Karnataka HC: Registrar can cancel sale deed based on illegal cooperative allotment

Karnataka HC ruled Additional Registrar can cancel sale deeds from illegal cooperative allotments, with due process, under limited powers of the KCS Act

In a landmark ruling with wide implications for cooperative housing disputes, the Karnataka High Court has affirmed that the Additional Registrar of Cooperative Societies holds the authority to cancel even a registered sale deed if it stems from an illegal allotment by a cooperative society.

Court’s Observation
Justice Suraj Govindaraj, delivering the judgment, clarified that while registered sale deeds carry legal weight, they cannot shield transactions rooted in irregular allotments. He emphasized that due process must be followed, including giving the affected party a fair hearing, before any cancellation is ordered.

The ruling came while dismissing a petition filed by Bengaluru resident Suresha, who had challenged the registrar’s jurisdiction over a registered deed. The court held that once an allotment is found illegal, the registrar can notify the local sub‑registrar to cancel the deed.

Limits of Registrar’s Powers
The bench also clarified that the registrar’s powers under Section 70 of the Karnataka Cooperative Societies (KCS) Act are not absolute. They cannot be invoked in routine transactions between members or between a member and a third party unless there is a violation of the Act, its rules, or the society’s bylaws.

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Case Background
The dispute involved a 4,026 sq. ft. site in Channasandra, Bengaluru South, originally allotted by the BEML Employees Cooperative Society to member BM Yogesh. A sale deed was registered in January 2013, and the property later passed to Suresha, who became sole owner in 2015 after co‑buyer Bhaskar relinquished his share. Suresha subsequently began constructing a multi‑storey building.

The society later alleged that Yogesh’s allotment violated seniority rules. It sought cancellation of the sale deed and recovery of over ₹62 crore, with interest, from former office‑bearers J Munnagappa and N Ramakrishna, who had executed the deed.

High Court’s Reasoning
Rejecting Suresha’s plea, the court observed that insisting on a civil suit would reward misconduct by the society’s governing body and the beneficiary. Justice Govindaraj noted that registrars retain oversight powers even after registration, ensuring accountability in cooperative housing transactions.

This ruling is expected to influence numerous cooperative housing disputes across Karnataka, reinforcing that irregular allotments cannot be legitimized through registration alone.

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