CCI’s realty test

Jun 07 2014, 03:47 IST
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SummaryIn a consumer-friendly move, COMPAT upholds CCI’s DLF decision, but what about others?

Ache din aane wale hain,” the new epiphany reflecting the mood of the nation, literally came knocking at the doors of the residents of three DLF projects—Belaire, Park Place and Magnolias—within days of Narendra Modi-led BJP winning the 2014 Lok Sabha elections with an outstanding majority.

The harbinger of the good news was the Competition Appellate Tribunal (COMPAT) which, on May 19, upheld an earlier decision of the Competition Commission of India (CCI) penalising DLF to the tune of R630 crore for abusing its dominant position in the real estate market of Gurgaon. The Competition Act, 2002, prohibits companies with superlative market power from exploiting consumers.

CCI Test

The main contention of the residents of Belaire, Park Place and Magnolias against DLF was that the real estate major was using its dominant position to impose arbitrary, unfair and unreasonable conditions on its apartment allottees.

CCI agreed with the contentions of the apartment allottees and, in its 237-page order, pointed out several onerous clauses of the standard DLF apartment buyer agreement. Such clauses, inter alia, allowed DLF to unilaterally increase the number of floors, change unequal interest rates on default, and costly exit option for the allottees. Further, it was also alleged by the residents that the allottees were required to pay a substantial amount upfront even before signing the agreement, and that the areas and facilities originally earmarked for the apartment allottees were substantially compressed. For example, DLF decided to raise the number of floors from 19 to 29 in Belaire without the consent of the allottees, which led to the number of apartments increasing to around 544 from 368 on the same land area. Besides, the projects were also abnormally delayed, resulting in financial losses to several apartment allottees.

CCI and COMPAT’s decision against DLF is in consonance of the age-old maxim of contra proferentem (against the offeror), where onerous and unfair terms of standard-form contracts are typically interpreted against the interests of the dominant contracting party, i.e. DLF. COMPAT has further held that dominant players like DLF have a special responsibility towards the industry to be ‘within four corners of law’, to set the trend for smaller real estate companies to follow.

DLF predictably has decided to appeal against the decision of COMPAT in the Supreme Court. However, now that COMPAT has upheld the decision of CCI, under the provisions of India’s Competition Act, residents

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