CCI finds that Chandigarh Housing Board abused its dominant position

According to CCI, non-disclosure of the date of delivery of possession to consumers is an abuse of dominant position.

On August 22, the Competition Commission of India (CCI) held that Chandigarh Housing Board (CHB) had abused its dominant position by imposing unfair conditions on the allottees of residential flats under Housing Scheme 2010.

The CCI directed CHB to cease and desist from its abusive behaviour. However, the competition watchdog did not impose any monetary penalty on the government housing board. This is the first anti-trust order by CCI in 2023 directing a company to cease and desist from its behaviour.

Background of the case

In 2021, a home buyer, Ramesh Kumar, moved the commission, stating that he had booked a flat in the housing board's Self-Financing Housing Scheme 2010. The scheme offered 160 flats on a freehold basis in Sector 51-A, Chandigarh. According to the complainant, the scheme was highly publicised, and construction was to be completed within 18 months in 2013. He alleged that the CHB imposed a full month's penalty on him for a delay of one day in paying an instalment. It even went to the extent of keeping him away from the draw of lots. Ultimately, he paid a penalty to become eligible to take part in the allotment process. However, even amidst such strict norms, the flats were allotted belatedly in October 2015.

According to Kumar, allottees were liable to pay interest at 18 percent for the first month of default, 21 percent for the second month of default, and 24 percent for the third month of default. However, the brochure did not mention any provision to pay corresponding interest to allottees for delay on the part of CHB in the allotment of flats.

Kumar cited that CHB had mopped up lakhs of rupees by way of shortfalls ranging from Re 1 to Rs 880 even in its other projects.
In January 2022, the CCI ordered the Director General (DG) of the commission to investigate the allegations after rendering an initial finding of the possibility of abuse of dominance.

Director General's report

Upon investigation, the DG found that CHB was in violation of the Competition Act for the following reasons:

1. In failing to mention the timeline for the completion of the project in its brochure, CHB was unfair and in contravention of the law.
2. CHB did not link the payment schedule with the progress of work in any of its documents.
3. CHB, a dominant player in the development and sale of residential flats in the Union Territory of Chandigarh, levying penal interest equal to a full month on account of a delay of one day is more capable of distorting the market in relation to smaller players.

CCI noted that since private builders do not operate in the geographical area of Chandigarh, they cannot be considered competitors of CHB, and hence it does indeed hold a dominant position.

According to CCI, non-disclosure of the date of delivery of possession to consumers is an abuse of dominant position, and it concluded that levying a month's interest as a penalty for a day's delay in paying an instalment was indeed abusive.
The CCI, however, did not levy any monetary penalty on CHB after noting that CHB has taken certain steps, such as not launching any scheme without getting it registered under the Real Estate Regulatory Authority (RERA), to complete the construction and hand over possession of the flats to the allottees at the earliest. Further, it noted that CHB has submitted that the policy of charging one month's interest for a few days’ delay in paying an instalment has been revoked. Currently, CHB is computing interest based on the actual period of delay.