Sateyendra Singh & Ors. vs Ghaziabad Development Authority & Anr.

NARESH SALECHA, MEMBER (TECHNICAL)

The present appeal has been filed under Section 53N (1) & (4), 42A of the Competition Act, 2002 (the “Competition Act”) by Sateyendra Singh, Narendra Kumar and Fazal ul Haque, who are the Applicant herein, for challenging the Impugned Order dated 28.02.2018 in Case No. 86/2016 passed by the Competition Commission of India under Section 27 of the Act.

Ghaziabad Development Authority (‘GDA’) is the contesting respondent as Respondent No. 1 herein. The Competition Commission of India (‘CCI’) is the Respondent No. 2 herein.

The Appellants submitted that they, along with similar other applicants, were allotted Economically Weaker Section (EWS) flats in the Pratap Vihar residential housing scheme announced by the Respondent in 2008, with the final cost of the flat stated as Rs. 2,00,000. The Appellant stated that as per paragraph 4 of the allotment letter, the Respondent promised to deliver possession of the flats by the end of 2009 upon payment of 20% of the final cost, which allottees, including the Appellants, duly paid. The Appellant stated that despite the passage of so many years, possession of flats were delayed abnormally resulting in severe losses and mental agony for the Appellants.

The Appellants further contended that by abusing his dominant position, the Respondent No. 1, despite having failed to deliver possession of flats on time at fixed price as promised, the Respondent No. 1 issued a common letter to all allottees, including the Appellants, indicating that due to project delays, possession would be available by 31.03.2016, and demanded a revised final cost of Rs. 7,00,000 instead of Rs. 2,00,000 (initial cost) and warned that failure to pay this amount by the Appellants would result in cancellation of their allotments.

The Appellants asserted that they were being compelled to consent to these revised terms due to the coercive and abusive conduct of the Respondent No. 1 and to protect their interests and prevent arbitrary cancellation of their flats, they decided to approach the CCI regarding this sudden and abusive action by the Respondent No. 1, consequently, on 28.02.2018, the CCI passed a detailed Impugned Order against the Respondent No. 1.

It is the case of the Appellants that they have suffered actual losses and are entitled to claim damages due to the Respondent No. 1 failure to deliver possession of their flats despite CCI's orders to cease and desist from such conduct.

The Appellants submitted that the penalty imposed on the Respondent No.1 should be recovered and paid to them as compensation for their quantified losses as of June 2018 which still continue at the same rate until actual payment is made by the Respondent No. 1 as they suffered due to the Respondent No. 1 abusive conduct, therefore their applications for compensation is maintainable under Section 53N(4) of the Competition Act, 2002.

The Appellants also highlighted that following the complaint filed by one of the applicants, that is, Mr. Satyendra Singh, the CCI conducted a thorough examination which included order to DG for report and based on DG's report and considering responses from both parties passed the detailed Impugned Order on 28.02.2018. The Impugned Order concluded that the Respondent No. 1 had engaged in abusive conduct in violation of Section 4(2)(a)(i) read with Section 4(1) of the Competition Act and accordingly, CCI in Impugned Order directed the Respondent No. 1 to cease and desist from such behaviour and imposed a penalty amounting to Rs. 1,00,60,794.

The Appellants requested this Appellate Authority to direct the Respondent to:

Concluding their pleadings, the Appellants requested to allow the appeal.

Per contra, the Respondent No. 1 denied all averments of the Appellant, treating these as misleading and mischievous.

The Respondent No. 1 elaborated that this appeal concerns an order issued by the CCI, Respondent No. 2 herein, on 28.02.2018, under Section 27 of the Competition Act, 2002 against Respondent No. 1.

Respondent No. 1 stated that GDA was constituted under Section 4 of the Uttar Pradesh Urban Planning and Development Act, 1973 ("Planning and Development Act") and is empowered to acquire, hold, and dispose of land and engage in development activities within Ghaziabad. In 2008, Respondent No. 1 launched the Pratap Vihar Residential Housing Scheme for Economically Weaker Sections (EWS), through which flats were allotted via a lottery draw in 2009 at a cost of Rs. 2,00,000 each. However, in 2015, Respondent No. 1 issued letters to allottees requesting payment of Rs. 7,00,000 as the revised sale price for the flats due to an assessment of actual construction costs.

