Interplay between Karnataka Apartment Ownership Act 1972 and Karnataka Co-Operative Societies Act 1959

Recently, the High Court of Karnataka in the case of Mrs. Saraswathi Prakash & Others vs. State of Karnataka & Ors., brought much-needed clarity to the legal framework governing management of residential complexes in Karnataka. .The judgment addresses the long-standing conflict between the Karnataka Apartment Ownership Act, 1972 (‘KAO Act’) and the Karnataka Co-operative Societies Act, 1959, (‘KCS Act’), particularly concerning the governance and management of residential complexes. The Court reaffirmed the primacy of the KAO Act, holding that upon registration of a Deed of Declaration, the KAO Act becomes the exclusive statute governing such properties..The dispute arose when the respondents i.e. certain residents of the apartment complex in question, approached the Registrar of Co-operative Societies, Bengaluru (‘Registrar’) for the formation of a cooperative society, and the Registrar allowed the chief promoter of the proposed society to collect share capital contributions from those residents/ owners desirous of being part of such society. .The petitioners, also residents of the same residential complex, approached the High Court and contended that (a) their apartments were already governed under the KAO Act by virtue of a duly registered Deed of Declaration and (b) an Apartment Ownership Association as per the KAO Act was already in place. They argued that the formation of a co-operative society under the KCS Act, for the same residential complex, was not only superfluous but also legally impermissible. The petitioners maintained that the registration of the Deed of Declaration triggered the exclusive application of the KAO Act, thereby precluding the applicability of the KCS Act..The respondents, however, argued that the execution and registration of the Deed of Declaration was not as per the terms of Section 2 of the KAO Act, further that the Deed of Declaration was not signed by all the 150 apartment owners. According to the respondents, the absence of unanimous consent rendered the Deed of Declaration defective, justifying the creation of an alternative governance body. The respondents also submitted that their right to form a society was a fundamental right under the Constitution of India..The Court held that the KAO Act provides an exclusive and comprehensive legal framework for the governance of apartment complexes. The Court further held that the KAO Act is triggered upon registration of a Deed of Declaration irrespective of whether all individual owners have signed it. Interpreting Section 2 of the KAO Act, which expressly applies to residential apartments, the Court clarified that registration of the Deed of Declaration alone suffices to bring the property within the ambit of the KAO Act..Furthermore, the Court referred to Section 5 of the KAO Act, which affirms that each apartment owner shall have exclusive ownership and control over their respective unit. Sub-section (2) of Section 5 of the KAO Act mandates the execution of a Deed of Apartment by each owner, thereby signifying submission to the provisions of the KAO Act. Consequently, once the Deed is registered, all apartment owners are deemed to have submitted to the statutory scheme provided under the KAO Act, and the intent to form an association to be governed by KAO Act becomes clear..The Court, while referring to the landmark judgements in Shantharam Prabhu and Ors Vs. K. Dayanand Rai , VDB Celadon Apartment Owners Association Vs. Mr. Praveen Prakash, and highlighting the relevant provisions of the KAO Act, held that the dispute was covered under the KAO Act and that the petitioners and members of their association were entitled to registration under the KAO Act, and further that a society cannot be registered under the KCS Act solely for managing residential flats unless the aim is to achieve any one/ all of the acts listed under Section 3 of KCS Act. .The Court also held that the Karnataka Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act (‘KOFA’), 1972, and its Rules, 1975, apply only when a property includes both residential and commercial units, which is not the case at hand. It observed that since the project consisted only of residential flats, KOFA was not applicable, and registration under the KCS Act was not permissible. Concluding that the petitioners' claims were valid, the Court allowed the petition and clarified that the Deed of Declaration, Deed of Apartment and Bye Laws would be registered before the Sub-registrar and an intimation about the same has to be sent to Registrar under the KCS Act..This judgment reaffirms the well-established principle that where a special statute specifically regulates a particular subject matter, it will take precedence over general legislation that might otherwise also apply. The Court emphasized that the KAO Act provides a comprehensive and special code for apartment governance, specifically for properties used mainly for residential purposes. Therefore, any attempt to form a cooperative society in respect of such a project as intended by the Respondents was held to be legally impermissible..The Judgement provides long-awaited clarity on the issue of management and governance of residential complexes, affirming that once a Deed of Declaration is registered under the KAO Act, the property must be governed exclusively under its provisions. This eliminates the possibility of dual or conflicting governance structures, such as the simultaneous operation of a co-operative society and a KAO Act compliant association. Further, this Judgment not only resolves ambiguity for apartment owners but also ensures orderly, uniform governance of residential complexes, avoiding overlapping jurisdictions and potential conflicts..This Judgement will also have significant implications for future apartment owners, builders, and developers across Karnataka. For apartment owners, it ensures greater legal certainty and protection by mandating that residential complexes must be governed solely under the KAO Act, once a Deed of Declaration is registered. This removes the risk of dual governance models and protects owners from being compelled to join cooperative societies that may not align with the statutory framework. For builders and developers, the Judgment imposes a clear obligation to structure the management framework of residential projects strictly within the KAO Act regime. They must ensure that a valid Deed of Declaration is executed and registered promptly and that the apartment association is properly formed in accordance with the KAO Act. Developers can no longer promote or facilitate the formation of cooperative societies for residential complexes where the KAO Act is applicable. This ruling will streamline apartment governance, reduce potential litigation, and bring much-needed clarity to the housing sector in Karnataka. However, it is noteworthy that when KOFA applies, the Association would be registered under KCS and/or Companies Act, 2013..About the authors: Ishwar Ahuja is a Partner and Bhairavi SN is a Senior Associate at Saga Legal.They were assisted by Harsha Parakh, Intern..The views and opinions expressed in this Article are those of the author(s) alone and meant to provide the readers with the understanding of the judgment passed in Mrs. Saraswathi Prakash & Others vs. State of Karnataka & Ors. The contents of the aforesaid Article do not necessarily reflect the official position of Saga Legal. The readers are suggested to obtain specific opinions/advise with respect to their individual case(s) from professional/experts and not to use this Article in place of expert legal advice..Disclaimer: The opinions expressed in this article are those of the author(s). 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