CCI initiates investigation against real estate players

By Amit Tambe and Gautam Chawla, Trilegal
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The Competition Commission of India (CCI) directed its investigation wing, the Office of the Director General, to investigate allegations of abuse of dominant position against the Delhi Development Authority (DDA) in April and Jaypee Greens in May. The investigation has been directed against allegedly unfair and abusive clauses inserted by these (prima facie dominant) real estate players in their allotment letters and brochures, which are heavily loaded in their favour.

DDA housing scheme case

In case No. 88/2014, Sunrise Resident Welfare Association, the informant before the CCI and a (registered) society incorporated for maintenance and upkeep of common portions of the flats allotted by the DDA, alleged that the DDA had abused its dominant position in its Housing Scheme 2010.

Amit Tambe
Amit Tambe

Based on the informant’s submissions, the CCI prima facie found the DDA to be dominant in the market for sale and distribution of residential flats in Delhi, and stated that (among others) the following clauses and acts appeared to be unfair and abusive:

(1) False promise in the Housing Scheme 2010 brochure regarding the status/stage of construction of the flats. The brochure issued with the scheme stated that the flats were ready for occupation, although as per the informant they were still being constructed on the date of the draw of lots in April 2011 (and even the basic minimum facilities were not ready).

(2) Delay in issuance of “allotment cum demand letter” and handing over of possession to the successful allottees. The draw of lots was held in April 2011, but the allotment cum demand letter was issued and possession was granted only in March 2012.

(3) Charging of penal interest for delayed payments and automatic cancellation in case of non-payment. As per the brochure, to avoid payment of any interest, the allottee had to pay the demand amount within 90 days of issue of the demand letter. If the demand amount was paid within the next 90 days after that, the allottee had to pay the demand amount with 15% compounded interest. The failure to pay (including interest) within 180 days of issue of the demand letter led to automatic cancellation of the allotment.

(4) Payment of applicable free-hold charges or conversion charges by the allottee at the time of execution and registration of the conveyance deed, even though the DDA had assured that the (initial) allotments would be made on a free-hold basis.

Based mainly on the above, the informant asked that the CCI direct the DDA to: (a) refund the free-hold or conversion charges; (b) refund the penal interest charged for delayed payments; and (c) pay compensation to each of the flat owners for sub-standard construction and workmanship.

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Amit Tambe is a partner at Trilegal and Gautam Chawla is a senior associate. Trilegal is a full-service law firm with offices in Delhi, Mumbai, Bangalore and Hyderabad.

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Tel: +91 22 4079 1000

Fax: +91 22 4079 1098

Email: amit.tambe@trilegal.com

gautam.chawla@trilegal.com

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