Case Law Details
Ramesh Kumar Vs Chandigarh Housing Board (Competition Commission of India)
Introduction The Competition Commission of India recently examined a notable case between Ramesh Kumar and the Chandigarh Housing Board (CHB). The primary point of contention revolves around whether CHB abused its dominant position, especially concerning the non-disclosure of house possession dates.
Non-disclosure of House Possession Date
- Relevance of Section 4: The Commission delved deep into Section 4 of the Act to determine if CHB’s actions constituted an abuse of their dominant position.
- Observations from Housing Scheme 2010: The Brochure and ACDL of the scheme were carefully scrutinized. It was found that CHB failed to mention the tentative date for handing over possession, a key concern for many potential homeowners.
- CHB’s Defense: CHB, in their response, stated that their brochure did not have any provision to mention completion dates. However, they did admit to certain schemes lacking tentative completion dates.
Levy of Penal Interest for Delayed Payments
- DG’s Observation: A major point of contention arose when CHB imposed an interest for a full month due to a delay of just one day in the payment of an instalment. This action was deemed as unfair and in violation of section 4(2)(a)(i) of the Act.
- CHB’s Response: CHB cited its regulations, which gave it the power to charge interest. However, the method they used for calculating this interest was under scrutiny.
Commission’s View and Decision
- Non-disclosure: The Commission aligned with the DG’s findings and stated that CHB’s non-disclosure of possession dates was indeed an abuse of its dominant position.
- Interest Levying: CHB’s action of charging a full month’s interest for a one-day delay was deemed as unfair and in contravention of the Act.
- Penalty Decisions: The Commission recognized that CHB had taken steps for improvement. They had begun indicating tentative completion dates post the implementation of RERA in 2016 and corrected their interest charging practices. As CHB had already initiated corrective measures, the Commission refrained from imposing any monetary penalties but ordered them to desist from such practices in the future.
Other issues:
What is the relevant market in the present case within the meaning of section 2(r) of the Act?
The determination of the relevant market forms a cornerstone for examining any allegations concerning dominance and its abuse under section 4 of the Act. The relevant market, as observed by the Commission, is comprised of two principal facets: the relevant product market and the relevant geographic market. The former focuses on the interchangeability and substitutability of products or services from the perspective of consumer choices, characteristics, prices, and their intended usage. In this case, residential properties, due to their unique nature and characteristics, are distinguished from other types of properties, like commercial and industrial. Specifically, the distinction between residential plots and residential flats has been underscored, emphasizing the difference in consumer choices, delivery mechanism, and overall functionality. On the geographical front, the unique position of Chandigarh as a centrally administered Union Territory sets it apart from its neighboring cities. The regulatory framework, urban planning, consumer preferences, and distinct competitive conditions make Chandigarh a standalone market, different from areas like Mohali and Panchkula, governed by their respective state administrations. The culmination of these observations led the Commission to delineate the relevant market as the one for the provision of services related to the development and sale of residential flats specifically within the Union Territory of Chandigarh. The consensus between different stakeholders, including the DG and the Informant, further solidifies this determination.
Whether CHB enjoys a position of dominance in the delineated relevant market?
To determine the dominance of CHB in the relevant market, the Commission relied on several facets outlined in section 19(4) of the Act. First, when examining CHB’s market share, the Commission found that primary entities like the Estate Office Chandigarh and Municipal Corporation Chandigarh were not its competitors in the residential unit development business. Second, Group Housing Building Societies in Chandigarh, which had historically constructed residential flats, ceased to be significant contributors after 2010, and thus, could not be considered as contemporaneous competitors of CHB. Third, it was found that private developers had no leeway to operate in Chandigarh UT, again eliminating them from the list of potential competitors. Another significant point that reinforces CHB’s dominance is the sheer consumer dependence on CHB for dwelling units in Chandigarh, evidenced by the large number of applications they receive for their housing schemes. Lastly, the statutory privileges CHB enjoys, by virtue of its establishment and governing Act, grants it exclusivity and comprehensive powers in the domain of housing in Chandigarh.
While CHB objected to the findings by pointing to the mere 25% population living in their flats and suggesting the presence of competitors like the Estate Office and private builders in neighboring cities, the Commission, echoing the Informant’s sentiments, favored the DG’s findings. It became evident that CHB’s ability to operate uninfluenced by market competition clearly points towards its dominant position in the provision of constructed residential flats within Chandigarh.
Conclusion In Ramesh Kumar vs. Chandigarh Housing Board, the Commission, after thorough analysis, found CHB in contravention of specific provisions of the Act. However, recognizing the Board’s subsequent corrective measures, it chose not to impose a monetary penalty. The Commission’s directive to CHB is a stern reminder for organizations to operate transparently and fairly, respecting consumers’ rights and the market’s integrity.
FULL TEXT OF THE ORDER OF COMPETITION COMMISSION OF INDIA
1. The present information has been filed by Mr. Ramesh Kumar (“Informant”) under section 19(1)(a) of the Competition Act, 2002 (“Act”) alleging contravention of the provisions of section 4 of the Act by Chandigarh Housing Board (“Opposite Party”/ “CHB”).
