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CCI modifies apartment buyers agreements in two more DLF cases

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New Delhi:

The Competition Commission of India (CCI) today said modifications suggested by it to the agreement between DLF and apartment buyers of the realtor's Belaire project would be applicable to two more projects of the company, namely Park Place and Magnolia.

The modifications to apartment buyer agreements follow a direction from the Competition Appellate Tribunal (COMPAT), which is hearing DLF's appeal against the fair trade regulator's Rs 630 crore penalty and other sanctions against it.

After finding DLF abusing its dominant position, CCI had in August 2011 imposed the penalty on DLF and had asked the company to suitably modify its apartment buyer agreement to remove the unfair conditions.

After hearing DLF's appeal, COMPAT, however, asked CCI in March 2012 to pass another order specifying the extent and manner in which terms and conditions of the apartment buyers agreement needed to be modified.

Consequently, CCI passed a supplementary order on January 3 to modify the buyer agreement DLF's Belaire project at Gurgaon in national capital region.

In two separate supplementary orders announced today, CCI has now said the modifications suggested for the Belaire project buyers agreement would be applicable for DLF's Park Place and Magnolia projects as well.

"The same modifications suggested by the Commission in its order in case (involving Belaire project).... shall be applicable" to cases related to Park Place and Magnolia projects, the CCI said.

CCI had earlier asked DLF "to cease and desist from formulating and imposing such unfair conditions in its agreement with buyers in Gurgaon" and to "suitably modify unfair conditions imposed on its buyers."

The Commission had left it to DLF to modify unfair conditions, but the company preferred an appeal before COMPAT, which directed the CCI to pass an order specifying the extent and manner in which the terms and conditions of the Agreement need to be modified.

Explaining the various modifications in its 104-page supplementary order in Belaire case, CCI had said DLF enjoyed unilateral right to increase or decrease super area at sole discretion without consulting allottees who were bound to pay additional amount or accept the reduction in area.

CCI said "a mere letter from the company that the super area has increased is not sufficient" and the builder would have to give relevant information to the allottee as to how the super area stands increased.

The changes have also been made in clauses that provided for heavy penalties for default of allottee, but comparatively "insignificant penalties on DLF for its own defaults."

The proportion of land on which apartment is situated and over which the allottee would have ownership right was also to be decided unilaterally at the discretion of DLF, while the company had also "unlawfully provided for itself right to further go up in air by increasing the number of floors and reserving to itself terrace rights."

"This is totally contrary to the law and imposition of this condition on the allottee by DLF is because of its dominance and amounts to gross abuse," CCI said.

The regulator has also modified a clause "giving right to DLF of having full and absolute rights in the community buildings/sites/recreational and sporting activities sites including maintenance of those," terming them as abusive.

The other clauses that have been modified include those providing "arbitrary forfeiture of earnest money by the company without even a notice to the allottee" and those governing the delivery of possession of the apartment. The CCI has also modified the parts giving the company "right to make additions, alterations, improvements and other changes in unsold apartments.

"The rights of the company and the apartment owners in their respective apartments are equal. Company cannot have more rights (in this regard)," CCI said.

CCI said some of the clauses have become superfluous after the modifications and these need to be deleted. Besides, it also reinforced that 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.

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 and those not agreeing to the terms should be allowed to withdraw the application with refund of entire application amount.

The CCI had passed its order against DLF following its inquiries into complaints filed by flat buyer associations of two DLF projects in Gurgaon, DLF Park Palace and The Belaire, alleging delays in the project and increase in the number of floors than planned earlier, among other things.

The CCI had passed its original order on August 12, 2011 wherein it had held that DLF Ltd was a dominant enterprise and violated the provisions of the Competition Act "by entering into an agreement with apartment allottees that was one sided, abusive and unfair to the allottees."

Recently, CCI chairman Ashok Chawla said the modified agreement in DLF case could work as a model framework for commercial agreements between realty developers and property buyers and could serve as an industry benchmark.

"Whether a real estate company is dominant or not, DLF was found to be dominant because it was big, most of them follow the same format pattern that flows from big players in the market," Mr Chawla had told PTI in an interview.

Story first published on: January 14, 2013 19:50 (IST)

Tags: DLF Ltd, Competition Commission of India, Competition Appellate Tribunal, CCI, Ashok Chawla, New Delhi

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