Real estate giant Jaiprakash Associates Limited and its associate, Jaypee Infratech Limited (collectively "Jaypee Group") narrowly escaped a ₹ 6,659,400,000 (Indian Rupees Six billion six hundred fifty nine million four hundred thousand) penalty. The dissenting members of the bench of the Competition Commission of India ("CCI") presiding over the matter suggested the penalty while the majority of the members of the bench concluded that Jaypee Group is not in a dominant position in the relevant market and therefore the question of examining the alleged abusive conduct did not arise.
The order passed by the CCI on October 26, 2015 ("Order"), was in relation to various complaints filed against Jaypee Group, by allottees of residential units in Jaypee Group's residential projects. The allottees had alleged that Jaypee Group had abused its dominant position by imposing arbitrary and unfair conditions in their allotment agreements, thereby contravening Section 4 the Competition Act, 2002.
It was alleged by the allottees that agreements relating to the allotment were one sided and onerous, wherein certain clauses were not adequately disclosed at the time of booking. It was further alleged that there was a delay in handing over possession and no compensation was paid for the delay by Jaypee Group. Moreover, shoddily constructed apartments were handed over to the allottees.
Since complaints were filed by different allottees on similar grounds, CCI clubbed the investigations to be conducted by the Director General ("DG"). The initial DG report concluded that Jaypee Group was not abusing/ exercising dominant position. However, the CCI was of the view that further investigation was required into the matter and a subsequent investigation was ordered, which concluded that Jaypee Group was in fact abusing its dominant position.
After hearing the submissions from both parties, 3 (three) out of the 5 (five) members, including the chairperson presiding over the case, were of the opinion that Jaypee Group was not abusing/ exercising dominant position. The majority members strongly recommended that not only Jaypee Group but also all the players in the sector should take appropriate voluntary measures to address the concerns of the allottees. However, 2 (two) members of the bench passed a dissenting order, imposing a penalty on Jaypee Group stating that Jaypee Group had in fact abused their dominant position and should immediately cease and desist from indulging in abusive practices.
Although the order was in favour of the real estate entities, the dissenting members submitted a detailed order with reasons, which included statistics and thorough observations. The Order illustrates the immediate need for more stringent laws regulating the real estate market, which even the CCI in its Order has observed, leaves a regulatory vacuum in the real estate sector and consequent need for its regulation through the Real Estate (Regulation and Development) Bill. Further, the CCI also noted that there is lack of adequate consumer protection against unfair practices in real estate sector.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
