NEW DELHI: Competition watchdog CCI today imposed a penalty of around Rs 600 crore on realty major DLF Ltd for abusing its dominant market position.

The penalty, which amounts to 7 per cent of the company's average annual turnover of last three years, was imposed as DLF has been proven guilty of violating section 4(2) of the Competition Act, 2002, sources told PTI.

A company violates Section 4(2)(a) of the Competition Act when it directly or indirectly imposes unfair or discriminatory conditions or prices with respect to the purchase or sale of goods or services.

In May last year, on the basis of complaints by some people who booked flats in DLF projects, the CCI had referred the matter for a probe by the Director General (Investigations).

According to one such complaint, DLF had promised to complete its residential project in Gurgaon, called Belaire, in 2009, but buyers are yet to get possession.

In addition, DLF has increased the number of floors in the apartment complex from the original figure given to buyers. This led to the number of apartments in Belaire increasing to 564 from 384.
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  • Delayed projects need to be tamed


    Thats a breaker of a news!!
    Would put a severe dent on DLF balance sheet if required to pay..
    Reminds me of a post showing delays in projects by the leaders in the RE industry..
    QuBREX Special: List Of Delayed Projects In Gurgaon - June 2011 - I, Qubrex
    Quiet a few implications if it is an order. High time a full time regulatory body for RE is required to be put in place. Turnover of this industry is now probably higher than any other regulated trade or business except banking..

  • the shareholders of dlf may not be happy but this is the best thing that could have happened to the RE investor or a end user. the effect will not only be limited to dlf but all other builders will now be forced to adhere to their promises.
    a new beginning has been made.
  • Great news . Hope it serves as a lesson to the rest of the Builders .
  • CommentQuote
  • Arrogance or blatant misuse of Unregulated RE space


    Thanks Raumy for the text of the order.. really a very honest presentation of facts though about wrong deeds..
    It is really unfortunate that the beacon of Indian Real Estate has been trounced by the commission for obvious wrong practices. No doubt smaller players have tried to emulate and at times gone beyond what DLF has done.

    DLFs act which now attracts a penalty. The order uses the following words against DLF which are are worth noticing by other perpetators of such acts

    "abuse of position for advantage to DLF..."
    "Imposing Unfair Conditions.."
    "False representation.."
    "undue economic gains and business profit..."
    "Housing is recognised as a basic necessity.."
    "Grossly abused its position against vulnerable sections of customers..."
    "DLF is directed to cease and desist from using such unfair conditions in its agreement.."

    The order monumentally also clarifies the role of HUDA and DTCP
    "Huda and DTCP are agencies or authorities of the State Government whose role is limited to granting various approvals to builders / developers. They are not providing any services of a commercial nature of the kind"

    This i think is not entirely correct and debatable.. Infact, they should stop providing licences to defaulting builders or at least conduct some sort of due deligence. As an authority they do not just have the powers but should also be responsible towards the permissions granted by them..

    The commission further acknowledges and declares
    "The absence of any single sectoral regulator to regulate the real estate sector in totality, so as to ensure adoption of transparent & ethical business practices and protect the consumers, has only made the situation in the real estate sector worse. "


    Finally, a govt organisation recognises it..


  • Does anybody have DLF's official reaction to this news ? Would love to see, what they have to say & what is their next step .
  • Response from DLF


    DLF- Building India (as appears on their website):o

    If certain Associations or consumer organisations with conscience exist, it is right time for all aggreived and progressive associations/organisations to step in and write a proper memorandum to Honble Minister Urban Development for setting up a Regulatory Authority.

    A commentary on The Commissions findings be enclosed to atleast ensure that the Builder Buyer Aggreements are not absolutely derogatory to the interest of the investing public.. Penalties be defined for such erring builders big or small.. bans imposed on further licences pan India for serious, continuous defaults.. impose non access to funds for such organisations through any and every source like banks, FIs, FIIs, stock markets etc. Also would suggest that all projects be suitably underwritten with regards to their performance secured by bank guarantees as projects are long term and of capital nature..

    Too many lacunae, loop holes and malifide intentions.. increase super area, change specifications, change floor plans, charge exhorbitant interest rates for delayed payments etc etc..

  • Very interesting read. Hope this knocks some sense in the Builders to not assume that buyers can be always taken for a ride.
    On another note, Im considering investment in IREO Uptown, that also seems to have been increased from originally 14 floors to 22 floors. Does anyone feel that it will lead to a similar issue as Belaire ?
  • Now Park Place buyers also want a similar judgement :

    DLF allegations unfair; must be compensated: DLF Park Place - CNBC-TV18 -
    DLF allegations unfair; must be compensated: DLF Park Place