The Respondent No. 1 stated that Mr. Satyendra Singh (Appellant No. 1) filed an Information under Section 19(1)(a) of the Competition Act against Respondent No. 1, alleging unfair practices and abuse of dominant position. In response to these allegations, Respondent No. 2 directed the DG for an investigation under Section 26(1) of the Competition Act on February 2, 2017, which culminated in a report submitted on September 4, 2017.

The Respondent No. 1 submitted that they have appealed against the Impugned Order (Competition Appeal No. 26 of 2018) before this Appellate Tribunal and complied with its directive on May 10, 2018, by depositing 10% of the penalty amount.

The Respondent No. 1 clarified that out of total of 348 flats under the Scheme, 114 flats are ready for possession with plans for additional flats to be available within three months.

The Respondent No. 1 highlighted that increase in costs was not arbitrary but based on actual construction assessments and compliance with applicable Costing Guidelines established by Uttar Pradesh authorities.

The Respondent No. 1 submitted that pending adjudication by this Appellate Tribunal regarding whether there was an abuse of dominant position by Respondent No. 1, no determination regarding compensation should be made at this stage.

The Respondent No. 1 submitted that the Application does not comply with Regulation 20 of the Competition Appellate Tribunal (Procedure for Appeals & Applications) Regulations, 2010, as it fails to specify the exact amount, rate of interest, or any other amount being claimed by the Applicants.

The Respondent No. 1 further submitted that any penalty imposed by CCI is required to be credited to the Consolidated Fund of India as per Section 47 of the Competition Act and therefore, the Appellant’s request for recovery of penalty amounts from Respondent No. 1 and allocated to the Appellants should not be granted based on these provisions.

The Respondent No. 1 clarified that assertions made by the Appellants regarding anti-competitive agreements are misleading as while Respondent No. 1 was found in contravention of Section 4(2)(a)(i) for abuse of dominant position, there was no finding regarding a contravention of Section 3 of the Competition Act.

The Respondent No. 1 submitted that they have complied with all orders issued by CCI and continue to adhere to the 'cease and desist' directive while awaiting further instructions from this Appellate Tribunal.

The Respondent No. 1 submitted that vide the Impugned Order, Respondent No. 2 imposed a penalty of Rs. 1,00,60,794/- on Respondent No. 1 as well as an order to ‘cease and desist’. Respondent No. 1 preferred an appeal against the Impugned Order and the payment of the penalty amount imposed through the Impugned Order was stayed by this Appellate Tribunal, subject to the deposit of 10% of the penalty amount by Respondent No. 1. The Respondent No.1 confirmed that he deposited 10% penalty, thus complied penalty as per stipulated orders. The Respondent No.1 also submitted that the 'cease and desist' order of Respondent No. 2 continues to be in force and that Respondent No. 1 is in due compliance with the operative part of the Impugned Order.

The Respondent No. 1 submitted that the Appellants are not entitled to compensation in terms of section 42A of the Competition Act, as there has been no contravention of any orders or directions of the CCI by the Respondent No. 1 and therefore section 42A of the Competition Act does not bear any application in this case.

The Respondent No. 1 submitted with respect to the amount of compensation claimed under the Application, no computation, documents or information in support of such claims have been adduced by the Appellants in furtherance of the claims made under this Application. The claims for compensation made by the Appellants are completely unsubstantiated and without any legal, economic or factual basis. Furthermore, as required under the provision of Section 53N of the Competition Act, the Appellants have not furnished any claim with respect to loss or damage alleged to be suffered by the Appellants.

The Respondent No. 1 stated that in the Application, there has been no reliance on any documentary evidence in furtherance of the claim for compensation and the computation of damages in the Application is remote without any casual link to the alleged abuse of dominant position by Respondent No. 1 and the computation of compensation under the Application is remote and no justification has been put forth in support of such claim.

The Respondent No. 1 submitted that consent letter was sent to the Appellants and in reply to the same letter, consent was given by the Appellants to the Respondent. In view of the consent given, compensation request made by the Appellants is unsustainable.