Facts, in brief as per information
2. CHB floated a Self-Financing Housing Scheme (“Scheme”) on 13.12.2010 offering 160 flats on free hold basis in Sector 51-A, Chandigarh. It has been stated that at the launch of that scheme, it was highly publicised that it would be completed within 18 months with the commencement date being 25.10.2011 e. the construction was scheduled to be completed by 25.04.2013. Further, a Press Note dated 25.10.2011, issued by the Chandigarh Administration stated that “it will take two years to complete the housing scheme including all other infrastructure development works”.
3. It has also been averred that the construction of flats in Sector 51-A, Chandigarh commenced in October, 2011, but the contractor failed to complete the construction within 18 months. CHB was required to initiate the process of allotment of flats after the completion of construction by the contractor. CHB issued an Acceptance-cum-Demand Letter (ACDL) on 25.04.2012, advising the schedule of payment of instalments, along with interest @12% p.a. The last instalment as per the schedule, was to be paid within 18 months of issuance of the ACDL, e., by 25.10.2013, corresponding to the date of completion of the scheme, along with all infrastructure development works.
4. Further, the Informant stated that he had participated in the said scheme and applied for allotment of a two bedroom flat vide application No. 3656 of 2010 and paid Rs. 5,00,000/-on 12.01.2011 for the same and had to make payment further in instalments, first to be paid on 25.05.2012, and thereafter in three instalments to be paid on 25.10.2012, 25.04.2013 and 25.10.2013 each being of Rs. 13,29,681/- (during the construction period).
5. The Informant has submitted that he had deposited an amount of over Rs. 38 lakhs till April, 2013, but could not pay the last instalment due on 25.10.2013 in time. However, there was also a corresponding delay in completion of construction for one year by CHB and that during October, 2014 while the construction was nearing completion, CHB decided to initiate the process of allotment and cancelled the registration of the Informant on 24.10.2014 after issuing a short notice on 17.10.2014 (owing to non-payment of last instalment due on 25.10.2013). The Informant submitted that his allotment was cancelled by CHB without considering his requests dated 23.10.2014 as well 25.10.2014 and that CHB held a draw of allotment on 28.10.2014 by excluding the Informant’s registration.
6. Owing to the cancellation of his registration, the Informant submitted an appeal on 03.11.2014, to the Chairman, CHB requesting condonation of delay in deposit of third instalment and revival of allotment of the flat and thereafter deposited the amount of last instalment on 18.11.2014. CHB intimated to the Informant on 27.01.2015, to deposit an additional amount of Rs.5,36,900/- towards interest, etc. The said amount was deposited by the Informant on 06.02.2015 and the revival order was issued by CHB on 22.04.2015.
7. The Informant further stated that CHB charged an interest at the rate of 30% p.a. from 25.10.2013 till 18.11.2014 (till the payment of last instalment) although there was concurrent delay on part of CHB in initiating the process of allotment and that CHB also charged renewal fees for revival of registration.
8. The Informant also averred that for a notional delay of one day in payment of instalment, CHB had charged interest @18% on Rs.13,29,681/- (commensurate to the period of entire month). As per the Informant his two instalments due on 24.10.2012 and 24.04.2013 were paid before the due dates e. on 22.10.2012 and 22.04.2013, respectively, however, they got credited in the account of the CHB on 25.10.2012 and 25.04.2013, for which also CHB charged an interest (commensurate to a month) for the delay of one day and that the Informant had to pay an amount of Rs.5,36,900/- towards interest and renewal charges on 06.02.2015. Thus, the Informant made a total payment of Rs.57,10,693/- to CHB.
9. Thereafter, vide its letter dated 28.08.2015, CHB issued offer of allotment of flat with request for submission of some documents. On 06.10.2015 CHB issued possession slip and handed over the physical possession of flat on 19.10.2015. The Informant was allotted a third floor 2-bedroom flat bearing No.72C.
10. The Informant averred that CHB even after levying renewal charges from the Informant, further delayed the process of allotment of flats for another 11 months (in addition to delay of one year in construction), whereas the entire amount of consideration of Rs.51 lakh stood paid by the Informant by 18.11.2014.
11. The Informant submitted that CHB, in its brochure issued for the Scheme, did not make any specific mention of date or time schedule for completion of construction or for handing over the possession of the flat. Further, even in ACDL dated 25.04.2012, there was no mention of any specific date for completion/handing over of the possession of the flat.
12. The Informant averred that as per the brochure of the Scheme, there were provisions for imposing penalty by way of heavy interest in case of delay in payment of instalments by the allottees wherein the allottee/applicant was liable to pay interest @18% p.a. for the first month, @21% p.a. for the second month and @24% p.a. for the third month. However, there was no provision to pay corresponding interest to allottees for delay on part of CHB in allotment of flats either in the brochure or in ACDL.
13. The Informant also alleged that CHB charged interest @12% p.a., even during the construction period e. during the period of payment of usual instalments. The instalment of Rs.13,29,681/- was inclusive of interest @12% p.a. which was unusually high.
14. The Informant alleged the following clauses in the brochure/scheme to be exploitative:
“CLAUSE XI SURRENDER/CANCELLATION
Xl (3) In case payment of registration money or the subsequent instalment are not made by the due date of the payment prescribed in the Acceptance-cum-Demand Letter, the applicant shall have to pay interest @ 18% per annum for the 1st month, @ 21% for the 2nd month and @ 24% p.a. for the 3rd month.
No extension will be allowed beyond three months and the registration shall be cancelled. However, the Chairman, CHB may allow an extension beyond three months, or revive registration, if the same has been cancelled, as the case may be, in case(s) of exceptional circumstances, on written request subject to the payment of interest @ 30% p.a. beyond the period of 3 months.
