association under KSRA formed by agreement holders, and a Co-operative Society registered under the Karnataka Co-operative Societies Act (KCSA) pursuant to directions from the Karnataka Real Estate Regulatory Authority (K-RERA).

II. The Central Legal Question

The case presented a fundamental question: Who can form an “Association of Allottees” under RERA, and what is its relationship with associations formed under state apartment ownership laws?

The petitioners (apartment owners with registered deeds) contended that only an Association under KAOA could legitimately maintain an apartment complex, and that RERA’s direction to register a Co-operative Society was contrary to settled law. They relied on precedents like VDB Celadon (2019) and Starnest Apartment Owners (2024), which held that co-operative societies require commercial units in the project.

III. The Court’s Analysis and Holdings

A. Association of Allottees vs. Association of Apartment Owners

The Court held that an “Association of Allottees” under RERA is conceptually and legally distinct from an “Association of Apartment Owners” under KAOA. The critical distinction lies in the definitions:

• RERA Section 2(d) defines “allottee” as a person to whom an apartment has been “allotted, sold…or otherwise transferred” – this includes both agreement holders and persons with registered deeds
• KAOA Section 3(b) defines “apartment owner” as a person “owning an apartment” – ownership crystallizes only upon registration of sale deed

The Court further distinguished these associations on temporal and functional grounds. RERA associations must be formed “within three months of majority of allottees having booked their units” (Section 11(4)(e)), whereas KAOA associations can only be formed after sale deeds are executed and a Declaration is registered. Functionally, RERA associations address grievances against developers and enforce statutory rights during the project lifecycle, while KAOA associations manage and maintain completed apartment complexes.

B. KAOA Association Cannot Be Formed Pre-Conveyance

The Court categorically held that an Association under KAOA cannot be formed by allottees who do not have registered sale deeds. Section 5(2) of KAOA mandates that “each apartment owner shall execute a Declaration” – this presupposes ownership. Since mere agreement holders are not “owners” under property law, they cannot execute a Declaration subjecting apartments to KAOA provisions.

This creates a practical impossibility: RERA requires association formation within 3 months of majority booking, but KAOA associations can only form post-conveyance. These timelines are temporally incompatible, necessitating a different legal vehicle for pre-conveyance collective action.

C. RERA Overrides KOFA, Complements KAOA

On the question of repugnancy between RERA and state laws, the Court held that where conflicts exist between RERA 2016 and KOFA 1972, RERA prevails by virtue of Article 254(1) of the Constitution and RERA’s non-obstante clause (Section 89). However, RERA and KAOA do not conflict as they operate in different temporal and functional domains – RERA applies pre-ownership during the construction phase, while KAOA applies post-ownership for maintenance and governance.

The Court applied the three-pronged test of repugnancy from the Supreme Court’s decision in Forum for People’s Collective Efforts v. State of West Bengal (2021): direct conflict test, occupied field test, and identical subject matter test. For RERA vs. KOFA, tests two and three were satisfied – RERA occupies the field of developer-allottee disputes. For RERA vs. KAOA, no test was satisfied, permitting harmonious coexistence.

D. The Co-operative Society Solution

Perhaps the most significant holding is the Court’s validation of co-operative societies for purely residential projects under the RERA framework. This departs from the Division Bench decision in Starnest Apartment Owners (2024), which held that co-operative societies could only be formed if the project included commercial units.

The Court distinguished Starnest on the ground that it dealt with pre-RERA law and the interplay between KOFA and KAOA, without considering RERA’s independent framework. Under RERA Section 11(4)(e), which expressly permits formation of “association or society or co-operative society,” allottees have a choice of legal vehicle. The Court held that co-operative societies formed under RERA can perform dual functions: (1) grievance redressal – filing complaints under Section 31, seeking project takeover under Section 8, and (2) maintenance – managing common areas and amenities.

This holding, while pragmatic, is potentially vulnerable on appeal as it represents a Single Judge departing from a recent Division Bench precedent. However, the Court’s reasoning is sophisticated: Starnest applied KOFA’s requirement of commercial units, but RERA’s non-obstante clause permits departure from state law requirements when necessary to achieve RERA’s objectives.

E. Societies Under KSRA Cannot Maintain Apartments

Reaffirming binding Division Bench precedents in VDB Celadon (2019) and DS Max (2024), the Court held that societies registered under the Karnataka Societies Registration Act, 1960 cannot have maintenance of apartment complexes as one of their objects. Section 3 of KSRA enumerates permissible objects in clauses (a) to (g), which do not include maintenance, administration, or management of apartment buildings.

Applying the principle that specific law prevails over general law, the Court held that KAOA 1972, being a specific statute for apartment complexes, must govern over KSRA 1960, which is a general law for societies. Consequently, both the petitioner’s Society and the respondent’s Association (both registered under KSRA) were held to lack legal authority to maintain the apartment complex.

