The court held that once possession is transferred to allottees under a property scheme, the developer cannot later claim they are mere licensees.

ORAL JUDGMENT

The captioned first appeal is by the unsuccessful plaintiffs calling in question the judgment and decree dated 20.1.2010 passed in O.S.No.6043/1998 on the file of IX Additional City Civil and Sessions Judge, Bengaluru, whereby the suit filed by first plaintiff/company seeking for a declaration that the formation and registration of defendant No.2/Apartment Owners Association is null and void and for consequential relief of injunction is dismissed by the Court below.

2. For the sake of convenience, the parties are referred to as per their rank before the trial Court.

3. The facts of the case are as under:

Plaintiff No.1, a private limited company, claims to be the absolute owner of the schedule property and asserts that it entered into a development agreement with plaintiff No.2 for construction of a multi-storied building thereon. It is the specific case of plaintiff No.1 that it floated a scheme under which shares of the company were issued to intending purchasers and, corresponding to the shares so issued, specific commercial/residential units were agreed to be allotted. According to the plaintiffs, defendants 3 to 18, who are stated to be the office bearers of defendant No.2–Association, are merely allottees under the said scheme. It is therefore contended that such allottees can at best be treated as licensees in occupation of the respective units and cannot claim ownership, as the title to the land and superstructure is asserted to have been retained by plaintiff No.1/company.

4. Plaintiff No.1/company further contends that no registered sale deeds have been executed in favour of the allottees and that mere allotment of shares proportionate to the area of the flats does not amount to transfer or conveyance of title in immovable property. It is also pleaded that the entire scheme is governed exclusively by the provisions of the Companies Act, 1956 and that the relationship between the company and the allottees is contractual in nature under company law. On that premise, it is urged that the provisions of the Karnataka Societies Registration Act, 1960 (for short, “Act, 1960”) have no application to the present arrangement.

5. Proceeding on the said foundation, the plaintiffs assert that the formation and registration of defendant No.2–Association do not fall within the scope of Section 3 of the Act, 1960. It is also contended that the provisions of the Karnataka Apartment Ownership Act, 1972 are inapplicable to the project in question. On these grounds, the plaintiffs have sought a declaration that the formation of defendant No.2–Association is illegal and not binding on plaintiff No.1/company.

6. Per contra, defendant No.2–Association, comprising the allottees who are in physical possession of the flats, has contested the suit by raising a preliminary objection as to maintainability. It is contended that defendant No.2 is a society duly registered under the Act, 1960 and that defendants 3 to 18 are its members, having been allotted flats by plaintiff No.1/company proportionate to the shares held by them. The defendants assert that possession of the respective flats was delivered to the purchasers and that the allottees are in settled possession. It is therefore contended that plaintiff No.1/company has no subsisting right, title or possession so as to maintain the present suit. The defendants further urge that in view of Section 34 of the Act, 1960, the suit is barred and that plaintiff No.1/company lacks locus standi to question the formation or functioning of the Association.

7. On the basis of the rival pleadings, the trial Court framed appropriate issues. Both sides adduced oral and documentary evidence in support of their respective stands. The trial Court, upon appreciation of the material on record, dismissed