No Sufficient Evidence To Establish Dominance In Loan Against Property Market, CCI Dismisses Complaint Against Indiabulls Housing Finance Limited
The Competition Commission of India (Commission) bench, comprising Ms. Ravneet Kaur (Chairperson), Ms. Sweta Kakkad (Member), Anil Agrawal (Member) and Mr. Deepak Anurag (Member), has dismissed the complaint against Indiabulls Housing Finance Limited (IHFL) and its Former Chairman, Chairman, Vice Chairman, Managing Director, Executive Director, and Financial Officer. The Commission found that although IHFL is the third-largest non-bank mortgage lender in India, the sector is highly competitive due to the presence of various other players, therefore, it cannot be said to have a dominant position.
Background Facts
The Informant mentioned that the Opposing Parties (OPs) used misleading advertisements to create the impression that they were reputable lenders offering loans against property at favourable interest rates.
Based on these representations, the Informant entered into an agreement with OP-1 to obtain a Loan against Property (LAP) at a floating interest rate. The Informant secured two LAP facilities, the first loan, sanctioned on March 1, 2013, at an interest rate of 13.25% per annum, had an EMI of ₹3,21,180 for a repayment period of 120 months. The second loan, sanctioned on June 1, 2013, also at 13.25% per annum, had an EMI of ₹60,316 for 121 months.
Throughout 2013 to 2023, the Informant received emails from OP-1 indicating an increase in their Floating Reference Rate (LFRR). During this period, the Informant repeatedly requested OP-1 to provide loan statements to settle accounts. However, despite these requests, OP-1 failed to provide the loan statements or the outstanding loan amount.
The Informant further mentioned that despite paying the last installment on March 3, 2023, OP-1 did not issue a no-dues certificate or acknowledgment. On March 25, 2023, the Informant sent an email concerning this issue. OP-1, without justification, demanded additional EMIs for further months and threatened to dispose of the mortgaged property if these payments weren't made.
The Informant contended that OP-1's actions restricted customers from transferring accounts due to foreclosure penalties, thus discouraging them from seeking better options. The imposition of high-interest rates and pre-payment penalties created barriers for new entrants in the market, causing an Appreciable Adverse Effect on Competition (AAEC) as per Section 19(3) of the Act. Therefore, under Sections 3(1) and 3(2) of the Act, these agreements are anti-competitive and void.
The Informant also contended that OP-1, being dominant in the Delhi and NCR region, used its market power to eliminate competition and impose unjust interest rates. By extending the loan term without consent and increasing interest rates, OP-1 abused its dominant position, resulting in unjust enrichment through payments via Electronic Clearance Service (ECS).
Therefore, feeling aggrieved, the Informant filed a complaint before the commission seeking action against OP-1 for violating Sections 3(1), 3(2), and 4 of the Competition Act, 2002.
Observation by Commission
On the issue of whether OP-1 held a dominant position in the market for loans against property in India, the Commission noted that although OP-1 is the third-largest non-bank mortgage lender in India and is regulated by the Reserve Bank of India, the relevant market is competitive due to the presence of numerous banks, Non-Bank Financial Companies (NBFCs), and housing finance companies. Therefore, the Commission concluded that there is insufficient evidence to establish OP-1's dominance in the market for loans against property in India.
Further, the Commission rejected the Informant's allegation of aftermarket abuse, holding that the loan services in question do not involve an aftermarket as claimed by the Informant. Additionally, the Commission held that the agreement with an end-consumer, does not qualify as an anti-competitive agreement and, therefore, is not violative of Section 3 of the Competition Act, 2002.
Case – Anil Bansal Versus Indiabulls Housing Finance Limited & others
Citation - Case No. 34 of 2023