SC directs DLF to pay up Rs630-cr CCI penalty in 3 months

The Supreme Court has upheld the Competition Appellate Tribunal's order directing real estate giant DLF to pay a penalty of Rs630 crore for resorting to grossly ''unfair trade practices'' with home buyers and instructed it to pay the penalty within three months.

The company has been asked to pay Rs50 crore within three weeks and the remaining within three months. It will also have to submit an undertaking to pay interest of 9 per cent on the penalty amount.

DLF had moved the Supreme Court against the Competition Appellate Tribunal's (Compat) May order, which had upheld the Competition Commission of India (CCI) ruling imposing the penalty on the firm for unfair business practices.

The CCI had, in 2011, found DLF violating fair trade norms and imposed a fine of Rs630 crore on it following a complaint by Belaire Owners' Association in Gurgaon. CCI said DLF had resorted to grossly ''unfair trade practices'' with the home buyers.

The association had moved the CCI alleging that DLF imposed highly arbitrary, unfair and unreasonable conditions on allottees of apartments, which had serious adverse effects and ramifications on the rights of the buyers.

The CCI's investigations established that DLF used its ''dominant'' position in the Gurgaon realty market to impose ''draconian and one-sided clauses'' against buyers, and ''there are clauses that give DLF Ltd sole discretion in respect of change of zoning plans, usage patterns, carpet area, alteration of structure, etc. In case of change in location of the apartment, PLC (preferential location charge) will be determined at the discretion of the builder and, if a refund is due, no interest is paid. No rights have been given to the buyers for raising any objections.''

DLF argued that CCI had no mandate to look into its case as it was neither dominant in realty nor was it a monopoly of any kind. But CCI ruled otherwise.

CCI found that DLF had unilaterally decided to increase the size of the building from 19 floors to 29, started work without all permissions being in place, and delayed completion to the extent where some buyers had still not obtained possession of their flats.

After the CCI order, DLF appealed to the Competition Appellate Tribunal (Compat), and it was the Compat's rejection of the challenge that the Supreme Court upheld today.

While the SC order will ensure that builders will, in future, be more mindful of neglecting consumers' interests in drawing up one-sided sales contracts, there is no guarantee that it would deter other builders from imposing one-sided contracts on hapless buyers, sday commentators.

However, with the Supreme Court now upholding the CCI's decision, the consumer courts can now get bolder with complaints filed against any builder.

DLF shares on Wednesday fell 4.5 per cent, after the Supreme Court directed the company to deposit Rs630 crore fine slapped on it by the CCI for resorting to unfair business practices.