XI (4) If the registration and allotment is cancelled either on the applicant’s own request or for non-payment of registration money or any of the subsequent instalment with interest, if any, or due to any other reason, the amount deposited with the Board shall be refunded after forfeiting 10% of the initial deposit. However, where the surrender or cancellation is made after the expiry of 1,2 & 3 months from the due date, in addition, interest calculated @ 18%,21% and 24% p.a. respectively, shall be charged on the due amount remaining unpaid, from the due date till the date of surrender or cancellation. Where the surrender/cancellation is made after 3 months, interest @ 30% p.a. shall be charged further for the period beyond 3 months in addition to the forfeiture of 10% of the initial deposit.”
15. The Informant had filed an application dated 03.10.2019 with CHB under Right to Information Act, 2005, regarding the two years of delay in providing possession of flats to which the response dated 28.02.2020 of CHB was that “no time limit for handing over the possession of the flat was mentioned and the same was handed over to you after actual completion of the work and that the reason for delay in completion of work was scarcity of raw material for building, construction, finalization of tenders of various allied material etc. which were beyond the control of agency and CHB, hence the claim of interest on account of delay in completion of the project is not justified”. The Informant stated that CHB willfully did not mention the schedule of completion in its brochure to avoid any liability.
16. The Informant also enclosed copies of news articles which stated that CHB had raised interest charges running approximately to lakhs of rupees for a shortfall of amount ranging from Rs.1/- to Rs.880/- even in respect of its other projects also.
17. Thus, the Informant submitted that aforementioned clauses as stipulated under the housing scheme as offered by CHB were unfair, exploitative and in contravention of the provisions of section 4 of the Act.
18. The Informant sought interim relief in the form of direction of refund of the amount of Rs.5,36,900/- imposed upon the Informant by CHB towards interest and renewal of registration charges.
19. The Informant, inter alia, prayed for grant of following reliefs:
i. to direct CHB to pay an interest for the delay from October, 2013 when CHB was required to allot the flat till October, 2014 on the amount deposited by the Informant up to October, 2013, e., Rs.38,44,111/-,
ii. to direct CHB to pay an interest from November, 2014 till the date of possession e. for the amount deposited by the Informant with CHB i.e., Rs.51,73,111/- (deposited till 18.11.2014) and Rs.57,10,693/- (deposited till 06.02.2015),
iii. any other relief which the Commission may deem fit and appropriate.
Prima-facie consideration of the Commission
20. The Commission vide its order dated 13.01.2022, directed the Director General to cause an investigation into the matter under section 26(1) of the Act for violation of the provisions of section 4 of the Act. The Commission, in the said order, noted that CHB is involved in an economic activity and thus it is an enterprise within the meaning of the Act. The Commission further observed that CHB seemed to be dominant in the market for the provision of services for development and sale of residential flats in the Union Territory of Chandigarh. The Commission, prima facie, found following conduct of CHB as abusive and violative of the Act:
a) Non-disclosure of date of possession by CHB: The Commission noted that CHB had stipulated a time-line for payment of amount of flat. However, no timeline was specified by CHB for delivery of possession to the allottees. CHB appeared to have relieved itself by not making time as an essence for fulfilling its obligation towards the allottee by not disclosing the date of the handing over of possession to the allottee.
b) Levy of interest for delay of one day in credit of required instalment: The Commission observed that the two instalments by the Informant got credited in the account of CHB one day after the due date for which CHB charged interest for the whole month.
21. On the issue of charging interest by the CHB @ 12% towards instalment amount, the Commission did not find the conduct abusive in terms of section 4 of the Act stating that consumer has a choice between payment of entire amount in one go or to choose payment based on instalments. In case the consumer choses the latter option, he/she has to pay interest on periodically reducing balance amount. Further, on the issue of imposition of penal interest in the event of delayed payment of instalments @18% p.a. for the first month, @21 % p.a. for second month, @24% p.a. for the third month and @30% p.a. beyond three month, the Commission observed that stipulation of penal interest may not be a competition concern as it is levied to secure an obligation and prevent any payment default.
22. Vide order dated 18.01.2022, the Commission, while stating that no case was made out for grant of interim relief in light of the dictum laid down in the judgment of the Hon’ble Supreme Court in Competition Commission of India vs Steel Authority of India Limited (2010) 10 SCC 744, rejected application of the Informant seeking interim relief under section 33 of the Act.
Findings of investigation
23. Pursuant to the aforesaid directions of the Commission, the DG conducted an investigation into the matter and submitted its Investigation Report on 29.09.2022. A brief of the findings of investigation by the DG is as under:
a. Relevant market: Relevant market has been delineated by the DG as the ‘market for the provision of services for development and sale of residential flats in the Union Territory of Chandigarh’.
b. Dominant position of CHB: Upon consideration of the strength of CHB based on the analysis of various factors under section 19 (4) of the Act such as market share, dependence of consumers and regulatory provisions etc., the DG concluded that CHB, is in a position to operate independently of the competitive forces prevailing in the relevant market, thus, is a dominant entity in the market for the provision of services for development and sale of residential flats in the Union Territory of Chandigarh.
