Karnataka RERA asks developer, landowners of a delayed project to form association of allottees, bear costs

A KRERA inspection found that the project remains incomplete without a power connection, water supply, lifts, sewage treatment plants, and other amenities.

Karnataka Real Estate Regulatory Authority has directed the developer and landowners of a Bengaluru-based project to establish an association of allottees under the Karnataka Cooperative Societies Act 1959 or Companies Act and also bear the cost for the same.

The Authority has held the landowners (Cherian A Paul and his wife Saramma Cherian Paul) and the developer (Chowriappa Construction Pvt Ltd) jointly responsible for failing to complete the project within the stipulated timeline of 2017.

"The developer is called upon to establish the association within 30 days and the entire cost of formation shall be borne by the respondent jointly or severally," the order dated August 2 mentioned.

The case

The resident welfare association (RWA) of the Chowriappa Constellation project in north Bengaluru's Hennur moved KRERA for the completion of the project, handover of the common areas and also the formation of the association.

Related stories

Souptik Datta

Sub Editor|Moneycontrol

• 
  If illegal floors can't be razed, demolish the building, says Karnataka High Court
• 
  Karnataka RERA asks Ozone Group to repay homebuyer's home loan, clears all liabilities on buyer
• 
  India turns 2nd fastest-growing data center market in Asia-Pacific with 28% growth in capacity

The project was scheduled to be completed within 2018 as per the construction agreement but remains incomplete.

KRERA noted that the developer has also started executing sales deeds without completing the project or obtaining occupancy certificates (OCs).
The RWA alleged before the court that the main reason for the non-completion of the project was the construction of the 13th and 14th floors (now within the approved building plan) and the diversion of funds collected from homebuyers.

Further, the landowners also submitted letters to cancel the joint venture signed with the developer and the General Power of Attorney raised for it.

KRERA finding

Appearing before the court, the landowners claimed that they are not responsible for the delay in the project and the onus of completing the project lies with the developer.

"The 13th and 14th floor was not part of the joint venture agreement signed between the parties and the developer had assured the landowners that the construction will be done legally with a modified sanction plan," the order said.

However, KRERA noted that the landowners had approached the developer in 2010 to develop the project through a joint venture agreement and also raised the General Power of Attorney.

A KRERA inspection found that the project remains incomplete without a power connection, water supply, lifts, sewage treatment plants, and other amenities.

The order

The Authority said that as per Section 2 of the RERA Act, both the developers and landowners are liable for the completion of the project.
However, KRERA said that the landowners have been collecting money from homebuyers for apartment sales and management of common amenities (in an incomplete project) thus preventing the developer from completing the project.

"Landowners are trying to take advantage of the situation and the homebuyers. This violates section 4 and other provisions of the RERA Act such as the landowners are also under legal and statutory obligation to complete the project," the order said.

Both the landowners and developer shall complete the project with amenities within 60 days, the order added.

Additionally, the Authority also prevented the landowners and the respondent from selling more apartments or executing sales deeds till OC is obtained.

Currently, RWAs in Bengaluru can be formed under Karnataka Societies Registration Act (KSRA) 1960, Karnataka Apartment Ownership Act (KAOA) 1972 and KCSA 1959. However, the Karnataka High Court struck down KSRA 1960 for registering RWAs. Additionally, the state government has clarified that KAOA 1972 does not have provisions to register associations. Advocates say registrations under KCSA 1959, the only Act available, are often avoided as the Act is stringent on developers.