One-sided agreements attract penalty

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In a landmark order that will help level the playing field in the real estate sector, the Competition Commission of India (CCI) recently found one of India’s largest real estate developers, DLF, guilty of “grossly abusing its dominant position” and indulging in anti-competitive practices (see page 49 for more information). Ruling in Belaire Owners’ Association v DLF Limited & Ors, the CCI directed DLF to cease and desist from imposing and formulating unfair conditions in its buyer’s agreements and to modify these conditions within three months.

In addition, holding that the penalty “has to be commensurate with the severity of the violation”, the CCI imposed its highest penalty to date on DLF of ₹6.3 billion (US$140 million). This amounts to 7% of the average of DLF’s turnover for the last three financial years. The company has said it will appeal the order.

Skyscrapers_in_MumbaiThe CCI was acting on a complaint by the Belaire Owners’ Association – a group that had entered into buyer’s agreements with DLF that the CCI said contained “draconian and one-sided clauses”. On receipt of the complaint in May 2010, the CCI had restrained DLF from cancelling allotments to the complainants and concluded that a prima facie case existed against DLF. It then ordered its investigative arm, the Office of the Director General, to investigate the matter.

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The update of court judgments is compiled by Bhasin & Co, Advocates, a corporate law firm based in New Delhi. The authors can be contacted at lbhasin@bhasinco.in or lbhasin@gmail.com. Readers should not act on the basis of this information without seeking professional legal advice.

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