Bank accounts of RWAs frozen as registrar enforces legal framework

The Karnataka Registrar of Cooperative Society (RoCS) has initiated a crackdown on Resident Welfare Associations (RWAs) registered under the Karnataka Societies Registration Act (KSRA), 1960. This marks the first instance of such action, with notices issued to freeze bank accounts and, in a separate case, even leading to the cancellation of an RWA's registration.
The move follows Karnataka High Court orders declaring the registration of housing associations under the Act as unlawful. Legal experts underscore the discrepancy between the Act's permissions and the unauthorised collection of maintenance fees by RWAs. While the KSRA allows the registration of societies for NGOs, educational and sports institutes, and organisations responsible for maintaining libraries, it explicitly does not authorise RWAs to engage in the collection of maintenance fees. Consequently, RWAs registered under the Act will face limitations in their ability to collect maintenance fees in the future.
While the KSRA does not mention RWAs, over time, more RWAs got registered under the Act and collected maintenance. The issue started coming into the light when several discrepancies in funds were seen by homebuyers.
Several Karnataka High Court rulings have emphasised that RWAs registered under the KSRA cannot maintain bank accounts for the purpose of collecting maintenance. The RoCS has now actively responded to this, serving notices to freeze the bank account of an RWA registered under the Act, thereby preventing further financial transactions. This crackdown reflects a significant shift in regulatory enforcement against RWAs operating under the KSRA.
The broader question emerges regarding whether homebuyers can form RWAs under the KSRA. Officials at the Karnataka Housing Department say that RWAs in Bengaluru should be registered under the Karnataka Cooperative Societies Act, 1959 (KCSA), one of the Acts in the state for housing purposes.
One reason for RWAs focusing on KSRA rather than KCSA can be that registration under KSRA is an easy process that can be done within 15 days. However, registration under KCSA is complex and requires about six months. In both cases, the banks will not object to providing an account as both bodies are legally registered bodies, but with different purposes.
This regulatory crackdown signals a paradigm shift, emphasising compliance with legal frameworks and restricting RWAs from unauthorised financial activities. The cancellation of registrations and freezing of bank accounts serve as tangible measures to enforce the legal boundaries set by the Karnataka High Court and the housing laws. This would help prevent homebuyers from getting entangled in the mess of fund misappropriation by RWAs.

Next (Mumbai residents protest against BMC's footpath encroachments in Chandivali)

Bank accounts of RWAs frozen as registrar enforces legal framework

This Month

Overview

Explore

Join Us