K-RERA Holds Welfare Societies Collecting Funds For Plots as 'Promoters,' Orders ₹22.45 Lakh Refund to Home Buyer

A plot in the Sankalpa Welfare Society's "Varakodu Project" in Mysuru was reserved by a homebuyer, Shobitha R. Despite receiving full consideration, the society did not execute an agreement for Sale, neither registered the plot in her name, nor did it register the project under RERA.

The homebuyer claimed that the Society marketed itself as 'authorised' to build and sell residential plots after complying with legal requirements. Based on these representations, she reserved the said plot and paid ₹22,45,000 in total between October 2023 and July 2024. She further claimed that by failing to register the project, the society had contravened Sections 3 and 13 of the RERA Act and misled her into paying substantial amounts.

The society contested the complaint's maintainability, arguing that it is a "welfare society" rather than a "promoter." They also argued that the dispute was purely contractual in nature and that the transaction was a "internal membership/booking arrangement" and that issues pertaining to society affairs were to be decided under the Karnataka Societies Registration Act, citing an ongoing civil suit.

The Authority rejected the society's argument, holding that under Section 2(zg) of the Real Estate Act, 2016, an association of persons, including a welfare society, qualifies as a "person." The Bench observed that "mere registration as a welfare society does not immunize an entity from compliance with statutory obligations under other laws, including RERA, if it undertakes activities that amount to real estate development and sale."

Regarding the nature of the transaction, the Authority held that "the complainant is an external party who made payments in reliance on representations made by the Respondent, and the transaction is commercial, not internal."

The Authority further noted that the society had collected of funds without registration and had blatantly violated statutory obligations under sections 3, 4 and 13 of the Act constituting misrepresentation and unauthorised real estate activity. It dismissed the argument regarding the pending civil suit, stating that K-RERA has "independent jurisdiction under Section 31 to address statutory violations, regardless of parallel civil proceedings."

Accordingly, the Authority allowed the complaint, directing the Sankalpa Welfare Society to refund the entire amount of ₹22,45,000 along with interest and also to register the project within 60 days.

The Authority held that the society is subject to penalty under Section 59 for non-registration and unapproved fund collection and also instructed the Secretary of K-RERA to initiate legal action for the project's non-registration.