Co-op Societies Act: Additional registrar can cancel illegal allotment, sale deed, says Karnataka HC

Bengaluru: In a dispute under Section 70 of the Karnataka Co-operative Societies Act, the Additional Registrar of Cooperative Societies (ARCS) can cancel the allotment and sale deed, executed and registered improperly or illegally, according to the High Court of Karnataka.

Justice Suraj Govindaraj ruled this on a petition filed by Suresha, a resident of Bengaluru, who was the subsequent purchaser of a site at
Channasandra in Uttarahalli hobli in the Bengaluru South taluk. 

The controversy is related to a site measuring 4,026 sqft, in a layout formed by the BEML Employees Cooperative Society in Channasandra.

The site was allotted by the society in favour of B M Yogesh, and the sale deed was executed on January 19, 2013. 

On March 11, 2013, Yogesh sold the site to Bhaskar, who had subsequently relinquished his 50% share in the property to Suresha under a registered release deed on October 9, 2015. 

After the change in the governing body of the society, a dispute was filed before the Additional Registrar of Cooperative Society.

The plea sought directions to J Munnagappa and N Ramakrishna, former president and vice president, respectively, to pay Rs 62,05,300 at 18% interest per annum and cancel the sale deed dated January 19, 2013. 

The society contended that the sale deed was executed in favour of Yogesh ignoring the seniority of other members. It moved the Karnataka Appellate Authority after the Additional Registrar rejected the plea. 

In his petition before the high court, Suresha challenged the Appellate Authority’s July 2020 order directing the Additional Registrar to consider the plea afresh. 

According to Suresha, once the sale is executed and registered, the Additional Registrar of Cooperative Society cannot decide whether the allotment made by the society was valid. 

‘Remedy available’

However, the society argued that if any of its office-bearers were to act contrary to the bylaws, it was not required to approach the civil court because a remedy is available under Section 70. 

Justice Govindaraj said that a subsequent committee or an administrator of the society cannot be expected to take action by filing a civil suit to right the wrong committed by the earlier governing
body.

He added that even if a further sale deed is executed by the member, who had received the undue benefit, proceedings under Section 70 would be maintainable against such third party. 

“..the Additional Registrar of Cooperative Societies could, in a dispute raised before him under Section 70 of the KCS Act, 1959, cancel the allotment that is improperly or illegally made, and thereafter cancel the sale deed improperly or illegally executed, even if it is so registered,” Justice Govindaraj said.