[Cites 8, Cited by 0]
Karnataka High Court
M/S Century Galaxy Developers Pvt Ltd vs The Registrar Of Societies on 16 February, 2026
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RFA No. 749 of 2010
HC-KAR
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 16TH DAY OF FEBRUARY, 2026
BEFORE
THE HON'BLE MR. JUSTICE SACHIN SHANKAR MAGADUM
REGULAR FIRST APPEAL NO. 749 OF 2010 (DEC)
BETWEEN:
1. M/S CENTURY GALAXY DEVELOPERS PVT LTD
NO.85/1, K H ROAD
BANGALORE-27
REP BY ITS DIRECTOR
SRI. ZIAULLA SHERIFF
2. M/S.DIAMOND DISTRICT
A PARTNERSHIP FIRM HAVING ITS
PRINCIPAL PLACE OF BUSINESS
AT SHERIFF CENTRE, NO.73/1
ST. MARKS ROAD,BANGALORE-1
REP BY ITS PARTNER
MR. ZIAULLA SHERIFF
...APPELLANTS
(BY SRI. A. SAMPATH, ADVOCATE)
Digitally signed
by AL BHAGYA
Location: HIGH AND:
COURT OF
KARNATAKA
1. THE REGISTRAR OF SOCIETIES
BANGALORE URBAN DISTRICT
OFFICE OF THE REGISTRAR OF
FIRMS AND SOCIETIES
GANDHINAGAR, BANGALORE-9.
2. DIAMOND DISTRICT APARTMENT
OWNERS WELFARE ASSOCIATION
NO.N-11, 24TH MAIN, J P NAGAR
1ST PHASE, BANGALORE-78
REP BY ITS SECRETARY
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RFA No. 749 of 2010
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3. MR. S K ARYA
S/O NOT KNOWN TO THE APPELLANTS
MAJOR
D24, GOLDEN ENCLAVE
AIRPORT ROAD, BANGALORE-17.
4. MR. G.K. KHANNA
S/O NOT KNOWN TO THE APPELLANTS
MAJOR
TCCL, GOLDEN ENCLAVE
AIRPORT ROAD, BANGALORE-17.
5. SRI. R.K. SUNDARAM
S/O NOT KNOWN TO THE APPELLANTS
MAJOR
TCCL, GOLDEN ENCLAVE
AIRPORT ROAD, BANGALORE-17.
6. SRI. NARASIMHAN RAGHAVAN
S/O NOT KNOWN TO THE APPELLANTS
MAJOR
TCCL, GOLDEN ENCLAVE
AIRPORT ROAD, BANGALORE-17.
7. MR. ATUL RASTOGI
S/O NOT KNOWN TO THE APPELLANTS
MAJOR
SENAVIHAR, BANASWADI
BANGALORE-43.
8. MR. SANJAY K. BAJAJ
S/O NOT KNOWN TO THE APPELLANTS
MAJOR
BAJAJ OVERSEAS, NO.12
17TH CROSS, CUBBONPET
BANGALORE-2.
9. MR. H. BHATNAGAR
S/O NOT KNOWN TO THE APPELLANTS
MAJOR
D-61, GOLDEN ENCLAVE
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RFA No. 749 of 2010
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AIRPORT ROAD
BANGALORE-17.
10. MR. S. SWAMYNATHAN
S/O NOT KNOWN TO THE APPELLANTS
MAJOR
3-26, GOLDEN ENCLAVE
AIRPORT ROAD, BANGALORE-17.
11. MR. ANANTH KISHOR
S/O NOT KNOWN TO THE APPELLANTS
MAJOR
S51, GOLDEN ENCLAVE
AIRPORT ROAD, BANGALORE-17.
12. MR. P. BALAJI
S/O NOT KNOWN TO THE APPELLANTS
MAJOR
301, RANKA APARTMENT
CAMBRIDGE LAYOUT, BANGALORE-8.
13. MR. S.K. BHASIN
S/O NOT KNOWN TO THE APPELLANTS
MAJOR
1739, 9TH CROSS, J.P. NAGAR
2ND PHASE, BANGALORE-78.
14. MR. SATISH C. GUPTA
S/O NOT KNOWN TO THE APPELLANTS
MAJOR
504, GOLF MANOR, NAL
WIND TUNNEL ROAD, BANGALORE-17.
