DLF to pay a penalty of Rs. 630 crore

New Delhi, 20 May-2014, BS: The Competition Appellate Tribunal (Compat) has directed real estate major DLF to pay a penalty of Rs 630 crore — seven per cent of its annual turnover — for abusing its dominant position in the market. Dismissing its plea against the fine imposed by the Competition Commission of India (CCI), the tribunal has given the realty developer 60 days to pay up or approach the Supreme Court.

DLF to pay a penalty of Rs. 630 crore

DLF to pay a penalty of Rs. 630 crore

In the recent past, the firm has been under a lens for its alleged links with Robert Vadra, Congress President Sonia Gandhi’s son-in-law. The Compat verdict on DLF comes at a time when a Bharatiya Janata Party (BJP) -led government is set to take charge at the Centre.

CCI had imposed the penalty on DLF in 2011, following a petition from flat buyers’ associations of DLF Park Palace and The Belaire — two of the firm’s projects in Gurgaon. CCI had also asked the company to modify the apartment buyers’ agreement on buyers’ complaints of delay in the project and increase in the number of floors beyond what was planned. Subsequently, DLF moved Compat and managed to get a stay order on the CCI penalty.

On Monday, judge V S Sirpurkar said in his order: “We cannot expect a leading player like DLF to go on in this fashion… If the consumer is exploited by a mighty builder, the mighty builder cannot claim a soft attitude from the state.”

DLF said it would challenge the order in the Supreme Court. “We have successfully delivered the Park Place, The Belaire and Magnolia projects, the subject matter of these appeals.” The company has respected in true letter and spirit the customer commitments made by it, DLF said. Of the 2,600 apartments, 2,200 had been handed over to buyers and 1,800 families were residing in those, it added.

DLF is again under the CCI lens for allegedly drafting a one-sided agreement with flat buyers in its New Town Heights project in Gurgaon.

The penalty is being seen as a blow to DLF, which has been on a non-core divestment spree to reduce its debt pile. The company reduced its net debt by Rs 2,500 crore to Rs 17,400 crore using proceeds from sale of its luxury hotel chain Aman Resorts and a refund from the Delhi Development Authority (DDA) earlier this year. It also sold off its NTC Mill land in Mumbai to Lodhas for about Rs 2,727 crore.

According to experts tracking the sector, the Compat order will encourage other resident welfare associations (RWAs) to speak out against erring developers. In a recent case, the Allahabad High Court had ordered demolition of two towers in Supertech’s Emerald Court project on a petition filed by RWAs alleging the company increased the number of floors without the required permission of existing owners and without following the UP Apartments Act for keeping the mandatory 16-metre distance between two towers. “Buyers are active like never before. With such a strong online medium, an increasing number of buyers are joining hands to protest against developers’ tyranny, especially when a developer has no explanation for delayed delivery,” says Sanjay Sharma, managing director, Qubrex, a real estate consultancy firm.

Ashutosh Limaye, head of research & real estate intelligence service at Jones Lang LaSalle India, says the order will encourage people to speak up against developers who take their buyers for a ride. But the industry won’t have any immediate impact. Earlier, the buyers had little say in these matters; now, earlier agreements of developers are being redrafted, Limaye adds.