Once An Apartment Is Subjected To Karnataka Apartment Ownership Act, Karnataka Ownership Flats Act Won't Apply: High Court

A single Judge of Justice Suraj Govindaraj, said

"Both Acts would apply in different time periods, KOFA would be applicable until the Apartment is subjected to the provisions of KAOA, if the Apartment is not subjected to KAOA, KOFA would continue to apply. Once an Apartment, Building, Property is subjected to the provisions of KAOA by execution of Declaration Deed of Apartment and Bye Laws, KOFA would stop being applicable."

Further, it said:

"KAOA would only apply to an apartment where it is used for residential purposes. A flat or an apartment which is used for an office or showroom or shop or godown (and includes garage) cannot be subjected to KAOA and would always continue to be governed by KOFA."

It added,

"When an apartment is proposed to be constructed or under construction and agreements are entered into, KOFA would apply insofar as the relationship and/or dispute between the purchaser and the promoter. KOFA would continue to apply if the Apartment is not subjected to KAOA. Once an apartment is subjected to KAOA, KOFA would cease to apply and it is only the KAOA, Declaration, Deed of Apartment and bye-laws which would be applicable."

The court also clarified that "In the event of an apartment being removed from the provisions of KAOA, in terms of Section 14 of KAOA, KOFA would come into operation". Further, it said,

"Essentially, KAOA, Declaration Deed of Apartment and bye-laws would be the provisions under which the relationship between an apartment owner and Association of the Apartment, building, property, would be governed. KOFA would apply insofar as the relationship and/or dispute between the purchaser of an apartment and the Promoter and any defaults on the part of the Promoter. The other enactments like RERA would also be applicable."

The court also noted, "Even when an Apartment is not subjected to KAOA and KOFA applies, the dispute and the relationship between the apartment owner and the Association would be governed in terms of the rules and regulations under the Co-operative Society, under which the said Association is registered or the terms of articles and memorandum of Association of companies, under which the said Association is registered."

It added, "If the Association is formed under KOFA, registration of the Association would be required under the Karnataka Cooperative Societies Registration Act and/or the Companies Act, depending on whether it is a Co-operative Society or a Company which is to be registered."

However, "In the event of a declaration, Deed of Apartment and Byelaws being executed and the Apartment, building, property is subjected to KAOA, the said documents would have to be registered before the jurisdictional Sub-Registrar and the same be informed to the Registrar of the Co-operative Societies."

The court also stated that "There would be no requirement for registration of the Declaration, Deed of Apartment and/or bye-laws with the Registrar of the Co-operative Societies. If the property is subjected to KAOA. The proceedings if any would have to be filed before the Civil Court of competent jurisdiction."

If a Co-operative Society or a Company is formed to manage the property, and the provisions of KOFA being applicable, the proceedings would have to be filed in terms of Section 13(5) before a Small Causes Court, where a Small Causes Court is established, in the absence thereof, before a Civil Court of competent jurisdiction.

Moreover, the court said, "All the apartment owners are not required to sign and execute the Declaration, Deed of Apartment and bye-laws. The Promoter before registration of a sale deed can execute and register the Declaration, Deed of Apartment and bye-laws with the jurisdictional Sub-Registrar, being the owner of the Apartment, building and property. If there is a joint development agreement, the owner of the property would also have to join the execution of the registration of the above documents."

It added, "Suffice it to say, it is only the persons or entities who have registered title in respect of the property who are required to execute and register the above documents."

Further, it was clarified,

"On the purchase of the property and registration of the sale deed, the purchaser or apartment taker would have to execute the necessary Declaration under Form B of KAOR agreeing to be bound by the said Declaration, Deed of Apartment and bye-laws. The Association, when formed, could always amend the same in terms of the provisions applicable thereto."

Case Background:

The plaintiff Shantharam Prabhu and other, owners of the Apartment bearing No.403 of Maurishka Park "B" Condominium had approached the court challenging orders of the judgment and decree dated 04.04.2019, passed by II Additional Senior Civil Judge & CJM, Mangaluru, in as much as the plaint in the said suit came to be rejected by allowing I.A.No.3 filed by the respondent (Association) wherein it was claimed by the association that KOFA, which had been invoked by Plaintiff, is not applicable inasmuch as it was KAOA which will be applicable.