15. MR. N.K. PANDEY
S/O NOT KNOWN TO THE APPELLANTS
MAJOR
29, IAS COLONY, 16TH MAIN, S C CROSS
BTM LAYOUT
II STAGE, BANGALORE-76.
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RFA No. 749 of 2010
HC-KAR
16. MRS. BHUVANESHWARI SWAMYNATHAN
W/O SWAMINATHAN
MAJOR
E-26, GOLDEN ENCALVE
AIRPORT ROAD, BANGALORE-17.
17. MR. NITESH AHUJA
S/O NOT KNOWN TO THE APPELLANTS
MAJOR
S-22, GOLDEN ENCLAVE
AIRPORT ROAD, BANGALORE-17.
18. MR. G. KUMAR
S/O NOT KNOWN TO THE APPELLANTS
MAJOR
C/O M/S DIAMOND DISTRICT
APARTMENT OWNERS WELFARE ASSOCIATION
NO.N-11, 24TH MAIN, J P NAGAR
1ST PHASE, BANGALORE-78.
19. THE CHIEF SECRETARY
GOVERNMENT OF KARNATAKA
VIDHANA SOUDHA
BANGALORE-560001.
...RESPONDENTS
(BY SRI. KIRAN KUMAR, HCGP FOR R1 AND R19;
SRI. M.V. VEDACHALA, ADVOCATE FOR R2 TO R18;
SMT. SHOBHA BAVIKATTI, ADVOCATE FOR R15)
THIS RFA IS FILED U/S 96 OF CPC., AGAINST THE
JUDGMENT AND DECREE DATED 20.1.2010 PASSED IN
OS.NO.6043/1998 ON THE FILE OF THE IX ADDL. CITY CIVIL &
SESSIONS JUDGE, BANGALORE, (CCH 5), DISMISSING THE
SUIT FOR DECLARATION & PERMANENT INJUNCTION.
THIS APPEAL, COMING ON FOR DICTATING JUDGMENT,
THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:
CORAM: HON'BLE MR. JUSTICE SACHIN SHANKAR MAGADUM
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RFA No. 749 of 2010
HC-KAR
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
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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
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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,
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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 the suit by answering Issue Nos.1 to
3 in the negative. While dealing with Issue No.1, the trial
Court drew an adverse inference against plaintiff
No.1/company for non-production of its Articles of
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Association. The trial Court further held that clause (ff) of
Section 3 of the Act, 1960 enables allottees to form a
society for purposes including promotion of conservation
and proper use of natural resources and infrastructural
facilities. The contention of the plaintiffs that the assets of
the company are exclusively governed by the Companies
Act and that the formation of defendant No.2-Association
under the Act, 1960 is impermissible was not accepted.
8. This Court has heard the learned counsel
appearing for the plaintiffs and the learned counsel
appearing for the defendants. The pleadings, documentary
evidence and the findings recorded by the trial Court have
been independently examined.
9. In the light of the rival contentions and the
material on record, the following points arise for
consideration:
(i) Whether plaintiff No.1/company could have
maintained the present suit without seeking a
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declaration of ownership and without producing
its Articles of Association?
(ii) Whether plaintiff No.1/company has the
locus standi to challenge the formation and
registration of defendant No.2-Apartment
Owners' Association?
(iii) What order?"
Findings on Points (i) and (ii):
10. Before adverting to the core points formulated
for consideration, this Court deems it appropriate to
extract the relevant pleadings in the plaint as well as the
prayer column, which read as under:
"03. The first plaintiff i.e. said company namely
M/s. Century Galaxy Developers Pvt. Ltd., had floated a
scheme under which the subscribers to the scheme on
booking a flat and subsequently on becoming a member
of the company and holding a specified number of shares
and maintaining a specified amount as security deposit
with the company, will be allotted with a specific
commercial/residential unit with/without car parking unit
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and with/without exclusive right of use of Terrace Area
together with a right to use and enjoy such unit and the
common area and facilities along with right to exploit, let-
out or otherwise enjoy the same and appropriate the
income, usufruct and other benefits therefrom with such
other members and also having the right to dispose off all
such share, deposit and right of enjoyment of the unit
allotted by a document inter-vivos or otherwise. Some of
the defendants 3 to 18 (who are stated to be the office
bearers of the alleged M/s.Diamond the District
Apartment Owners Welfare Association), under the
scheme floated by the first plaintiff-M/s.Century Galaxy
Developers Pvt. Ltd., are presently nothing but allottees
but not the owners of any residential unit in the proposed
construction under the name "Diamond District" over the
plaint schedule lands. At best such persons can be
termed as LICENSEES. The entire scheme floated by
M/s.Century Galaxy Developers Pvt. Ltd., is subject to the
dictum, rules, regulations under the provision of the
Companies Act, 1956.
