Competition Tribunal Upholds .` 630-crore Penalty on DLF
Co plans to challenge order in Supreme Court within 60 days; experts feel order may have ramifications on the realty industry
The Competition Appellate Tribunal on Monday upheld .` 630crore penalty on real estate firm DLF for abusing its dominant position in Gurgaon to impose onesided terms on buyers, a move that will boost hopes of all aggrieved homebuyers across the country. In 2011, the Competition Commission of India (CCI) had slapped the penalty on the real estate major after complaints by flat buyer associations of DLF Park Palace and The Belaire projects in Gurgaon that the builder had delayed possession of apartments, changed its original plan to accommodate more floors and that the apartment buyer’s agreement was one-sided. Experts said Monday’s order of the Competition Appellate Tribunal, or COMPAT, may have ramifications on the real estate industry as many developers have been indulging in similar practices. “This new order will bring about a lot of order in the way things are done in the industry. Developers will be careful about how they manage projects and what they disclose and what they don’t,” said Mudassir Zaidi, national director — residential, at Knight Frank India. “It will help buyers as developers will now put forward more balanced agreements for them to sign,” he added. DLF said it will challenge the order in Supreme Court within 60 days. “The company wishes to point out that it has successfully delivered Park Place, Belaire and Magnolia projects, which were the subject matter of the above appeals. The company has respected in true letter and spirit the customer commitments made by it,” DLF said in a statement. Vaibhav Gaggar, partner at law firm Gaggar & Associates that represented the two buyers associations, said: “This order will become a precedent of sorts for other courts and tribunals in cases against other builders. We are hoping that the super-area game that builders play, changing of plans
‘The COMPAT order has paved the way for buyers in the DLF projects to file compensation claims’
midway through the project, and the tussle between residents and the builders on common areas and facilities all become more transparent.”
Apartment owners in Belaire project had alleged in their May 2010 complaint to CCI that each of the five towers in the project were to have 19 floors but the builder “constructed 29 floors in all the buildings and consequently the areas and facilities originally earmarked for apartment allottees were substantially compressed”. They had also said: “The project was abnormally delayed, as a result of which hundreds of apartment allottees had to bear huge financial losses, in the sense that their hard-earned money was blocked, and they had to wait indefinitely for occupation.”
The buyers had also alleged that the Apartment Buyer’s Agreements (ABA) were signed months after the booking of the apartment and by that time they had already paid a substantial amount. “The said ABA was devised by the Appellant for booking the apartments and a person desirous of booking the apartment was required to accept it in ‘toto’ by giving assent to the ABA on signing the dot- ted lines, even when clauses of the ABA were onerous and one-sided,” the COMPAT order said.
The buyers had also pointed out in their complaint that the agreement did not contain proportionate liability clauses to fasten commensurate penalty/damages for breach in discharge of the builder’s obligations.
Sanjay Bhasin, president of the Belaire Owners’ Association said the COMPAT order has paved the way for buyers in the DLF projects to file compensation claims. If all of the 2,500 owners in the three projects file for compensation, the claims could potentially run into thousands of crores. “The members are happy that their stand has been vindicated and we hope that this judgment will go a long way in ameliorating the hardships of apartment buyers,” said Harsh Sehgal, president of Park Place Residents’ Welfare Association. DLF will now have to pay the penalty with an interest of 9% since the original order.