Also, to set aside the order dated 04.04.2019 passed by the II Additional Senior Civil Judge & CJM, Mangaluru, D.K, dismissing I.A.No.2 filed by the Plaintiffs for restoration of electricity supply to the Plaintiff's Apartment.

The trial court had, after hearing the parties and considering the application filed under Order VII Rule 11(a) and (d) of CPC, allowed the same and dismissed the application filed by Plaintiffs under Order XXXIX Rule 1 and 2 of CPC for an injunction.

The court had said, "The ownership of the Plaintiffs is not in dispute, the Declaration and Deed of Apartment having been submitted are also not in dispute, the Declaration and Deed of Apartment were executed prior to the date of sale in favour of the Plaintiffs and the contents of the Declaration and Deed of Apartment would be binding on the Plaintiffs. In terms of Declaration and Deed of Apartment, there are certain covenants that have been agreed to be bound to by the owners. In terms thereof, any demand made by the Association is required to be paid by the owners of the Apartments."

It had added "If at all they are aggrieved by the amount of payment sought for, the same is required to be challenged, but so long as there was no challenge, the due amount would be required to be paid. In terms of Section 11 of the KAOA, the declaration and Deed of Apartment have been drafted and contents thereof incorporated in the said Deed, no one can claim exemption of payment of the due amounts, and the Court has come to the conclusion that it is the KAOA, which is applicable and not the KOFA.

Plaintiff's Submissions:

Advocate Aravind Babu.J and Advocate Suriya Narayana for the plaintiff submitted "The intent of KAOA is only to make each Apartment heritable and provide for the transfer of the Apartment. KAOA only deals with the transfer of apartments and does not deal with the maintenance thereof."

Further, he submitted, "The Declaration and the Deed of Apartment were executed only by the Promoter on 16.03.2007, and none of the apartment takérs/purchasers has signed the Declaration and the Deed of Apartment. The fact of execution of registration of Declaration and the Deed of Apartment has not been informed to the Registrar of Co-operative Societies. Hence, he submits that KAOA would also not be applicable. On this ground, he submits that the Plaintiffs have the necessary right in terms of Section 13(2) of KOFA to approach the jurisdictional Court, which cannot be faulted with."

Advocate Vijaykrishna Bhat, appearing for the defendants, submitted "KAOA and KOFA are two different enactments. They are not supplemental to each other, nor would they apply concurrently to an apartment, they being mutually exclusive."

"KOFA applies only in respect of the protection of interest of a purchaser who has made payment of advances for the construction of the Apartment, liabilities of the Promoter and protection of interest of intending purchasers. Under KOFA, a society or company of owners for Management of the Apartment by such society or company is contemplated. The primary Liability to form such a society is on the Promoter and thereafter, once the society is formed, the Management of common areas and facilities would be with the said society," it was submitted.

Moreover, KAOA applies to the transfer of the apartments and all matters relating to the apartments, which would include maintenance. He said "The provision of KAOA is self-contained. Once the Apartment is submitted to KAOA, the apartment owners would be governed by the provision of KAOA and Declaration and Deed Of Apartment submitted thereunder. Hence, KOFA would not be applicable."

Court Findings:

After going through the relevant provisions of both the Acts, the court held:

 "Since the Apartment in question is subjected to KAOA by execution of a Declaration, Deed of Apartment and bye-laws KOFA would not be applicable, no proceedings could have been initiated under Section 13 (5) before the Small Causes Court, Mangalore the said proceedings not being maintainable is barred under provision of the KAOA, the trial court has rightly allowed the application under Order VII of the Rule 11(a) and (b) of the CPC."

Case Title: Shantharam Prabhu And Mr. K. Dayanand Rai

Case No: Crp No.96 Of 2021

Date Of Order: September 8, 2021

Appearance: Advocate Aravind Babu.J, A/W Advocate Suriya Naraynan.G, For Petitioner

Advocate Vijayakrishna Bhat.M, For Respondent.

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