c. Abuse of dominant position by CHB: The investigation brought out that CHB has imposed the following unfair conditions on its allottees of residential flats of Housing Scheme 2010, which have been found to be falling foul of provisions of section 4 of the Act:
i. Non-disclosure of date of possession by CHB: The investigation revealed that CHB did not link the payment schedule with the progress of work, in any of its documents Brochure and ACDL in order to relieve itself of any financial liability of paying any compensation to the allottee on account of any delay in handing over the possession. Thus, the DG found that the conduct of CHB in failing to mention the timeline for the completion of project in its brochure or ACDL in its Housing Scheme pertaining to Sector 51 A, Chandigarh was unfair and in contravention of section 4(2)(a)(i) of the Act i.e. abuse by way of imposing unfair/discriminatory condition in purchase or sale of services.
ii. Levy of interest for delay of one day in credit of required instalment: The DG drew reasoning on the lines of doctrine of special responsibility of a dominant player and opined that the conduct of CHB, which is a dominant entity in the relevant market, in levying penal interest for full month on account of delay of one day is more capable of distorting the market or leading to adverse impact vis-à-vis the same conduct being adopted by a small player. The investigation found that the practice of the CHB of levying penal interest for the full month on account of delay of payment by one day to be abusive and unfair and in contravention of the provisions of section 4(2)(a)(i) of the Act.
iii. As mitigating factors, the DG has mentioned that CHB has registered all its projects (after 2016) with Real Estate Regulatory Authority (RERA), Chandigarh and ever since CHB has started indicating tentative dates of completion of its flats under construction in all the Schemes. Further, CHB also mentions about compensation to the allottee in case of delay in handing over of flat beyond the stipulated period. The DG has also mentioned that the policy of CHB of charging full months’ interest on account of a few days delay has been revoked and CHB is presently computing interest on actual delay period.
Consideration of Investigation Report by the Commission
24. Having considered the Investigation Report in its meeting held on 11.10.2022, the Commission directed to forward an electronic copy of Investigation Report to the parties, for filing their respective objections/ suggestions thereto, if any, latest by 15.11.2022 and exchange their objections and suggestions with each other. CHB was also directed to file copies of its respective financial statements/balance sheets/profit and loss accounts and/or Income and Expenditure Accounts, as the case may be, duly certified by a Chartered Accountant, for the last three financial years i.e. 2019-20, 2020-21, and 2021-22 latest by 15.11.2022. The Informant and CHB, were granted liberty to file rejoinder to each other’s objections/suggestions, if any, latest by 29.11.2022 and provide a copy in advance to each other. The Commission further decided to hear the parties on the Investigation Report on 07.12.2022 through video conferencing. Accordingly, CHB filed its objections/suggestions to the Investigation Report, along with a copy of its financials vide application dated 18.11.2022 and the Informant filed its objections/suggestions on 21.11.2022. The Informant and CHB filed their respective rejoinders on 02.12.2022 and 06.12.2022.
25. On 14.06.2023, the Commission decided to hear the parties on the Investigation Report on 12.07.2023.
26. On 12.07.2023, the parties appeared before the Commission through Video Conferencing and concluded their arguments. During the hearing, the Commission noted that Informant had filed an additional submission through an email on 11.07.2023 in the matter which was not shared with CHB. On being directed by the Commission, the Informant undertook to share the copy of the said submission with CHB. CHB was granted liberty to respond to the submission filed by the Informant on 11.07.2023 within five days of the receipt of the said submission. The Commission also decided to pass an appropriate order in due course.
27. A summary of objections and rejoinder filed by CHB is as under:
a. It is incorrect to state that CHB is the dominant/single agency which has allotted residential flats in Chandigarh to general public (not falling under any specific category or class of persons like being part of cooperative Society or people being part of rehabilitation schemes). Other options viz. Estate Office, Chandigarh Administration, Municipal Corporation, Chandigarh, other Cooperative Housing Building Societies are also available with the consumers. CHB has further submitted that it is not in dominant position as only 25% of people in Chandigarh are living in CHB flats. Remaining 75% of population in Chandigarh is living in flats/houses provided by other Government departments/private builders.
b. All the allotments are being made by CHB under the Chandigarh Housing Board (Allotment, Management and Sale of Tenements) Regulations, 1979.
c. Now, CHB is computing interest for the actual delay period and accordingly the provisions have been made in the software.
d. Since the implementation of RERA in Chandigarh, CHB has not launched any scheme without getting it registered under RERA. At present, best possible efforts are being made to complete the construction and hand over possession of the flats to the applicants at the earliest. Some instances of delay may be for the reasons which were beyond the control of CHB. In recent past, CHB has taken many initiatives to bring more fairness and transparency in its working and that many of the processes have been simplified.
e. CHB has submitted that it is providing housing to people with fair terms and conditions. The interest/penalty charged from allottees is as per terms and conditions mentioned in the brochure to make the allottees aware in order to avoid delay in making payments. It has been stated that 99.9% of allottees of any scheme generally make payments on time and were not charged any interest/penalty on delay in payment, remaining 0.1% allottees who did not make payment on time were charged interest/penalty as per terms and conditions of the Scheme already known to allottees. Further, it has stated that from time to time many amendments were made in terms and conditions of the schemes, i.e. charging interest day wise instead of month wise.
f. CHB has stated that it has filed an appeal before National Consumer Disputes Redressal Commission, New Delhi against the order dated 20.09.2022 passed by the SCDRC, as the SCDRC has not taken view of the submission made by CHB.
