CCI finds DLF guilty of 'unfair' business practices

DLF, country's largest real estate firm, has once again come under the scanner of Competition Commission of India (CCI). The competition watchdog has found the realty firm guilty of "unfair and abusive" business practices in one of a housing projects in Gurgaon.

CCI in its order has asked DLF Gurgaon Home Developers Private Ltd and its group companies to "cease and desist" from such unfair trade practices. It, however, did not impose any fresh penalty. A fine of Rs 630 crore has already been slapped on DLF for a similar violation in a separate case.

"The Commission is of the view that since a penalty of Rs 630 crore has already been imposed on the opposite party (DLF) in the Belaire's case for the same time period to which contravention in the present cases belong, no financial penalty under this required to be imposed," CCI said in its 49-page order.

Last year, CCI had imposed a fine of Rs 630 crore on DLF for alleged unfair practices in The Belaire project in Gurgaon, which the company has challenged in the Supreme Court. Also, last year, the Competition Appellate Tribunal had upheld the penalty of Rs 630 crore. Subsequently, SC asked DLF to deposit the penalty amount in tranches, pending the final order.

DLF in a statement said, "We have received the order passed by the Competition Commission of India today and we are still studying it. We will take necessary steps as advised by legal counsels. It is, however, very surprising that in Gurgaon there are tens of companies which offer flats in the same range of Rs 45-50 lakh. It is also well-known that that tens of thousands of flats are offered in the area of Gurgaon within the same price range, with same amenities and in the same product line. We have also noticed that no penalty has been imposed. We are studying the order in details and go as advised by legal counsel."

Thursday's order was passed on an application by three different home-buyers, after which the CCI ordered the investigation against the company - finding it prima facie abusing its dominant position in Gurgaon.

According to buyers, the company had lured them to book apartments at "very attractive" rates in DLF New Town Heights project under a pre-launch scheme. As per the order, the complainant booked the apartments and made the initial payments, after which they were asked to make payments under an installment plan on different dates. However, they did not make the payments as "there was no sign of construction/development at the project site..."

Later, they sought cancellation of allotment and requested for refund of the amounts paid by them, which the developer refused to do, saying that applications signed by buyers were irrevocable and the request for cancellation cannot be acceded to. Agreeing with the applicants, CCI's investigative arm found merit in the allegations regarding forfeiture of booking amount in case a buyer wishes to cancel the allotment.

DLF is also contesting a ban a markets ban imposed by SEBI for non-disclosures during its IPO in 2007. Though the ban was overturned by SAT, SEBI has challenged it in the Supreme Court.

DLF's plan of listing its rental assets as a REIT is stuck because of this ban. DLF's inability to access capital markets could impact its fund raising programme, as a listed company and for potential listing of its commercial assets as REITs. And, DLF would have to resort to large asset sales to reduce debt in the future, according to a report by Macquarie Capital.

Over the past two years, DLF has sold almost all its non-core assets, aiming to bring down debt, which had once reached Rs 23,000 crore.