F. Common Areas Conveyance Timeline

The Court mandated that developers must execute conveyance of common areas in favor of the Association within 120 days of its registration. This directive is grounded in RERA Section 11(2)(d), which prohibits promoters from transferring or mortgaging common areas except to the association of allottees, and Section 19(3), which provides that “the association of allottees shall be entitled to claim the possession of the common areas.”

Furthermore, the Court held that RERA Section 2(n)’s definition of “common areas” is exhaustive and statutory – it cannot be modified by developers through Declarations under KAOA Section 3(f). Relying on the Supreme Court’s observation in Forum for People’s Collective Efforts (Para 178.1) that the definition of common areas “cannot be overridden even by State Government through subordinate legislation,” the Court held that during the RERA-regulated phase, developers cannot reduce common areas below RERA’s specification.

G. KAOA Association Lacks Locus Under RERA Section 31

Extending the Supreme Court’s holding in Hibiscus Condominium v. Sobha Developers (2016) from the Consumer Protection Act context to RERA, the Court held that KAOA associations are not “voluntary consumer associations” and therefore lack locus standi to file complaints under RERA Section 31. The Explanation to Section 31 requires associations to be “voluntary,” but KAOA associations arise from statutory mandate under Section 5(2), not voluntary formation. Additionally, the temporal impossibility – KAOA associations can only form post-conveyance, but most RERA complaints arise during construction – renders this practically moot.

IV. Practical Implications

For Homebuyers and Allottees

Homebuyers in RERA-registered projects should ensure association formation within 3 months of majority booking. Pre-conveyance, form a co-operative society under KCSA 1959 (not a society under KSRA 1960). Post-conveyance, form a KAOA association with all owners executing the Declaration. Exercise rights under RERA Section 19(3) to claim common areas and seek conveyance within 120 days. Use the co-operative society (not KAOA association) for filing complaints against developers.

For Developers and Promoters

Developers must proactively “enable” association formation per RERA Section 11(4)(e) – provide allottee contact details, facilitate organizational meetings, and assist with registration applications. Mark calendars for the 3-month deadline from majority booking. Identify all common areas per RERA Section 2(n) and execute conveyance to the association within 120 days. Avoid conflicting clauses in sale agreements that override RERA’s common areas definition or prevent pre-conveyance association formation. Non-compliance triggers Section 63 penalties (up to 3 years imprisonment) and Section 18 compensation claims.

For RERA Authorities

RERA authorities can exercise Section 32 powers to issue recommendations facilitating RERA objectives, including directing the Registrar of Co-operative Societies to register associations. Coordinate with the Co-operative Department for expedited registrations and with the Registration Department for common areas conveyance. When permitting Section 8 project takeovers, ensure the co-operative society has capacity (financial and technical) to complete the project.

V. Critical Analysis

The Precedent Vulnerability

The judgment’s holding on co-operative societies faces a significant challenge: it represents a Single Judge decision potentially conflicting with the Division Bench precedent in Starnest (2024). Under Article 141 and established judicial hierarchy, a Single Judge is bound by Division Bench decisions. While Justice Govindaraj attempted to distinguish Starnest on the ground that it didn’t consider RERA, this may not survive appellate scrutiny. The Division Bench in Starnest held that co-operative societies require commercial units “under the Act of 1959” (KCSA) – a broader holding than merely KOFA.

The Legislative Gap

The Court correctly identified a critical gap: no mechanism exists for transition from co-operative society (formed during construction) to KAOA association (required post-conveyance). Questions remain unresolved: Does the co-operative society automatically dissolve? How are assets and liabilities transferred? Who owns common areas during transition? In an unprecedented step, the Court directed that a copy of the judgment be forwarded to the Union and State Law Commissions, inviting legislative intervention.

VI. Conclusion

The Karnataka High Court’s judgment in Akhilesh Anand represents a significant contribution to the evolving jurisprudence on the intersection of RERA and state apartment ownership laws. It achieves doctrinal clarity by distinguishing between “allottees” (RERA) and “owners” (KAOA), validates co-operative societies as vehicles for collective action during construction, and applies constitutional principles of repugnancy while respecting cooperative federalism.

However, the judgment faces potential appellate challenges on the co-operative society issue and leaves the transition mechanism unresolved. Its true test will come in application over the next few years as hundreds of partially completed projects across Karnataka grapple with these questions.

For homebuyers, the message is clear: You have rights, remedies, and a legal framework to protect your interests. But those rights must be asserted promptly through the correct legal vehicles. For developers, RERA compliance is not optional – the consequences of non-compliance are severe.

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