28. A summary of suggestions/objections, rejoinder and subsequent submissions filed by the Informant is as under:
a. The Informant has agreed with the findings of DG on the dominance of CHB and abuse of dominant position by CHB, resulting in contravention of provisions of section 4(2)(a)(i) of the Act.
b. The Informant has also averred that the Hon’ble Supreme Court of India has held such nature of contractual terms amount to unfair trade practice and has relied upon the case of Ireo Grace Realtech Pvt. Ltd. vs Abhishek Khanna and Others (2021) 3 SCC 241 to state that the ratio of that case is applicable in the instant case as facts are similar to the contractual terms adopted by CHB. As per brochure issued by CHB, there is provision of payment of heavy interest by the applicant in case of delay in payment of the instalment. It provides that applicant shall be liable to pay interest @ 18% for delay first month, @ 21% for second month, 24% for the third month and 30% for the period beyond 3 months. However, there was no provision to pay interest for delay on part of CHB in allotment of flats. The Informant has submitted that CHB even did not specify the date of completion/allotment/delivery of flats in the brochure issued for the scheme.
c. On the consideration of mitigating factors as stated by the DG in its Investigation Report, the Informant has stated that there are no mitigating aspects as for decades, CHB had been practicing unfair and abusive terms and conditions. The Informant has stated that as for consideration of mitigating factors, past conduct of CHB is of utmost significance. The Informant has stated that thousands of allottees might have suffered at the hands of CHB for it being a mighty organization.
d. The Informant has also stated that he had filed a complaint before SCDRC, Chandigarh seeking compensation by way of interest on the total amount of Rs.51,73,793/-, for the delay period e. from October, 2013 till the date of handing over the possession of his flat. In relation to the said complaint, SCDRC, vide order dated 20.09.2022 directed CHB to pay interest and compensation for delayed delivery of possession. The Informant has further disclosed that order dated 20.09.2022 passed by the SCDRC has not been implemented by CHB as yet and CHB has filed an appeal before the Hon’ble National Consumer Dispute Redressal Commission.
e. As regards the mitigating factors as brought out by CHB, the Informant has stated that CHB has now started calculating interest on actual day basis, the Informant has stated that it is only specific to the order passed by SCDRC in the year 2018. The Informant has stated that it took four years for CHB to refund interest to the Informant. The act of charging interest for delay of one day and that too notional is unfair.
Analysis and Findings of the Commission
29. The Commission has examined the material available on record, including the information filed by the Informant, Investigation Report of the DG, objections/suggestions, rejoinders and other submissions filed by the parties and oral submissions made by their respective counsel on 12.07.2023.
30. The Commission notes that allegations in the matter pertain to abuse of dominant position by CHB under section 4 of the Act wherein as per the Informant, CHB has abused its dominant position by imposing one sided clauses on the allottees in relation to its Self-Financing Housing Scheme dated 13.12.2010.
31. The Commission notes that following issues arise for determination in the present case:
Issue 1: What is the relevant market in the present case within the meaning of section 2(r) of the Act?
Issue 2: Whether CHB is a dominant enterprise in the relevant market within the meaning of section 4 of the Act?
Issue 3: Whether CHB has abused its dominant position in contravention of the provisions of section 4 of the Act in the relevant market?
Issue 1: What is the relevant market in the present case within the meaning of section 2(r) of the Act?
32. The Commission notes that for examining allegations under section 4 of the Act, delineation of the relevant market is sine qua non to ascertain dominance in the relevant market and alleged abuse of dominance in the delineated relevant market.
33. The Commission notes that relevant market is comprised of relevant product market and/or relevant geographic market. The relevant product market as defined under section 2 (t) of the Act means “a market comprising of all those products or services which are regarded as interchangeable or substitutable by the consumer, by reason of characteristics of the products or services, their prices and intended use.” The relevant geographic market, on the other hand, defines the contours with regard to the geography within which the conditions of competition for supply of goods or provision of services are distinctly homogenous and can be distinguished from the conditions prevailing in the neighbouring areas.
34. The Commission notes that while delineating the relevant product market, the DG, upon consideration of the parameters of section 19(7), observed that due to their physical characteristics, intended use, consumer preference and prices, residential properties are not substitutable or interchangeable with any other type of properties such as commercial, institutional and industrial. The DG also considered the substitutability of residential plots with residential flats and observed that a plot of land is simply an earmarked piece of land and may be surrounded by boundaries. A residential plot is sold by the developer/builder as a bare piece of land without any construction on it and it is up to the consumer to make a choice on the internal lay-out plan and specifications of the residential unit that he desires to build on that bare piece of land. Flats are situated in a multi-story apartment and there may be several flats on one floor of a multi-story building. In case of flats, the developers deliver a readily built unit to the consumer as per the agreed internal lay out plan and specification of a unit for which the developer not only takes the prior approval of the authorities but also enters into an agreement with the consumer to deliver the flat as per agreed internal lay out plan and specifications. Accordingly, the DG delineated the relevant product market in the present case as ‘market for the provision of services for development and sale of residential flats’.