Since the compensation has been sought in terms of Section 42 (A) and Section 53N (1), we will consider the same which reads as under: -

From above, we note that the compensation is payable in case of contravention of order of CCI. Section 42 A provides that any person may make an application to the Appellate Authority for an order of recovery of compensation from any enterprises for any loss or damage shown to have been suffered by such person as a result of said enterprise violating directions issued by CCI.

We note that in the Impugned Order dated 02.02.2027, the CCI gave two orders i.e., “The Commission directs the OP to cease and desist from indulging in such abusive conduct which has been found to be in contravention of Section 4(2)(a)(i) r/w Section 4(1) of the Competition Act.”

CCI also gave order regarding payment of penalty as contained in Para 48 of the Impugned Order which reads as under :-

Thus, there were only two directions to the Respondent No. 1 by CCI i.e., regarding ‘cease and desist’ order and payment of penalty.

We note that the Appellant has conceded categorically during hearing that he has not violated cease and desist order of the CCI and is complying the same. Similarly, we note that the CCI had imposed the penalty of Rs. 1,00,60,794/- on the Appellant and the Appellant during the appeal before us has deposited 10% of such penalty vide FD No. 078120 and consequently this Appellate Tribunal gave stay in favour of the Respondent No. 1. Thus, the Respondent No. 1 complied penalty provisions of the CCI contained in the Impugned Order. Thus, there is no violation of the Impugned Order passed by the CCI.

We observe that any person may file appeal for payment of compensation only if the enterprise, the Appellant herein, has violated and breached the orders or directives of the CCI. Since, there is no violation by the Respondent No. 1 of the CCI Impugned Order, the question of claiming composition at this stage is found to be premature in view of Section 42A of the Competition Act.

It is case of the Appellants that they suffered the losses which they continue to suffer and have also suffered mental agony for which they are seeking compensation from the Respondent No. 1.

The Appellants argued that since the flats have been not, given by the Appellant even after several years of delay and has rather increased the cost of the flats from Rs. 2 Lakhs to Rs. 7 Lakhs abusing its position of dominate player in the relevant geographical market.

The Appellants have sought following compensation :-

From above, we note that every Appellant has claimed the monthly rental @10,000 per month amounting to Rs. 10,20,000/- for the period from 01.01.2010 to 30.06.2018 which continue till payments. Similarly, the Appellants have claimed the damage for inconvenience, mental, physical loss, expectancy loss amounting to Rs. 25,50,000/- each. Another claim has been made regarding interest on payment deposited amounting to Rs. 1,70,000/- each and finally litigation and out of pocket expenses of Rs. 5,00,000/- each. Thus, the total compensation by each is Rs. 42,42,000/- which continues till payment is made by the Appellants.

We note that the eligibility criteria for the applicant to apply for EWS flats was annual earnings ceilings of Rs. 25,000 each. We find it rather strange that person whose annual income is Rs. 25,000 is claiming monthly payment of rent of Rs. 10,000/- i.e., almost four times of his earning. We put a specific query regarding the same to the Appellants who could not furnish any satisfactory reply. We also note that no documentations or evidence of all claims including rental, damage, deposits, litigations etc, have been furnished by the Appellants in the appeal as well as during the pleadings before us.

The claims, on face of it do not seems to be convincing. Be that as it may, we have already noted in earlier that that the compensation is due only if CCI orders have been violated by the Respondent No. 1 which is not the case here. As such, we do not find any merit in the appeal before us.

We also take into cognizance that the Respondent No. 1 issued letters to all the allottee for giving their consent for enhancing cost from Rs. 2 Lakhs to Rs. 7 Lakhs. We also note that the Appellants gave their consent. Following is the relevant correspondence.

Thus, we observe that after giving consent for enhancement of cost of flats, it does not lie in the mount of the Appellants to challenge the same. This does not help the cause of the Appellants, despite CCI holding that Respondent No. 1 was involved in abusive conduct as dominant player in relevant geographic market.

We however observe that the Appellants can seek other appropriate legal remedies, if so available, in accordance with law.

The appeal devoid of any merit fails and stand rejected. No costs. I.A., if any, are closed.