NCLAT Delhi Sets Aside CCI Order Giving Clean Chit To DLF, Remands Matter To CCI For Fresh Consideration

Background Facts

DLF Ltd. (Respondent No. 1) is a public limited company engaged in the business of residential, commercial and retail properties. DLF Home Developers Ltd. (Respondent No. 2) is a wholly owned subsidiary of DLF Ltd.

The DLF group launched a residential township in the name of Regal Garden ("Project"), situated in Sector 90, DLF Garden City, Gurgaon. The Project comprised of 3 and 4 BHK apartment units. Amit Mittal ("Flat Buyer/Appellant") was allotted an apartment in the Project and an Apartment Buyer's Agreement was executed on 01.09.2012. However, the Agreement contained arbitrary one sided clauses, reflecting abuse of dominance position by DLF. In 2014, the Flat Buyer filed an application before the CCI alleging abuse of dominant position by DLF which was unfair and discriminatory.

The CCI found prima facie case of abuse of dominance under Section 4(2)(a)(i) of the Competition Act, 2002 ("Act, 2002"). The CCI directed the Director General ("DG") to conduct an investigation.

The DG in its investigation report dated 18.03.2016 concluded that DLF violated the Section 4(2)(a)(i) read with Section 19(4) of the Competition Act, 2002. However, CCI passed an order dated 09.11.2016 directing the DG to conduct further investigation.

The DG in its supplementary investigation concluded that DLF as a group had higher financial strength, however, the same does not appear to bestow a position of strength to the DLF group.

After receipt of the second/supplementary DG report, the CCI passed an order dated 31.08.2018 under Section 26(6) of the Act, 2002 concluding that "the contravention of the provisions under Section 4 of the Act is not established in the instant matter. Hence, the case is ordered to be closed under Section 26(6) of the Act."

The Flat Buyer challenged the Order dated 31.08.2018 before NCLAT.

NCLAT Verdict

The Bench opined that under Section 26 of the Act, 2002, CCI has very limited jurisdiction to direct for further investigation. If the DG recommends that there is no contravention of the Act, 2002, then CCI shall invite objections or suggestions under Section 26(5). Thereafter, CCI may direct for further investigation under Section 26(7) if deemed necessary.

"Further investigation as per Act is required in a case of closure not in a case where DG has submitted report showing contravention of provisions of the Act by a party/parties."

The Bench observed that the DG's first report disclosed violation of Section 4 of the Act, 2002 by DLF but CCI took shelter of Regulation 20(6) of the CCI (General) Regulations, 2009 and directed the DG to submit supplementary report.

"The aforesaid Regulation 20 describes procedure about the investigation by the DG, whereas Regulation 20(6) empowers the CCI to direct DG for further investigation. However, in view of Section 26 of the Act it can be concluded that Regulation 20 (6) of CCI(General) Regulations, 2009 can be used in furtherance of exercise of jurisdiction under Section 26(7) of the Act which is required to be invoked in a case where DG under Section 26(5) submits report regarding non contravention of the provisions of the Act. In any event taking shelter of Regulation 20(6) of Regulation 2009 CCI was not authorised to pass an order for further investigation and the same cannot be justified."

The Bench has set aside the order dated 31.08.2018 since it was primarily passed on the supplementary investigation report submitted by the DG, which was conducted on a void order of the CCI. The Bench declared all the subsequent proceeding after the submission of the 1^st report by the DG dated 18.03.2016 as void.

The Bench remitted the matter back to the CCI to pass fresh order on the basis of the 1^st DG Report dated 18.03.2016. The CCI has been directed to examine the entire issue and pass appropriate order in accordance with law, after giving opportunity of being heard to all concerned within a period of three months.

Case Title: Amit Mittal v DLF Ltd. & Ors.

Case No.: COMPETITION APPEAL (AT) NO.82 OF 2018

Counsel For Appellant: Mr Jitendra Malkan, Mr R.P. Sharma, Advocates.

Counsel For Respondents: Mr Pravin Bahadur, Ms Kanika Sharma, Mr Rohan Arora, Ms Chandni Anand, Mr Aakash Kumbhat, Advocates for R1 and R2. Ms Shama Nargis, Dy Director (Law), CCI. Mr. Avishkar Singhvi, Mr Nipun Katyal, Mr Vivek Kumar, Advocates for R3.

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