35. With respect to delineation of relevant geographic market in the present case the DG considered various factors such as regulatory barriers, consumer preferences as well as presence of a separate master plan in the UT of Chandigarh. As per the DG, the rules and regulations applicable in Chandigarh are not enforceable in other parts of the country. Chandigarh is a centrally administered area whereas adjacent cities such as Panchkula and Mohali and are managed by respective State Governments. Further, a consumer who intends to purchase a flat in Chandigarh may not opt to purchase in any other nearby cities. The DG, has stated that Chandigarh is a well-planned city, has a separate master plan, comparatively low FAR, comparatively lower permissible height and restrictions on vertical development, which makes it distinguishable from other cities. Accordingly, the DG concluded that the condition of competition for supply of flats in Chandigarh UT are substantially distinguishable from other neighborhood States. Accordingly, the DG delineated the relevant market ‘market for the provision of services for development and sale of residential flats in the Union Territory of Chandigarh’.
36. CHB, in their objections/suggestions to the Investigation Report has not specifically commented on the relevant market. Informant, in its suggestions to the Investigation Report has agreed with the delineation of relevant market by the DG.
37. The Commission is in agreement with the definition of the relevant product market as delineated by the DG as the ‘market for the provision of services for development and sale of residential flats’.
38. With respect to the relevant geographic market as the ‘Union Territory of Chandigarh’, delineated by the DG, the Commission concurs with the same mainly noting that the growth, potential and other parameters for the Union Territory of Chandigarh are not comparable to any other State or Union Territory. Chandigarh UT is a centrally administered area whereas the adjacent cities are controlled and managed by the respective State governments. With different local laws, different structure of rules, regulations and local taxes are followed in these states/UT which makes it distinct from the adjacent areas like Mohali and Panchkula.
39. Accordingly, the Commission delineates the relevant market as ‘market for the provision of services for development and sale of residential flats in the Union Territory of Chandigarh’.
Issue 2: Whether CHB enjoys a position of dominance in the delineated relevant market?
40. The next issue for determination by the Commission is whether CHB is in a dominant position in the delineated relevant market. The DG evaluated the dominance of CHB in the relevant market on the basis of factors enumerated under section 19(4) of the Act, which are discussed as under:
i) Market share of the enterprise: The DG assessed the market share of CHB by understanding its comparative standing amongst its probable competitors during the relevant time period from 2010-11 to 2021-22 to examine its dominance in the relevant market. The DG observed that both Estate Office Chandigarh and Municipal Corporation Chandigarh are not involved in the business of development and sale of residential units in Chandigarh and hence cannot be considered as competitors of CHB.
ii) Role of Group Housing Building Societies: During investigation, the DG gathered that in Chandigarh UT, there were many Group Housing Building Societies to whom land has been allotted by Estate Office from time to time for construction of residential flats. The Office of Additional Registrar, Cooperative Societies, Chandigarh vide its submission dated 22.09.2022 submitted details of 112 Cooperative Housing Building Societies registered with them. The DG assessed the role of Group Housing Building Societies and noted that a total of 6780 flats were constructed by 12 Cooperative Housing Building societies up till 2008 (except two Societies namely Roadways Directorate PB employees CHS and the Pink Rose Cooperative Housing Building Society which were allotted land in the year 2002 and a total of 192 flats were constructed for its members in 2010 and 2011). It was found that new registration of Cooperative Housing Building Societies in Chandigarh (UT) was banned by the Finance Secretary, Chandigarh vide letter No. 5705-FIV (12)-91/4528 dated 13.05.1991. The DG concluded that all the Societies were found to have completed construction and allotment of flats prior to 2010 and further noted that in the relevant period no significant construction was carried out by these Cooperative Housing Building Societies as far as development and sale of residential flats in Chandigarh UT was concerned. Therefore, these Cooperative Housing Building Societies could not be considered as competitors of CHB in the relevant market.
iii) Presence of private developers in the UT of Chandigarh: During investigation specific queries were raised to CHB and other Government Authorities such as Estate office regarding granting of permission to private builders for developing and selling residential flats in Chandigarh UT. In response, the Estate Office vide reply dated 04.04.2022 submitted that it does not give any permission to private builders to build and sell residential flats/units in UT of Chandigarh. Further, vide reply dated 07.07.2022, the Estate Office submitted that there was no provision/rule which allowed Estate Office to allot land to private builders. CHB vide its submission dated 07.03.2022 to the DG stated that there was no policy framed for private builders to construct flats in Chandigarh. The DG noted that, as private builders do not operate in the geographical area of Chandigarh UT, they are not considered as competitors of CHB in the relevant market.
iv) Dependence of Consumers on the Enterprise: The investigation revealed that the schemes launched by CHB are much awaited by consumers. This aspect is also clear from the fact that for 160 Two Bedroom Housing Scheme in Sector 51 A launched in 2010, CHB received 5390 applications from the consumers. The DG observed that CHB being the only entity mandated to develop and sell houses in the UT of Chandigarh, the consumers are totally dependent upon CHB for purchasing dwelling units/flats in Chandigarh UT.
v) Dominance whether acquired as result of any statute or virtue of being Government Undertaking: CHB was constituted in the year 1976 by extending the Haryana Housing Board Act 1971 to the Union Territory of Chandigarh. Section 3(2) of this Act empowers CHB to acquire, hold, administer and transfer property, both movable and immovable. Further, section 20 of the said Act empowers CHB to incur expenditure and to undertake works in any area for the framing and execution of such housing schemes as may be considered necessary from time to time. CHB has also been vested with wide powers of acquisition, development and disposal of the land and framing housing schemes under Haryana Housing Board Act, 1971. CHB enjoys exclusive powers relating to development and sale of dwelling units in Chandigarh.
