In a major setback for realty major DLF, the Competition Appellate Tribunal (Compat) on Monday upheld the 2011 order of the Competition Commission of India holding the company guilty of abusing its dominant market position with regard to a residential society in Gurgaon. DLF will now have to pay the penalty of R630 crore levied by CCI along with 9% interest. In a statement, the company said it was still studying the order but would appeal against it in the Supreme Court.
“The order of CCI as well as this judgment is expected to go a long way to ameliorate all the conditions of the customers… If the consumer is exploited by a mighty builder, then such mighty builder cannot claim soft attitude from the State. We, therefore, refuse to bring down the penalty in any manner,” the 139-page Compat order stated. It said that as a dominant player, DLF has a special duty to be within the four corners of the law.
This is the first major CCI ruling to have been upheld by the appellate tribunal.
The CCI had levied a penalty of R630 crore on DLF on August 12, 2011 for abuse of its dominant position, which involved selling of flats. In another case, which also related to unfair conditions imposed on buyers, it had asked DLF to ‘cease and desist’ but did not levy any penalty.
These orders followed inquiries into complaints filed by the flat buyer associations of two DLF projects in Gurgaon — DLF Park Palace and The Belaire. These associations had lodged complaints with the CCI citing delays and increase in the number of floors from what was initially planned, among other things.
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According to the DLF advertisement, Belaire was to consist of five multi-storeyed residential buildings, each to have 19 floors. The total number of apartments to be built was 368 and the construction was to be completed within 36 months. However, in place of 19 floors with 368 apartments, 29 floors were constructed, CCI had said.
“Another feature of this far from healthy relationship between the service provider and its clients is the draconian and one-sided clauses in the buyers’ agreement. There are clauses that give DLF sole discretion in respect of change of zoning plans, usage patterns, carpet area, alteration of structure etc,” CCI had said in its August 2011 order.
DLF had subsequently approached Compat seeking relief from CCI’s orders, challenging it on various grounds, including the jurisdiction of the case, the basis for determining relevant market and dominant position and the company not being served with show-cause notices before the order was passed. The Compat, while staying the CCI order, had said that if the company finally lost the case it would have to pay the entire amount along with 9% interest. In May 2010, the buyer’s association had complained against DLF alleging that the company imposed highly arbitrary, unfair and unreasonable conditions on the apartment allottees of the housing complex The Belaire.
“The Compat has pronounced the order today upholding certain findings of the earlier orders of CCI. The company is yet to examine the detailed order, therefore, the company at this stage will not be in a position to make any further comments,” DLF said.