Karnataka high court: Additional registrar can cancel sale deed for illegal cooperative society allotment | Bengaluru News

Bengaluru: In a significant ruling that could affect hundreds of cooperative housing cases, Karnataka high court has held that the additional registrar of cooperative societies has the power to cancel even a registered sale deed if it is based on an illegal allotment made by a cooperative society.Justice Suraj Govindaraj made this ruling while dismissing a petition filed by a Bengaluru resident, Suresha, who had questioned the authority of the registrar to interfere once a sale deed was registered. Clarifying the law, the court said after cancelling such an illegal allotment, the registrar could inform the local sub-registrar to take further action. However, the judge stressed that due process must be followed.“Necessary intimation could be sent by the registrar concerned to the jurisdictional sub-registrar to do the needful after such cancellation. Of course, before doing so, the person in whose favour the illegal allotment was made would have to be heard,” the judge observed. He also made it clear that the registrar’s powers under Section 70 of the Karnataka Cooperative Societies (KCS) Act are not unlimited.“Jurisdiction under Section 70 cannot be entertained as regards transactions between members or a member and a third party where there is no allegation of violation of KCS Act, KCS Rules, society’s bylaws or the like,” Justice Govindaraj clarified.How the dispute aroseThe case relates to a 4,026-sqft site in Channasandra village, Bengaluru South. The plot was originally allotted by the BEML Employees Cooperative Society to one of its members, BM Yogesh. A sale deed was registered on Jan 19, 2013. Soon afterwards, the site was sold to Suresha and another buyer, Bhaskar. In 2015, Bhaskar gave up his share, making Suresha the absolute owner. Suresha later began constructing a multi-storey building on the site. The cooperative society later claimed that the original allotment to Yogesh was illegal as it had bypassed seniority rules. The society approached the additional registrar seeking cancellation of the sale deed and recovery of over Rs 62 crore, with 18% interest, from the then society office-bearers — J Munnagappa (president) and N Ramakrishna (vice president) — who executed the sale deed in favour of Yogesh. The additional registrar rejected the plea. Thereafter, the Karnataka Appellate Authority directed on July 9, 2020, that the matter be decided afresh by the additional registrar.Challenging this directive before the high court, Suresha contended that the additional registrar lacked jurisdiction over a registered sale deed and that he and Bhaskar were not society members. The society argued that only a civil court could decide the matter as the governing body had acted illegally and that the registrar had the authority to step in.However, Justice Govindaraj held that the society could not insist on a civil suit to rectify the misconduct of its governing body, and that the additional registrar and other registrars retained power under the Act despite the sale deed’s registration. Accepting such an argument would amount to granting a premium for the illegal actions on the part of the governing board as also by the beneficiary, inasmuch as the beneficiary also was aware that, in normal circumstances, there could have been no allotment made without following the due procedure and complying with the applicable seniority rules, etc., the judge added, pointing out that the additional registrar can look at all contentions raised by the petitioner.