04. Hence it is clear from the above scheme floated
by the first plaintiff company for which some of the
defendants who are stated to have subscribed along with
such other persons, and such a person's right over such
identified flat can be considered as licensee and the said
right shall devolve on such person only on delivery, of the
respective residential unit in conjunction with delivery of
share certificate (identifying shares held by such
person/s) on payment of entire consideration to the
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company through the 2nd plaintiff being its agent-
developer and such a person under the scheme of the
company shall be entitled to posses, use the unit
identified with the shares subject to easements. As such,
the defendants 3 to 18 ог any of them who are stated to
be the members of the 2nd defendant-association above
named can not be considered as the owners of the unit
since the ownership lies with the first plaintiff-M/s.Century
Galaxy Developers Pvt. Ltd."
PRAYER:
"WHEREFORE, the plaintiffs pray that this Hon'ble
Court may be pleased to pass a judgment and decree
against the defendants, their agents, successors in
interest and persons claiming through or under them:
(a) declaring that the second defendant-the
Diamond District Apartment Owners Welfare Association
registered in the office of the first defendant vide
registration No.
109/98-99 dated 12/05/1998 as null and void, inoperative
and contrary to law and the same do not and cannot bind
the plaintiffs in any manner who have been functioning
under the provisions of Companies Act of 1956,
(b) for permanent injunction restraining the
defendants, their agents, successors in interest and
persons claiming through or under them including their
servants from in any way interfering or meddling with the
affairs of the suit schedule property owned and possessed
by the first plaintiff and functioning under the provisions
of the Companies Act of 1956, and
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(c) grant such other reliefs together with costs of
the proceedings, in the interests of justice, equity and
law. "
11. The principal plank of the first plaintiff's
argument is that mere issuance of shares proportionate to
the flat area does not amount to conveyance of title in
immovable property and that ownership can pass only by
way of a registered instrument in accordance with the
provisions of the Transfer of Property Act, 1882 read with
the Registration Act, 1908. It is further contended that
issuance of shares is an act governed exclusively by
company law and confers only contractual or membership
rights, and therefore, the allottees cannot claim
proprietary rights in the respective flats.
12. While the legal proposition that title to
immovable property ordinarily passes through a registered
conveyance is unexceptionable, the said contention cannot
be accepted in its abstract form divorced from the peculiar
factual matrix of the present case. The pleadings extracted
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above clearly demonstrate that the scheme itself conferred
not merely a bare licence, but a bundle of rights including
exclusive possession of a specified unit, right to use and
enjoy common areas, right to exploit, let-out, appropriate
income and even to transfer the "right of enjoyment" inter
vivos. The nomenclature employed by the plaintiff cannot
override the substantive nature of the rights created and
acted upon.
13. The records disclose that plaintiff
No.1/company invited members of the public to subscribe
to the scheme, issued shares proportionate to the area of
the flats, collected full consideration, and delivered
possession of specific residential/commercial units
corresponding to such shares. The allottees were put in
exclusive occupation of identifiable units and were enabled
to collectively use and manage the common areas and
facilities. The scheme, as pleaded by the plaintiff itself,
contemplated enjoyment and even transfer of such rights.
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14. Having consciously structured the transaction in
such a manner and having voluntarily parted with
possession of specific units in favour of the allottees,
plaintiff No.1/company cannot now be permitted to turn
around and contend that the occupants are mere licensees
without any enforceable rights. The doctrine of estoppel by
conduct squarely operates against the plaintiff. A promoter
who has induced purchasers to invest, accept possession
and enjoy the property as their own, cannot subsequently
deny the legal incidents that naturally flow from such
possession and enjoyment.
