AN ASSOCIATION FORMED UNDER KAOA 1972 IS NOT A VOLUNTARY CONSUMER : SC

The legal framework governing apartment ownership in Karnataka has long been a subject of confusion, particularly with respect to the status of associations formed under the Karnataka Apartment Ownership Act, 1972 (KAOA 1972). Unlike the Karnataka Cooperative Societies Act, 1959 (KCSA 1959), the KAOA does not contain a specific provision allowing the formation and registration of associations in the same manner as cooperative societies. The Supreme Court of India in the case of Sobha Hibiscus Condominium vs. Managing Director, M/S Sobha Developers Ltd. (14 February 2020), in its ruling, the Hon’ble Court held as follows:

“In view of the mandatory provisions of the 1972 Act, the appellant cannot be said to be a voluntary registered association for the purpose of filing a complaint before the competent authority under the provisions of the [Consumer Protection] Act.” And further it states that “A voluntary consumer association will be a body formed by a group of persons coming together of their own will, without pressure or influence, and without being mandated by law. The appellant association, consisting of members of flat owners in a building pursuant to a declaration under the 1972 Act, cannot be said to be a voluntary association to maintain a complaint under the provisions of the Act.” Concluding the interpretation with “By applying the said Explanation, the appellant cannot be said to be a voluntary consumer association so as to maintain a petition”

This interpretation has far-reaching consequences. If an association under KAOA cannot be considered a voluntary consumer association, then:

• It cannot file complaints before consumer forums.
• It may be legally untenable to enter into contracts as a “consumer” for essential services such as facility management, electricity supply from BESCOM/ESCOMS, or even maintenance services.
• Banks, in line with KYC compliance requirements, mandate that associations must be registered to open accounts. Several banks have already published such requirements on their websites.

However, this interpretation does not resolve the fundamental issue: if the association is not legally recognized as a consumer in one domain, how can it be considered a consumer in other transactions involving goods or services?

The Apartment owners who are deprived of basic rights as home owners can not claim their rights through the so called association claimed to be formed under KAOA 1972. Apartment owners expect their association to represent them effectively, particularly in legal disputes and in managing collective facilities. But when the highest court has clarified that such associations lack recognition as voluntary bodies under consumer law, their effectiveness in protecting residents’ rights is non-existent.

While the KCSA 1959 provides an effective framework for registered cooperative societies, the KAOA 1972 falls short of being a corporate/juristic body failing to establish a robust and recognized structure for apartment associations. KAOA 1972 fails in its content and intent to protect the interest of the Flat owners when it cannot legally sign a contract as a consumer of services provided by the Facility Management contractor unlike the Apartment Cooperative Societies formed under the KCSA 1959. Finally a myth is busted.