Legal Dimensions of International Business

Shamma Dhanawat Roll no 44 MIB 2010-2012

The summary of the order in the case of Belaire Owners Association vs DLF Limited, Haryana Urban Development Authority and Department of Town and Country Planning, State of Haryana. The informant in this case has alleged that DLF Limited has abused its dominant position by imposing arbitrary, unfair and unreasonable conditions on the apartment allottees of the housing Complex the Belaire that is being constructed by it. Parties to the case :  Informant - Belaire Owners Association The association has been formed by the apartment allottees of a building complex, Belaire being constructed by DLF Limited in DLF city, Phase-V, Gurgaon. The President of the association is Sanjay Bhasin who is also one of the allottees in the complex. Respondent DLF Limited DLF Limited is a public limited company and the developers of the building complex Belaire in DLF city , Phase V , Gurgaon. It is one of the countrys largest real estate companies and is known for developing many colonies and complexes. Haryana Urban Development Authority ( HUDA) is a statutory body under the Haryana Urban Development Authority Act , 1977.It is supposed to undertake the activities of planning and development of the urban areas. Development of Town and Country Planning , Haryana undertakes the activity of ensuring a healthy competition amongst the various developers in the area. It also renders advisory advices the other housing and development boards.

Facts of the case DLF Ltd announced a group housing complex named as the Belaire consisting of five multi storied residential buildings to be constructed in the land embarked Zone 8, Phase V in DLF city, Gurgaon. Each of the building was to have nineteen floors each. The total number of apartments would be 368. The time for completion of construction was 36 months. However, the developers have constructed 29 floors instead of the nineteen floors that was decided initially, there by reducing the Floor Area Ratio. This has also led to a delay in the project as a whole amounting to huge losses to the allottees. It should be noted that the Apartment Buyer s Agreement was signed even before the blue print of the project was approved by any competent authority. Also , the terms and conditions in the agreement were very dominating and were framed in such a way so as to benefit DLF Ltd.

Complaint made The Belaire Owner s Association were vexed at the attitude of DLF Limited and made complaints against the atrocities. The Belaire Owners Association (BOA) stated that the allottees had paid huge sum of approx Rs 20 lacs for the purpose of getting allotment at the Belaire. They were promised that the construction would be completed in 36 months and the property would be handed over but instead of the promised nineteen floors that were to be build in each of the five buildings, DLF revised the plan to 29 floors reducing the Floor Area Ratio and causing delay to the project. The BOA stated that while the interest on late payment of installments was 15% for the first three months and 18% thereafter, the compensation for delay in the project was mere Rs 5/sq meter per month.

 It should be noted that the apartments were offered for sale even before any competent authority had approved the plan.BOA also questioned the role of Haryana Urban Development Authority and the Development of Town and Country Planning, Haryana who were the party responsible for passing the said plan. Questions were also raised on the terms of agreement . An allottee could not move out of the contract. If he wished to sell his apartment ,he would not be paid any money until DLF has resold the apartment to another buyer. The allottee was not aware of the price at which the sale was being made and he was also deprived of any interest on the amount due from DLF. The agreement also stated that in case of non payment of installment, the entire amount paid earlier would be forfeited. There was also a case where an allottee lost Rs 51 lacs due to non payment of an installment. Some of the allottees had paid amounts up to Rs 1.2 crore and were still not aware of the status of their apartment.

 DLF also did not alter the price of the apartments and amenities that it had offered to its earlier allottees even though the cost would now be slightly reduced due to the change in the plans of construction. DLF also held the right to modify the building plan at any point of time without even informing the allottees. Thus the allottees did not even know the what they have paid for until the completion of the project. BOA stated that DLF held the dominant position and dictated terms.

Defense by DLF
DLF stated that it had worked according to the rules and regulations and none of its steps were in any ways a demonstration of its dominance. It stated that they had cleared mentioned in the Buyers agreement that the proposal is yet to be approved.lt stated that the real state business is such a competitive that one needs to use attractive packages like the one offer to Belair for the purpose of sale. DLF constantly mentioned and argued that it didn t enjoy any dominant position to dictate terms. It stated that though DLF is the largest player in the real estate market there are a huge number of competitors and as a result it has to keep itself distinguished from the competitors. On being alleged that its brand recognition was being capitalized upon, it stated that in no ways was it an act to cheat customers.

 On the allegations of low compensation against delay in completion, DLF stated that after the increase in number of floors from 19 to 29, the floor area ratio was within permissible limits of the law under which the territory was governed. BOA had also alleged DLF that in case of dispute the area of jurisdiction was DLF City itself and that no arbitration outside the territory was permitted. DLF replied that this is a standard clause and the absence of such a clause will lead to DLF fighting cases all over the country.

Product Market In this case the relevant product market is the services provided by the developers, DLF for providing high end apartments to consumers Geographic Market In this case the Geographic Market is only the National Capital Region (Gurgaon) and not the whole North India as Gurgaon is the place of construction of the project. There were a few issues that had to be cleared as well
1) Do the provisions of competition act apply in this case? 2) What is the relevant market? 3) Was DLF ltd dominant? 4) If DLF ltd was dominant , did it abuse its dominance?

 DLF argued that sale of Appt. was neither a good nor a service and hence it was not under the purview of the Competition Act 2002 but as per the judgment of the Honorable Supreme Court , selling of apartments unless no money is taken is regarded as a service and since DLF took money from the allottees it was doing a service of providing them homes, thus it was under the purview of Competition Act 2002. Also after deep analysis of various factors and past cases it was decided that the relevant market was the market of services of developer of giving high end residential buildings. Considering the large market share and the statements made by its founders and also the analysis of reports of trusted agencies it was concluded that DLF held a dominant position in the relevant market

The result
The Competition Commission of India ordered DLF Limited to pay a fine of Rs 630 crore for misusing its dominant position to draft one sided agreements with flat buyers in Belaire housing complex.