CCI Dismisses Allegations of Abuse of Dominance against Haryana Urban Development Authority

On January 14, 2021, the CCI closed an investigation into allegations of abuse of dominance against the Haryana Urban Development Authority (‘HUDA’).[1]

The informant claimed that HUDA was dominant in the market for supply and sale of institutional plots in urban estates in the State of Haryana. It was alleged that HUDA imposed illegal terms and conditions for execution of conveyance/sale deed in favour of the allottees, who were allotted institutional plots on a freehold basis, even though the allottees had paid the entire consideration as demanded by HUDA and completed construction of buildings.  It was also alleged that HUDA imposed an ex facie illegal and void condition restricting the rights of the allottees to further sell, mortgage, lease out the plots purchased and buildings constructed by them.

Pursuant to a prima facie order issued by the CCI on October 31, 2017, the DG conducted an investigation and delineated the relevant product market as market for provision of services for development and sale of institutional plots’. The DG also suggested an alternate relevant product market as ‘the market for provision of services for development and sale of institutional plots (other than in residential projects). The relevant geographic market was delineated as ‘the State of Haryana’.  The DG found HUDA to be dominant in the relevant market. The DG concluded that the conduct of HUDA in not allowing the transfer of institutional plots was unfair as it led to exit barriers by closing the opportunities for allottees to resell those institutional plots. The restriction also created entry barriers as it prevented subsequent buyers to deal in these plots/ properties, ultimately creating impediments in the development of secondary market for resale of institutional plots. Further, the same was also considered exploitative as the only exit route available to the buyer of an institutional plot was to return it to HUDA and receiving 90% of the actual price in return.

The DG also noted that the arbitration clause in the conveyance deed between HUDA and the allottees left the latter with no right to challenge the appointment of the arbitrator, which effectively took away the right of the informant to appeal. HUDA was therefore in contravention of the provisions of the Act.

Before the CCI, HUDA argued that it was a statutory authority discharging sovereign functions (of regulating the use of land (product) in order to prevent ill-planned and haphazard urbanisation in or around towns in the State of Haryana and administering the directions and policies of the State Government. Therefore, it cannot be viewed as an ‘enterprise’ under the provisions of the Act. The CCI rejected this contention observing that all of HUDA’s functions may not be classifiable as statutory functions more so of a sovereign nature, especially when it allots various types of plots to third parties for a consideration.

In relation to restrictions on sale/mortgage of the plots, HUDA argued that such institutional plots have been allotted for specific purposes, at a price much below the then prevailing market prices and the owners of such plots cannot be allowed to profit from the sale/transfer of such plots. It was never its objective to allow sale of such institutional plots and it was for this precise reason, these plots were given to seekers satisfying the eligibility conditions at concessional rates. The CCI agreed with these submissions and noted that HUDA has not permitted transfer of the institutional plots in public interest and as a matter of policy to prevent unjust enrichment and profiteering by allottees of such plots.

With respect to the arbitration clause, the CCI held that aspects relating to the appointment of the arbitrator, etc., can be suitably dealt with under the provisions of the Arbitration and Conciliation Act, 1996.

Thus, the CCI concluded that HUDA cannot be said to have contravened the provisions of the Act.

 

[1] Case No. 94 of 2016, Order dated January 19, 2021.

Published In:Inter Alia Special Edititon - Competition Law - March 2021 [ English
Date: March 15, 2021