41. Based on above mentioned factors, the DG concluded that CHB is in a position to operate independently of the competitive forces prevailing in the relevant market and thus, is dominant in the relevant market.
42. CHB, in its objections/suggestions to the Investigation Report submitted that it is not the only player in the relevant market and refuted that it was a dominant entity in the Chandigarh UT as only 25% of people in Chandigarh are living in CHB flats while the remaining 75% of population in Chandigarh is living in flats/houses provided by other Government Department/private builders. CHB, in its objections to the Investigation Report as well as during the course of hearing submitted that Estate Office and Municipal Corporation, Chandigarh are its competitors as government bodies since they have allotted residential plots/land to societies and general public in some areas of Chandigarh. Further, CHB also submitted that there are private builders developing and selling flats in Mohali and Panchkula and people have number of options to purchase flats. Accordingly, as per CHB, it does not enjoy dominant position.
43. The Informant, on the other hand, has agreed with the findings of DG on the dominance of CHB. Informant submitted that CHB enjoys absolute monopoly as there is no other authority/real estate players in the business of construction of dwelling units.
44. In this regard, the Commission holds a view congruent with the DG’s finding that CHB is in a position to operate independently of the competitive forces prevailing in the relevant market and accordingly enjoys dominant position in the delineated relevant market as no other entities were offering constructed residential flats in Chandigarh.
Issue 3: Whether the CHB has abused its dominant position in contravention of the provisions of section 4 of the Act in the relevant market?
45. The next issue for determination is whether the conduct of CHB is in abuse of dominant position under section 4 of the Act. The Commission, now proceeds to deal with each of the conduct in subsequent paragraphs.
Failure to disclose the possession date by CHB in its brochure and/or ACDL in Housing Scheme 2010
46. The Commission notes that DG after examining the Brochure and ACDL of the Housing Scheme, observed that CHB, in its Brochure only mentioned of the date of draw e. within six months from the date of closing of the Scheme. In respect of handing over the possession, the Brochure stated that the delivery would be handed over to the allottee only after receiving full payment and completion of all the formalities. Further, even ACDL mentioned about charging of interest at a certain rate in case of default in payment or delay in payment of the instalment in due time. Thus, even ACDL did not mention tentative dates of completion of construction and/or handing over the possession of flats to the allottee. Further, the DG during the course of investigation, inquired with CHB for not mentioning the tentative date of handing over the possession to which, CHB vide its letter dated 15.06.2022, stated that there is no provision of mentioning date of completion in the Brochure, and provided no reason for omission of date of handling over possession in the Brochure. CHB in the subsequent submission dated 13.07.2022 before the DG admitted that there were certain schemes where the tentative completion dates were not mentioned. The DG observed that in similar projects, payment plan is linked with the stage-wise completion of the floors of the project. In the instant case, the DG observed that CHB did not link the payment schedule with the progress of work, in any of its documents viz. Brochure and ACDL in order to relieve itself of any financial liability of paying any compensation to the allottee on account of any delay in handing over the possession. Thus, the DG concluded that the conduct of CHB in failing to mention the timeline for the completion of project in its brochure or ACDL in its Housing Scheme pertaining to Sector 51 A, Chandigarh is unfair and violative of section 4(2)(a)(i) of the Act.
47. In this regard, the Informant has agreed with the finding of the DG that CHB has abused its dominant position and its conduct of failure to disclose the possession date in the brochure and manner of charging interest is unfair, arbitrary and unreasonable, resulting in contravention of provision of section 4(2)(a)(i) of the Act.
48. CHB, in its objections to the Investigation Report, has submitted that since the implementation of RERA in Chandigarh, CHB has not launched any scheme without getting it registered under RERA and at present best possible efforts are being made to complete the construction and hand-over possession of the flats to the applicants at the earliest. It has also been stated that there could be some instances of delay for reasons which were beyond the control of CHB.
49. In view of the foregoing, the Commission is in agreement with the findings of the investigation that non- disclosure of date of delivery of possession to consumers is an abuse of dominant position under section 4(2)(a)(i) of the Act.
Levy of penal interest for full month on account of delay of one day in credit of instalment
50. On this issue, the DG has observed that as per the payment schedule mentioned in ACDL issued by CHB, two instalments of Rs. 13,29,681 each were due on 24.10.2012 and 24.04.2013 respectively. The same were paid by the Informant before the due date (on 22.10.2012 and 22.04.2013 respectively) by depositing a Pay-in slip viz. Banker’s cheque in their account with Axis Bank. However, CHB during the course of investigation stated that the said amount of the instalments was actually credited & realised in their account on 25.10.2012 and 25.04.2013 respectively and therefore, there was a delay of one day in payment of instalments. CHB charged interest @18% p.a. from the Informant on the whole amount of instalment for full month for such notional delay of one day. In response to the query raised by the DG with respect to the imposition of interest on delayed payment by CHB, CHB vide its reply dated 07.03.2022 submitted, during the course of investigation, that as per clause 7(4) of the Chandigarh Housing Board (Allotment, Management & Sale of Tenements Regulations, 1979) CHB is empowered to charge interest. The same is provided as under:
“7(4) In case any instalment is not paid by the allottee by the due date, a notice shall be served on him calling upon him to pay the instalment within a month together with penalty which may extend up to 1[25] percent of the amount due. If the payment is not made within the said period or such extended period as may be allowed by the Board but not exceeding three months in all, from the date on which the instalment was originally due, the Board may cancel the allotment and forfeit the whole or part of the consideration money and ground rent already paid in respect of the property and thenceforth the property shall vest in the Board.”