    The Competition Commission of India (CCI) has imposed a hefty penalty of Rs 630 crore on realty major DLF for abusing its dominant market position on a complaint by 'The Belaire' association in Gurgaon.
    But even the buyers of the Park Place project in Gurgaon had approached the CCI with similar grievances. In the case of Park Place, when DLF had revised the project midway, the number of flats had gone up from 988 to nearly 1,500.
    The CCI in fact had heard both these cases together and the buyer associations were also represented by the same lawyer.
    In an interview on CNBC-TV18, Harsh Sehgal, head of the buyer association at DLF Park Place talks about the DLF order and its ramifications.
    Below is a verbatim transcript of his interview with CNBC-TV18’s Shereen Bhan. For complete details watch the accompanying video.
    Q: The CCIs order on the Park Place case is expected any day now. DLF has been saying all along that you knew what you were getting into when you signed the contract and nobody forced buyers to buy these apartments. If so, then what are you complaining about?
    A: That’s absolutely unfair and that is a spin which DLF has been giving. Firstly, what choice do I have? If I have to buy an apartment I have to sign on the dotted line. I have no other choice. I cannot buy an apartment in this country unless I sign on the agreement which is forwarded to me.
    DLF’s apartment buyer’s agreement at the outset of page one says that if you do not return the agreement duly signed within 30 days without altering even a comma or a full stop, your apartment will not be allotted to you. The money that you have paid to them will be forfeited, so what choice do I have? I would like to inform you that the agreements mostly come almost a year after signing the application form.
    Q: What the CCI order has also said that DLF must seize and desists from adopting unfair practices and must suitably modify contracts in the next three months. What according to you and the buyers association will be a suitable modification? Are you going to be seeking compensation?
    A: We will ask them firstly to compensate us for the delay in construction in the same way as they charge for delayed payments. They charge 15-18% while the revised payment term is Rs 10 per square foot for any delay after three years. We would also ask them to pay us at least commensurately, which is 15-18% for all the delay.
    Q: What are the legal options available to you now? What are you exploring?
    A: The immediate option that is available to either DLF or us is to go to the COMPAT (Competition Appellate Tribunal) for redressal of any grievance or any issues which have not been settled by the CCI. DLF can appeal within 60 days of this order to COMPAT.
    The ultimate fear for anybody is that DLF has so far always managed to delay proceedings in the Supreme Court where there are a number of cases which are lying pending and have not been settled for the last many years.
    Q: The CCI has fined DLF Rs 630 crore but the rest of the buyers don’t get any of that money. You still have to negotiate with DLF to arrive at an arrangement. What have you actually got after all of this?
    A: We will have to go through it with a fine toothcomb to understand what exactly has been granted to us. If it has not been granted to us, an appeal is open to us in COMPAT.
  • The complaint against DLF Home Developers Ltd, a DLF group company, dates back to 2008 and pertains to delays and the firm increasing the number of units being built in the same area. In May 2008, director general, CCI, started investigating the case based on a complaint filed by Belaire Owners’ Association.

    DLF Belaire and DLF Park Place, the two projects in question in this case, are expected to have 2,142 flats collectively. Apartments in these projects are priced between Rs. 1.5 crore and Rs. 3 crore and are likely to be delivered this year against the original deadline of end-2009.

    A key complaint against DLF was that it decided to raise the number of floors from 19 to 29 in Belaire, which led to the number of apartments increasing to 564 from 384 on the same land area without the consent of the allottees.

    “CCI agreed with our views,” said M.L. Lahoty, counsel for the petitioners.

    “We had four main points where we felt that DLF has violated norms. First, the company did not inform the buyers about the changes in the number of floors; second, as the project is already delayed by a year, there is no word on the delivery of the project till date; third, the company had unilaterally decided to charge buyers for the modification in apartments’ size, and fourth, the company brought changes in the apartments without any notice to buyers of the project,” he said.

    Rajeev Talwar, group executive director of DLF Ltd, said: “We’re reading the order, consulting experts for the options available. We believe we have a strong case.”

    According to the Competition Act, the company has got around 60 days to appeal against the ruling to the Competition Appellate Tribunal (Compat).

    “In the view of the commission, the conduct of DLF in abusing its dominant position requires to be taken very seriously and thus, the commission is required to adopt a deterrent approach so that recurrence of such conduct is stopped,” said the order.

    The 237-page order adds: “The abuse of dominant position in this case is in respect of the basic necessity of housing. The earlier deliberation on the elements and extent of abuse make it clear that DLF has been grossly abusing its dominant position, and that too against a vulnerable section of consumers, who have little ability to act or organize against such abuse. The penalty, therefore, has to be commensurate with the severity of the violation through such blatant abuse of dominance.”

    This is the second case of abuse of dominant position imposed by CCI.

    Earlier, in the case of NSE in June, in which CCI imposed a penalty of Rs. 55 crore, two members took a differing view on the alleged attempt by the exchange to abuse its dominant position in the currency derivatives market as claimed by rival MCX Stock Exchange Ltd.

    Prasad elaborated on CCI’s actions against DLF in a separate note. “In this particular case, when a buyer enters the market, he has the choice of going to a large number of builders for the purpose of purchase of a flat. There is large competition in the market. But when a consumer makes a choice and enters into an agreement with a builder, he is bound by the agreement and even if he wants to switch to another builder, he has to pay high switching costs,” he said.

    Samir R. Gandhi, partner at Economic Laws Practice, feels CCI has enough jurisprudence on what can be called a dominant position.

    “Internationally, several cases exist where respective competition authorities have looked into the question of what actually is abuse of dominance. And CCI has increasingly looked at such precedents to precisely define the term,” said Gandhi.
  • who will get this amount? 1 cr each for close to 600 buyers?
  • Originally Posted by amty_gr
    who will get this amount? 1 cr each for close to 600 buyers?

    Very good question...I was also trying to find the answer for the same.
  • NO dear - I dont think so this amount 600 crores will go to buyers...they may get some compensation for delay but not 1-1 cr each LOL
  • Bhaiya, sab buyers ko 1-1 cr. mil gaye, then everybody would start wishing that their projects get delayed & CCI intervenes & the decision goes the DLF way . LOL :D.
  • Sahi keh rahe ho manoj bhai

    Originally Posted by MANOJa
    Bhaiya, sab buyers ko 1-1 cr. mil gaye, then everybody would start wishing that their projects get delayed & CCI intervenes & the decision goes the DLF way . LOL :D.