Tribunal stays CCI's Rs. 630 cr fine on DLF

The tribunal clarified in its interim order that if DLF loses its case, the company will have to deposit the entire penalty amount along with 9% interest

The Competition Appellate Tribunal (Compat) on Wednesday stayed the Rs630 crore penalty imposed by fair trade watchdog Competition Commission of India (CCI) on DLF Ltd, Indias biggest real estate firm by market value, over alleged abuse of dominant market position.

A three-member bench headed by Justice Arijit Pasayat stayed the execution of the CCI order.

However, the tribunal clarified in its interim order that if DLF loses its case, the company will have to deposit the entire penalty amount along with 9% interest. It also asked the real estate company to give an undertaking that it would pay the penalty and interest if it loses the case.

DLF had moved Compat against the CCI order in October. A DLF spokesperson said the company was pleased with the development.

CCI slapped a penalty of Rs630 crore on DLF in August for alleged abuse of its dominant position resulting in unfair treatment to the buyers of flats at its Belaire project in Gurgaon. The order came on a complaint filed by the Belaire Owners Association against DLF in May 2010 for delay in giving possession of flats and violating building restriction norms by increasing the number of floors and apartments.

CCI had also imposed a cease and desist order over unfair conditions imposed on buyers at another project in Gurgaon, Park Place, and asked the company to revise the terms of the sale agreement within 90 days.

Compat has now directed DLF Ltd and the flat owners association to separately work out a draft of the revised terms, as directed by CCI in its order, within a period of eight weeks.

The court has asked to modify clauses mentioned in the sale agreement signed between the flat owners and DLF Ltd. We have to send the draft within eight weeks, said Vaibhav Gaggar, counsel of the flat owners associations.

The tribunal has tried to look into all aspects, said M.M. Sharma, head of competition law practice at Vaish Associates Advocates. For instance, CCI imposed fine without working out a framework for the quantum of the fine and without giving DLF a hearing, which suggests CCI had concluded there were no mitigating factors.

Harsh Sehgal, president of the Park Place flat owners association said the courts (Compats) order was along expected lines. This will lead to more transparency in the builder-buyer agreements and the real estate market.

DLF is building 2,230 apartments at the two projects Belaire and Park Placein Gurgaon. The buyers have alleged that the agreement between the apartment owners and DLF was extremely one sided.

As per the agreement, while DLF Ltd was charging its buyers 15-18% interest in case of delayed payment, it promised only 10% annual interest to the buyers in case there is delay in construction and delivery, said Gaggar.

Either of the parties (CCI or DLF) can appeal in the Supreme Court against the final Compat order, which is expected by April, a senior CCI official said, speaking on condition of anonymity

Devesh Chandra Srivastava & Sangeeta Singh