By way of a January 12 2017 order, the Competition Commission of India (CCI) initiated an investigation into the Delhi Development Authority (DDA) for alleged abuse of its dominant position in relation to the delayed allotment of residential flats to the middle income group under the Rohini Residential Plot Scheme 1981.(1)

Facts

Claimant Sudarshan Kumar Kapur alleged that although the DDA residential allotment scheme was floated in 1981, the drawing of lots had been delayed until 2012 and the allotment agreement had been issued after a further two-year delay in 2014.

Decision

The CCI considered that under the Delhi Development Act 1957, the DDA constitutes a government department with an objective to promote and secure planned developments in Delhi. However, it held that although the DDA is a statutory authority, its functions are neither sovereign nor identical with the inalienable functions of the state. Therefore, the DDA falls within the definition of an 'enterprise' and its conduct can be scrutinised for abuse of its dominant position under Section 4 of the Competition Act 2002.

The CCI found that no other developers in the relevant market (ie, the provision of services for the development and sale of residential flats in Delhi) could match the size and structure of the DDA. It held that no comparable alternatives were available for buyers of flats in Delhi and, therefore, the DDA was considered dominant in the market.

The CCI noted the inordinate delay of 31 years taken by the DDA in allotting a flat to the claimant. It held that given the DDA's dominance in the relevant market, buyers were forced to abide by its terms and conditions. The CCI also noted the unfair clauses stipulated in the allotment agreement, which included a penalty for buyers for delayed payments, but no corresponding penalty for the DDA for delayed allotment or delivery. The agreement itself stated that electricity, street lighting and domestic connections were as yet unavailable. Yet the DDA made it mandatory for recipients to pay approximately 80% of the total consideration amount, failing which the agreement would be cancelled. Further, the DDA revised the price of the flats from Rs200 per square metre in 1981 to Rs23,252 per square metre in 2014.

The CCI was of the prima facie view that the conduct of the DDA constituted an abuse of its dominant position, thereby violating Section 4 of the Competition Act. The director general was ordered to investigate the DDA's conduct and submit a report within 60 days of receipt of the CCI order.

Comment

The order marks the CCI's third investigation into the DDA for alleged abuse of its dominant position in the market for residential flats in Delhi. It follows investigations in Sunrise Resident Welfare Association v DDA (CCI Case 88/2014) and Dr Adla Satya Narayan Rao v DDA (06/2013). All three cases are awaiting final orders.

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Endnotes

(1) CCI order, January 12 2017. For full text, please see the CCI website.