'Unjust Enrichment' : Karnataka RERA Directs Developer To Transfer Corpus Fund To Owners' Association, Fulfil Promises In Senior Citizen's Project

The Karnataka Real Estate Regulatory Authority (KRERA) has directed a private developer engaged in the construction of a senior citizens' project in Mandya District to transfer the entire corpus fund of Rs 62.26 lakh, collected from buyers to the owners' association.

“It is also to be noted that common amenities under the project are made available for the common use and enjoyment of the allottees of all the phases and they are inseparable in nature. Having regard to all these aspects this Authority is of the considered view that the respondent is liable to transfer the entire corpus fund in favour of Complainant's Association irrespective of whether he has completed the project phase-wise or not.”

The project named Sharadindu–Stage III is being developed by developer "Sree Senior Homes”. The Sharadindu Senior Commune Owners Association, representing the residents, has raised concerns regarding the developer's failure to transfer the collected funds to the association. The association was officially formed and registered on April 7, 2022, and under Section 11 of the Act, the developer is obligated to transfer the corpus fund to the association.

The complainants argue that the developer had not adhered to the agreed-upon project timeline and had not delivered the promised amenities as per the promoter's agreements. This delay had prevented the allottees from forming an association earlier.

The developer countered these claims by stating that they had used the corpus fund to cover ongoing maintenance costs, which the complainant association had refused to pay. The developer asserts that the complainant association is liable to pay a significant sum to cover these maintenance costs and service fees.

The dispute centres around whether the complaint adheres to the Karnataka Apartment Ownership Act and the registered bylaws from April 7, 2022. The developer argues that the complaint has not followed the proper procedures, including obtaining authorization from the majority of the owners as mandated under the bylaws.

Moreover, it is the complainant association which is liable to pay a sum of Rs.1,65,72,221, to the respondent firm on account of its refusal to honour the deficit maintenance costs and service fee based on the services that were provided.

Additionally, the developer claims that the project's Phase 1 falls outside the purview of RERA (Real Estate Regulatory Authority) since all units had been handed over before RERA came into effect. The project's RERA registration applies only to Phase III, not the entire project.

KRERA carefully examined the records and found that the developer had failed to demonstrate any intent to develop the project in phases as claimed. Instead, it appears that the developer had conveniently avoided registering the project as a whole, possibly to avoid certain RERA obligations.

“Therefore, the intention to develop the project in question, in phase-wise was never contemplated by the respondent promoter. Only with an intent to dodge the accountability and various responsibilities as contemplated under the RERA Act and the rules made thereunder, the respondent has conveniently not registered the project as a whole.”

The authority concluded that the undefined phases could not be treated as standalone real estate projects under RERA, as they had not followed the requirements for occupancy certificates. As there was only one association for the entire project, it was unjustifiable for the developer to withhold the corpus fund based on individual phases.

It added that the complainant's claim was not maintainable since it could not be construed under any circumstances that the project is being developed phase-wise and the cluster cottages, which allegedly formed a part of "Stage-I" were already completed at the time of commencement of RERA Act. 

“The complainant association sought for transfer of the corpusfund collected towards maintenance when the complainant association was formed in April 2022 and the demand made by the complainant association to the respondent was refused by the respondent. Hence the claim of the complainant being with respect to the entire project and not anyone single phase/stage, since there is only one association for the entire project.” 

It also added that the said township was being developed as one big project which is still under construction. Thus, the corpus fund which has been collected is required to be duly transferred to the registered Association upon its coming into existence as per the provisions of Section 11 of the RERA Act.

Then it took into account that the project is a peculiar project represented to have essential amenities catering to senior citizens. Amenities such as a permanent kitchen and dining hall, equipped medical centre, library, gym etc., have been provided at the time of the formation of the complainant association.

In fact, many of the other amenities such as emergency push button, intercom, indoor shuttle court, swimming pool, Jacusy, hobby room etc., as agreed to be delivered to the allottees by the respondents, have not yet been provided and the respondent has to complete constructing the same.

“The respondent having assured certain amenities to the senior citizens and the scheme of development being a township catering to the needs of the senior citizens has not discharged the same.”

With many promised amenities still pending, the developer's withholding of the corpus fund was considered unjust enrichment.

Thus it directed the developer to complete the project and provide all the amenities as agreed within 60 days from the date of this order.

Appearance: Advocate ANANDITA SRINIVASAN for Complainant.

Advocate SRINIVAS L for Respondent.

Case Title: SHARADINDU SENIOR COMMUNE OWNERS ASSOCIATION AND SREE SENIOR HOMES

Case No: COMPLAINT NO. CMP/220803/0009845

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