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Too early to tell if CCI changes in DLF buyer-builder pact will become model

Source : BUSINESS_STANDARD
Last Updated: Sun, Jan 06, 2013 20:12 hrs

Modifying the buyer-builder agreement of DLF-Belaire last week, the Competition Commission of India (CCI) said it could become a model pact for the industry, since DLF is the market leader. However, according to experts, the competition watchdog might be too ambitious here, as the dominance of DLF is yet to be proved at the Competition Appellate Tribunal (Compat). Incidentally, some real estate associations are already in discussion with CCI over a model agreement for the industry.

According to CCI Chairman Ashok Chawla, the modified agreement in the DLF case could work as a model framework for commercial agreements between real estate developers and property buyers, and could serve as a benchmark for the sector.

“It is a very large wish of CCI. Whether DLF was dominant or not is yet to be decided,” said M M Sharma, partner, competition practice, Vyas Associates. The moot point, according to Sharma, a competition lawyer, is whether DLF is dominant in the “relevant market”.

Compat’s next hearing of the DLF case is slated for Wednesday.

“Whether a real estate company is dominant or not — DLF was found to be dominant because it was big — most of them follow the same format pattern that flows from big players in the market,” Chawla had told media last week.

According to Vinod Dhall, former CCI chairman, the CCI’s modification in the buyer-builder agreement is part of the appeal process to Compat for a particular case. “It is a case of abuse of dominance, and a part of it is the one-sided clauses. However, it will be hard to understand who started these one-sided clauses.” However, based on the outcome of the case, if DLF makes these changes in its agreement, many developers may feel compelled to fall in line, said Dhall.

The former CCI chairman added that although it was more of a consumer matter, CCI looked into one-sided agreements due to a regulatory vacuum and consumer courts being unable to have made an impact.

On the other hand, the Confederation of Real Estate Developers of India (Credai) told Business Standard that it had a meeting with CCI recently to discuss standard clauses for the sector. “We have asked CCI to give us standard clauses, a list of do’s and don’ts for the entire industry,” said Lalit Kumar Jain, chairman, Credai. “We will welcome a well-dialogued document, a result of detailed discussions on what’s right and judicious,” he added.

Jain said Credai will study the modified clauses by the CCI in DLF’s case and come out with its own clauses, discuss with the CCI and circulate it among builders. In case of delay in delivery, the CCI said DLF should pay an amount to its buyers as penalty, similar to the penalty the builder charges from buyers for delayed payments, the CCI said. To this, Jain said that penalty is a “hugely disputable clause”.

According to R R Singh, director-general of the National Real Estate Development Council (Naredco), the draft submitted by CCI is for a particular case and is up to the Compat to accept or reject it. However, he added that after some modifications and corrections, the draft could become a model agreement. “Whoever makes the model agreement for the industry, be it the regulatory authority or the state government, the draft will work as a base for model agreement,” he said.

In March 2012, Compat had asked the CCI to pass an order specifying the extent and manner in which terms and conditions of the apartment buyers’ agreement need to be modified.



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