15. It is not in dispute that defendants 3 to 18 and
other similarly placed allottees are in exclusive and settled
possession of their respective flats. Once possession of
specific, demarcated flats has been delivered and the
allottees have been allowed to deal with the same in terms
of the scheme, plaintiff No.1/company, being a promoter
engaged in real estate development, cannot maintain the
present suit seeking a negative declaration that the
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Association formed by such flat holders is null and void,
while at the same time avoiding any substantive prayer for
declaration of its own subsisting ownership vis-à-vis the
individual units.
16. A careful reading of the prayer extracted above
makes it manifest that the suit is conspicuously silent on
any substantive relief seeking declaration of title in favour
of plaintiff No.1/company over the individual flats. The
plaintiffs have merely sought a declaration that the second
defendant-Association is null and void and a consequential
injunction restraining interference, while consciously
avoiding a prayer for declaration of ownership in respect of
the units admittedly allotted and delivered to the
purchasers. When the very foundation of the dispute
revolves around competing claims of ownership and
possessory rights over identified flats, omission to seek a
declaratory relief as to title renders the suit fundamentally
defective. The drafting of the plaint, therefore, appears to
be deliberate and misconceived, inasmuch as it attempts
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to secure a negative declaration against the Association
without inviting adjudication on the company's own title
vis-à-vis the flat holders.
17. The position is further compounded by the fact
that plaintiff No.1/company has not produced its Articles of
Association, though its entire case is premised on the
internal corporate scheme allegedly governing the rights of
subscribers. When the company asserts that the
relationship between it and the allottees is exclusively
regulated by its Articles and the provisions of company
law, non-production of such foundational document
justifies an adverse inference. In the absence of the
Articles, the Court is deprived of examining whether the
scheme truly reserved ownership with the company or
whether it contemplated eventual transfer of proprietary
rights upon allotment and delivery of possession.
18. The material on record unmistakably indicates
that plaintiff No.1/company, though engaged in real estate
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development, adopted a device of issuing shares
proportionate to flat area and delivering possession of
specific residential flats to purchasers. By structuring the
transaction in the guise of a shareholding arrangement
rather than executing registered conveyances, the
company effectively enabled occupation and enjoyment of
immovable property while avoiding execution of sale
deeds. Such a mechanism, if accepted at face value, would
result in circumvention of statutory requirements under
the Transfer of Property Act, 1882 and the Registration
Act, 1908, besides depriving the State exchequer of
legitimate stamp duty and registration charges ordinarily
payable on conveyance of immovable property. A
promoter who has consciously adopted such a course
cannot subsequently seek equitable relief from the Court
by branding the very flat holders, who have paid
consideration and are in settled possession, as mere
licensees.
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19. Having parted with possession, permitted
exclusive enjoyment of demarcated units, and enabled
collective use of common areas, plaintiff No.1/company
cannot now question the formation of an Association by
such flat owners for management of the property. Once
the purchasers are in settled possession and are asserting
rights flowing from the very scheme floated by the
company, the company's locus to challenge the
registration of their Association becomes highly tenuous.
The suit, in effect, seeks to retain de jure control over the
property while having divested de facto possession and
beneficial enjoyment. Such an approach not only lacks
bona fides but also disentitles the plaintiff from invoking
the discretionary relief of declaration and injunction.
20. In the considered view of this Court, the
plaintiffs, having parted with possession and having
clothed the allottees with substantive rights of enjoyment
and exploitation, cannot approbate and reprobate. The
present suit, founded on a purely technical plea that title
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remains with the company notwithstanding delivery of
possession and creation of enforceable rights, is therefore
liable to be rejected in the light of the plaintiffs' own
conduct and the equitable principles governing such
transactions. Accordingly, point no.(i) and (ii) are
answered in the 'Negative'.
Finding on point No.(iii):
21. For the foregoing reasons, this Court proceeds
to pass the following:
ORDER
Appeal is devoid of merits and accordingly,
stands dismissed.
Sd/-
(SACHIN SHANKAR MAGADUM)
JUDGE
ALB
List No.: 1 Sl No.: 15
