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DLF found guilty of unfair trade practices

MRTP commission has found DLF guilty of unfair trade practices for not completing construction within the stipulated time and charging extra money from clients for resultant cost escalations.

india Updated: May 03, 2006 17:09 IST

In a significant judgement, the Monopolies and Restrictive Trade Practices Commission has found DLF Universal Ltd guilty of unfair trade practices for not completing construction within the stipulated time and charging extra money from clients for resultant cost escalations.

Warning the construction major not to repeat such practice in future, the commission asked DLF, which is soon coming out with an Initial Public Offering, to pay interest at the rate of nine per cent to its consumers.

"DLF is not entitled to claim escalation charges and has indulged in unfair trade practice by claiming the same," MRTPC Chairman BK Rathi said in its order.

The issue reached MRTPC after some of DLF's customers filed a compensation application along with request for Unfair Trade Practice enquiry against the company.

In 1993, DLF came up with plans for a luxury residential apartment complex -- Regency Park -- at Gurgaon where it promised modern amenities such as private swimming pool, tennis court, health club-cum-gymnasium, sauna and steam bath, club house with a restaurant and bar to occupants.

At the time of purchase, DLF offered attractive schemes. In the first offer, it had a provision for full cash-down payment and in the second and third offer, occupants were to pay 40 per cent in the first 30 months (the period of construction).

As per the sales agreement, DLF was to hand over the flats in the stipulated time of 30 months or by mid-1995. However, it could not finish the construction and handed over flats after six years.

At the time of handing over of possession, DLF claimed Rs 11.97 lakh extra from each customer towards cost escalation. It also demanded charges for "so-called improvements" in the form of things like spacious balcony that were not in the original plan.

The aggrieved customers knocked the door of the commission and prayed for interest for late delivery. They also sought an order restraining DLF from charging holding rate at the rate of five per cent against those who had not given money in protest.

DLF, however, said in its defence that there was no provision to deliver flats in 30 months in the 'apartment buyer's agreement'. It claimed that the agreement was binding in nature and added that DLF was not to incur any liability in case of delay in the project.

It also blamed the Directorate of town and country planning of Haryana for the delay, saying it did not give the occupation certificate as well as mandatory legal clearances within due time.

The Commission, however, struck down the company's plea and said, "It is strange that DLF floated such big schemes promising completion within a timeframe without prior approval of building plans.

"In any case, if the scheme was floated earlier to it (before getting clearances), DLF should have told purchasers and specified in the agreement that building plans are yet to be approved and it may get delayed."

MRTPC also rejected DLF's argument that there was no such provision in the agreement. "If there is delay of (six) years, then it cannot take shield of this clause. There was a clear misrepresentation by DLF regarding it and it is incorrect to say that the apartment cannot be completed for reason beyond their control."

Regarding improvement charges for construction of larger and additional lobbies, the Commission said that if there is reduction or increase in the covered area of flats, then DLF cannot charge money for it over the rate agreed.

It further directed DLF to return the holding charges to those buyers, who have not taken possession in protest of 'illegal demand' of escalation charges.

First Published: May 03, 2006 16:34 IST