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It might sound a bit lame but ... how do I withdraw the restriction? I tried disabling both groups admin role and the roles plugin but it didn't work.
I tried overriding the existing roles with 'rule' => 'allow' parameter but it didn't help either. :/
@Shouvik Mukherjee I'm pretty sure once those plugins are disabled, they don't have any effect on your site (unless you modified core). So I guess there must be another plugin that restricts you from creating groups on your site. Incidentally, there was a core Elgg bug that prevented group creation, see http://blog.elgg.org/pg/blog/steve/read/219/elgg-1811-bugfix-release
So if you're using Elgg 1.8.10, this might be the source of your problem. If not, there must be a 3rd plugin that denies group creation.
Oops, sorry, it was my Groups settings. My bad :p
how to disable groups-> add blog for an user type?