2013 (1) TMI 736 - Commission - Companies Law

Supplementary Order u/s 27 of the Competition Act, 2002 - In earlier order Commission found that DLF Ltd. had abused its dominant position and violated the provisions of Section 4 of the Competition Act, 2002 - Held that - The Commission, in its order, observed that while heavy penalties were imposed in the agreement for default of allottee, there were insignificant penalties on DLF for its own defaults. A reference was made to clause 35 of the agreement, which shows abuse of dominance. The company can refuse to condone delay and can cancel the apartment even if the allottee was prepared to pay interest on delayed payment. While in case of company, the company for itself has reserved so many excuses for non delivery of possession and for scrapping the contract altogether or for delaying the project. It has given itself the powers to extend the period of delivering possession but for the allottee, the sole discretion lies with the company to cancel the flat in case of delayed payment. In case of condoning delay, the Company could be charging interest to the tune of 15% for 1st 90 days and thereafter 18%. However, for the default of the company, the company was liable to pay only 9% interest to the allottee on only such amount which the company deemed refundable to the allottee. That makes the clause abusive, one sided and shows blatant abuse of dominance. In clause 12, the company has given events of defaults and consequences for the allottee. The company has nowhere given in the entire agreement the events of defaults for itself. The Commission considers that the defaults can be on the part of the company as well on the part of the allottees and the agreement should provide for defaults of both the parties and the agreement must be equitable in dealing with both the sides and levy of interest /penalty should of equal level on both sides. The Commission also considers that Force Majeure in clause 39 should be defined as understood in common parlance of law. The consequent modifications are suggested in the clauses 35 & 39. In view of the modified clauses/sub clauses as suggested above in the agreement, certain clauses/sub clauses of the agreement have become superfluous. The Commission has suggested deletion of these clauses. Certain clauses of the agreement, in view of the suggested modified clauses, needed small changes so as to bring them in consonance with the modified clauses. These changes are minor in nature and have been suggested wherever needed. Some clauses are closely interlinked with the abusive clauses and had to be modified so that the abuse was not perpetuated. These interlinked clauses wherever existed have been accordingly modified. The clauses which needed fine tuning with the modified clauses have also been accordingly modified and the suggested clauses have been given in the table below. The terms of the agreement to be entered into with the allottee were never shown to the allottee at the time of booking of the apartment. These terms and conditions of the agreement were prepared and framed by the company unilaterally without consulting the buyer. Once the company had already received considerable amount from the applicants/buyers, this agreement was forced upon the allottees and the allottee had no option but to sign the agreement, as otherwise the agreement provided for heavy penalties and deduction from the money already deposited by the allottees with the company, which itself was an abuse of dominance. The appropriate procedure would have been that a copy of the agreement which DLF proposed to enter with the allottee should have been made available to the applicants at the time of inviting applications. The agreement should be signed within a reasonable time from the date of allotment and all additional amounts should be demanded from the allottee only when the agreement has been signed. Any allottee, who was not agreeable to the terms of agreement, should have liberty to withdraw his application and should be given the entire application amount back. The Commission thus considered all the clauses of the Buyer s Agreement. The reasons for proposed modification are given.The modifications suggested have been given in tabular form at the end opposite the existing clause.

Summary

Issues Involved:
1. Abuse of Dominant Position
2. Modification of Buyer's Agreement
3. Compliance with Applicable Laws
4. Rights of Apartment Allottees
5. Penalties and Remedies

Detailed Analysis:

1. Abuse of Dominant Position:
The Commission found that DLF Ltd. had abused its dominant position in the geographic area of Gurgaon by making flat owners sign a highly abusive apartment buyers agreement. The agreement contained several clauses that were biased in favor of DLF Ltd., including sole discretion to make changes in zoning plans, usage patterns, super area, carpet area, and alteration of structure without giving buyers any rights to raise objections. The Commission concluded that this conduct was unfair and amounted to abuse of dominance under Section 4 of the Competition Act, 2002.

2. Modification of Buyer's Agreement:
The Commission directed DLF to cease and desist from formulating and imposing such unfair conditions in its agreements with buyers in Gurgaon and to suitably modify the unfair conditions imposed on its buyers within three months. The exact terms and conditions of the agreement were not formulated, leaving it to DLF to finalize the modified agreement in consultation with buyers. The Commission expected that the modified agreement would properly define the product/service, state all requisite clearances, and clearly lay down the delivery schedule stage-wise. One-sided clauses were to be suitably modified to remove the abuse of dominance.

3. Compliance with Applicable Laws:
The Commission emphasized the necessity to comply with the Haryana Development and Regulation of Urban Areas Act, 1975, Haryana Development and Regulation of Urban Area Rules, 1976, and the Haryana Apartment Ownership Act, 1983. The laws mandate specific requirements such as maximum permissible coverage, FAR, car parking space, and the transfer of residential units to allottees. The Commission highlighted that the builder's rights in the land area and common facilities should be transferred to the apartment owners as per the law.

4. Rights of Apartment Allottees:
The Commission observed that the apartment owners jointly become owners of the entire land of which FAR is utilized for construction. The agreement clauses that gave DLF ownership rights over common areas and facilities were deemed abusive. The Commission directed modifications to ensure that apartment owners have undivided ownership rights over land and common facilities. The Commission also addressed issues related to preferential location charges, increase or decrease in super area, and the rights of allottees to use common areas and facilities subject to timely payment of maintenance charges.

5. Penalties and Remedies:
The Commission found that the agreement imposed heavy penalties on buyers for defaults while imposing insignificant penalties on DLF for its defaults. The Commission suggested modifications to make the agreement equitable in dealing with both parties and to levy interest/penalty equally on both sides. The Commission also directed that force majeure should be defined as understood in common parlance of law. The Commission ordered DLF to modify clauses related to forfeiture of earnest money, delivery of possession, and execution of conveyance deed to ensure fairness and remove abusive terms.

Conclusion:
The Commission's judgment required DLF Ltd. to modify the buyer's agreement to remove abusive clauses, comply with applicable laws, and ensure fairness in the terms and conditions imposed on apartment allottees. The modifications aimed to protect the rights of buyers and prevent the abuse of dominance by DLF Ltd.