51. CHB submitted that as per above clause, CHB could charge up to 25% penalty on delay in payment of instalment not exceeding three months. Further, CHB could cancel the allotment and forfeit the consideration money and ground rent already paid in respect of the property. Upon perusal of the above clause of Regulation 7(4) of Chandigarh Housing Board (Allotment, Management & Sale of Tenements Regulations, 1979), the DG found that the said clause provides that in case any instalment is not paid by the allottee by the due date, CHB shall ask the allottee to pay the instalment within a month along with penalty which may extend up to 25% of the amount due. In case the payment is not made within the time allowed by CHB, it can cancel the allotment and forfeit the whole or part of the consideration money. Thus, the said regulation discusses imposition of penalty up to 25% of the amount due in case of delayed payment but without any stipulation for charging interest. According to the DG, the power to levy interest on delayed payment by CHB is derived from Regulation 7 of Chandigarh Housing Board (Allotment, Management & Sale of Tenements Regulations, 1979). In this regard, the DG observed that although there is a provision for levying penalty/interest in case of delay in making payments, yet charging penal interest for the full month on account of notional delay of 1 day seemed patently unfair. As per the DG, the interest is required to be charged only for the actual delay period and not for the full month as the dominant entity has a special responsibility under the provisions of section 4 of the Act. Further, the DG observed that the conduct of CHB, which is a dominant entity in the relevant market, in levying penal interest for full month on account of delay of one day is more capable of distorting the market or leading to adverse impact vis-à-vis the same conduct being adopted by a small player and accordingly is in contravention of provisions of section 4(2)(a)(i) of the Act.
52. The Commission is of the view that the conduct of CHB in levying penal interest for full month on account of delay of one day in credit of instalment is unfair and abusive in terms of section 4(2)(a)(i) of the Act, in light of the fact that no express provision stipulating charging of interest (commensurate with one month for delay of one day) seems to be incorporated in the pertinent Brochure/ACDL/Regulations by CHB for its prospective consumers, to be sufficiently aware of the same beforehand. Though the brochure has a clause stating that in case the registration money or the subsequent instalments are not paid by the due date of the payment prescribed in the ACDL, the applicant shall have to pay interest @18% p.a. for the 1st month, @ 21% for the @2nd month and @24% p.a. for the 3rd month, the Commission is of the view that bare interpretation of the clause makes it unlikely that an applicant would fathom levying of interest commensurate with one month for one day delay (unless explicitly indicated). Moreover, the Commission also notes that during the course of investigation, CHB was asked to explain the reason for levying interest for the full month in case of default of one day by the Informant for which it did not provide any satisfactory justification/explanation. CHB vide replies dated 07.03.2022 and 13.07.2022 submitted before the DG, admitted that previously, the penal interest was being charged for the whole of the month in case of delay of a few days. Presently, CHB is computing the interest for the actual delay period. As per the submissions of CHB, the Commission notes that CHB was to refund Informant an amount of Rs. 43, 133/- on account of calculation made day wise instead of month wise pursuant to the order of the Hon’ble SCDRC dated 23.04.2018. The said amount was refunded to the Informant only in the month of February, 2022 pursuant to passing of order dated 13.01.2022 under section 26(1) of the Act by the Commission. Therefore, the Commission considering the facts and circumstances of the case is of the view that the conduct of CHB in levying penal interest for full month on account of delay of one day in credit of instalment is in contravention of provisions of section 4(2)(a)(i) of the Act.
53. Once contravention of the provisions of the Act has been established, the Commission now proceeds to assess the penalty to be imposed under the provisions of section 27(b) of the Act, upon CHB. CHB has argued a host of mitigating factors before the Commission. On the other hand, the Informant in its suggestions/objections to the Investigation Report largely agrees with the findings of the DG and has pleaded for imposition of maximum penalty.
54. The Commission notes that CHB has taken certain steps, such as, not launching any scheme without getting it registered under RERA and at present, best possible efforts are being made to complete the construction and hand-over possession of the flats to the applicants at the earliest. Further, CHB has also submitted that policy of charging full months’ interest on account of a few days delay has been revoked and presently CHB is computing interest on actual delay period and necessary changes in the accounting software has been made by CHB.
55. The ultimate object of the Act is to correct market distortions and discipline the behavior of the market participants. The Commission is of the considered opinion that the objectives of the Act have already been met as CHB after implementation of RERA in 2016 has started indicating tentative dates of completion of its flats under construction in all the Schemes, and discontinued charging interest on monthly basis and are charging on actual delay period. In view of the fact that corrective measures have already been taken by CHB, the Commission refrains from imposing monetary penalty upon CHB.
56. Now, that CHB has ceased from such actions, the Commission deems it fit to order CHB to desist in future from indulging in practices which have been found in the present order to be in contravention of the provisions of section 4 of the Act.
ORDER
57. In view of the above, the Commission holds CHB in contravention of the provisions of section 4(2)(a)(i) of the Act read with section 4(1) of the Act, without imposing any monetary penalty.
58. The Commission, in terms of section 27(a) of the Act, directs CHB to desist in the future from indulging in practices which have been found in the present order to be in contravention of the provisions of section 4 of the Act.
59. The Secretary is directed to forward certified copy of the order to the parties, accordingly.
