Madras High Court Stays Single Judge Order Which Held Apartment Owners Association Cannot Claim Transfer Fee On Every Resale Of Flat

The bench of Justice D Krishnakumar and Justice PB Balaji have stayed by 8 weeks the order passed by the single judge. The stay was granted on an appeal filed by the Ankur Grand Owners Association challenging the May 2023 decision of Justice SM Subramaniam.

The single judge had observed that if the association was permitted to collect a transfer fee on every resale of a flat, it would not only result in discrimination but also result in multiple collections of corpus funds on every resale or transfer of property. The court had ruled that in the absence of any statutory provision, the association could not be allowed to levy and collect transfer fees on the purchase of pre-owned flats.

The single judge had also noted that as per the provisions of the Apartment Ownership Act, the common expenses of the building were to be met by collecting the same from the members/occupiers of the flat proportionately. The court had remarked that the Apartment Owners' Association was not a profit-making association and was not empowered to collect transfer fees by amending its bylaws.

The single judge had even noted that the apartment owners' association had no role to play in the transfer of the flat between persons and by interfering/ preventing the owner from dealing with his property, the association was interfering with the constitutional right to property of the persons.

The association had challenged the order of the District Registrar (Administration) declaring null and void an amendment made to the bylaws of the association permitting them to collect transfer fees. The District Registrar had also directed the association to refund the corpus fee. The association contended that the Registrar was not empowered to rule the same. The association submitted that as per Section 13 of the Tamil Nadu Apartment Ownership Act, the society had to submit the amendments to the Competent Authority which had no power to reject the registration of the amendments.

The court however did not agree with this submission and said that the amendments of a society could be legal only if the requirements under Section 12 of the Societies Registration Act were met. The court noted that the society had to pass a special resolution that should be presented to the Registrar, who will then scrutinize and satisfy himself regarding the amendments and then finally register the amendments.

Though the society claimed that the amendments were to be presented before the competent authority under the Apartment Owners Association, the court observed that no society could be allowed to take a dual stand that they will register its bye-laws under the Societies Registration Act which is approved and for amendment they will only present the document before the competent authority under the Apartment Ownership Act. The court said that if such a dual stand was permitted it would create an anomalous situation.

Citation: 2024 LiveLaw (Mad) 367

Case Title: Ankur Grand Owners Association v The District Registrar (Admin)

Case No: WA 528 of 2024