Karnataka cracks down on housing associations for unlawful registration under KSRA Act

Legal experts say that though the Act permits the registration of societies under NGOs, charities etc, it does not permit the collection of maintenance by RWAs.

For the first time, the Karnataka Registrar of Cooperative Society (RoCS) has started cracking down on resident welfare associations (RWAs) registered under the Karnataka Societies Registration Act (KSRA), 1960.

It has sent notices to freeze the bank account of a resident welfare association registered under the Act to prevent further financial transactions. In another case, the RoCS has cancelled the registration of an RWA registered under the same Act. This comes after several Karnataka High Court orders deemed it unlawful to register housing associations under the Act.

Legal experts say that though the Act permits the registration of societies under NGOs, charities etc, it does not permit the collection of maintenance by RWAs. In future, such RWAs registered under the Act will not be able to collect maintenance fees.

Can homebuyers form RWAs under KSRA?

According to Section 3 of the KSRA, societies that can register under the Act include NGOs, educational and sports institutes, organisations responsible for maintaining libraries, etc.

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“However, it does not mention registration of RWAs to collect maintenance,” advocate Vittal BR said. “The apartment culture in Bengaluru is still at a nascent stage and the problem started right from the early 1990s. Over time, more RWAs got registered under the Act and collected maintenance. The issue started coming into the light when several discrepancies in funds were seen by homebuyers,” he added.

In December 2022, the Karnataka RoCS clarified that RWAs cannot be registered under the Karnataka Societies Registration Act (KSRA), 1960, according to a document accessed by Moneycontrol.

Officials at the Karnataka Housing Department told Moneycontrol that RWAs in Bengaluru should be registered under the Karnataka Cooperative Societies Act, 1959 (KCSA), one of the Acts in the state for housing purposes.

“One other reason can be that registration under KSRA is an easy process that can be done within 15 days. However, registration under KCSA is complex and requires about six months. In both cases, the banks will not object to providing an account as both bodies are legally registered bodies, but with different purposes,” Vittal said.

The cases

In 2021, RR Hegde purchased an apartment in the north Bengaluru project Whistling Woods for about Rs 70 lakh.

“The RWA registered under KSRA misappropriated funds to the tune of Rs 26 lakh,” he said. Following this, he submitted a complaint to RoCS and on October 6, the department sent notices to freeze the bank accounts of Whistling Woods Welfare Association.

In another case involving Lilium Gardenia, homebuyers had moved the High Court last November. “A bench presided by Justice Nagaprasanna said that any transactions by RWAs registered under KSRA will be unauthorised,” Vittal said.

Following this, the RoCS cancelled the registration of the Lilium Gardenia Resident Welfare Association as well.

The consequences

Dhananjaya Padmanabhachar, president of the Karnataka Home Buyers Forum, said more than 60-70 percent of RWAs in Bengaluru continue to be registered under KSRA, 1960 due to little awareness among homebuyers. Such associations will not be able to collect maintenance fees or be deregistered by the state department on complaints.

Advocate Abhilash Naik added that, to date, courts have already clarified that associations cannot be registered under KSRA. And given the unclear interpretation of the Karnataka Apartment Ownership Act (KAOA), 1972, associations in the state have only one way to be registered, under KCSA, 1959.

Members of the Whistling Woods Welfare Association told Moneycontrol that awareness is needed in government departments as well for the correct laws. “Whenever we approach a sub-registrar, nobody tells us that we cannot register the association under the particular Act. We have decided to hold elections within 3-4 months and migrate to the Karnataka Cooperative Societies Act, 1959,” said one member.