CCI Grants Interim Relief to Confederation of Real Estate Developers Association of India – NCR Against HUDA’s Conduct

In its order dated August 1, 2018, CCI issued an order under Section 33 of the Act, granting interim relief to the Confederation of Real Estate Developers Association of India – NCR (‘Developers’) against the conduct of Department of Town and Country Planning (‘DTCP’) and Haryana Urban Development Authority (‘HUDA’) (collectively, ‘Respondents’).

The primary allegation was with respect to compelling Developers to pay External Development Charges (‘EDC’) and Infrastructure Development Charges (‘IDC’). The Developers requested CCI to restrain the Respondents from invoking the bank guarantee against them and sought a cease and desist order against the Respondents from taking any coercive actions including compelling the Developers to pay EDC or IDC or any increase or any penalty payment until the disposal of the case.

While considering the application for interim relief, CCI relied on the factors laid down in M. Gurudas and Others v. Rasaranjan and Others[1] i.e. (i) existence of prima facie case; (ii) balance of convenience and (iii) irreparable injury.

To determine the existence of the first element of prima facie case, CCI referred to its prima facie order issued under Section 26(1) of the Act, directing the DG to conduct an investigation. However, citing the SC decision in Competition Commission of India v. Steel Authority of India Limited (‘SAIL Case’) that required CCI to apply a higher standard for establishing a prima facie case than the one required under Section 26(1) of the Act, CCI considered the Respondents’ conduct beyond its prima facie order under Section 26(1) of the Act. In doing so, CCI noted that despite collecting EDC from Developers, the Respondents had failed to undertake external development services (‘EDS’) or infrastructure work. While the Respondents contended that other government agencies had indeed undertaken some infrastructure works, CCI noted that they did not cover basic facilities like water supply, sewerage, drains, roads, electrical works, etc. without which the flats would be uninhabitable.

CCI also noted that a policy was issued in 2010 that allowed relaxations with respect to collecting EDC up until the time the rates for medium and low potential zones were finalized and also, the Developers were exempted from payment of any EDC when it wasn’t charged to the allottees. However, no such benefit or a similar policy was in place for high potential zone. Additionally, 60% of the collected IDC was already transferred and utilized for refund purposes for other projects by HUDA. In view of the above fact, the CCI noted that the alleged anticompetitive conduct has been continued by the Respondents and there was a prima facie case to intervene.

On the following two elements of balance of convenience and irreparable injury, CCI noted that to obtain a license to set up a colony in Sohna, a Letter of Intent (‘LOI’) and LC-IV (Agreement by owner of land intending to set up a colony) (‘Agreement’) between the Developers and DTCP had to be executed. The LOI and the Agreement required Developers to pay the EDC either within 30 days of grant of license or in 8 to 10 six monthly installments. The Agreement additionally, contemplated annual interest in case of delayed EDC payment by Developers. CCI also noted that licenses were to be renewed every five years and renewal fee deposited each time, even if the reason for non completion of the project was limited to EDS.

Citing Dalpat Kumar and Anr. v. Prahlad Singh and Ors.,[2] CCI held that in order for the third element of ‘irreparable injury’ to be satisfied, it needed to be reasonably satisfied that absent its interference, Developers and consumers would suffer irreparable loss. To this extent, CCI noted that without interim relief, Developers, and consequently consumers, would suffer significant damages for which they were unlikely to be appropriately compensated. CCI also noted that if interim relief is not granted, Developers may lose their licenses and be forced to pay penal interest even when the Respondents are at fault. Such actions will cause irretrievable harm to Developers.

On this basis, CCI noted that the balance of convenience lay in favour of the Developers and absent intervention, irreparable harm would be caused to Developers and consumers alike. In order to preserve status quo, CCI noted that it was important to intervene and restrain the Respondents from taking coercive steps with respect to EDC installment payments. CCI, in its order, also took cognizance of the fact that EDC was imperative in order carry out EDS, but as Respondents had failed to take requisite action, CCI granted interim relief to Developers. Specifically, CCI directed that, where Developers had already paid 10% of EDC and deposited 25% of EDC in the form of bank guarantee, DTCP will not coerce the Developers for remaining installments or take coercive measures with respect to licenses granted to the Developers. Expressly CCI has directed that the status quo be maintained until final disposal of the matter.

[1] AIR 2006 SC 3275
[2] (1992)1 SCC 719

Published In:Inter Alia Special Edition Competition Law October 2018 [ English
Date: October 30, 2018