Ghaziabad Development Authority Faces Rs 1-Cr Fine For Misusing Position

While private developers are often accused of using their “dominant position” in the market to make bigger gains, this time penalty has been slapped on a public body for applying “unfair and arbitrary practices”. The Competition Commission (CCI) on February 28 imposed a penalty of Rs 1 crore, apart from cease and desist order, on the Ghaziabad Development Authority (GDA) for “abuse of dominant position” in sale of flats under a housing scheme meant for the economically weaker sections (EWS).

In Pratap Vihar Residential Housing Scheme which has as many as 348 flats, rates of flats were increased from Rs 2 lakh in 2008 to Rs 7 lakh in 2015 by the GDA. A buyer, who was allotted a flat in the housing scheme in 2009 through a lottery draw, had approached the competition watchdog with a complaint accusing the development body of “misusing its position” with the knowledge that people belonging to the EWS category would not be financially equipped to challenge its “unfair conduct”.  The buyer said he was allotted one unit for Rs 2 lakh in 2009. However, the GDA in 2015 issued notices to all buyers intimidating them rates of the units have been increased to Rs 7 lakh keeping in view the “construction cost”. The GDA also directed buyers to acknowledge and give their consent within 15 days or face cancellation.

The fine on the GDA – Rs 100,60,794, to be specific – translates to five per cent of average turnover generated from the provision of services for development and sale of low-cost residential flats under affordable housing schemes for the EWS. It is worth mentioning here that the GDA has not delivered possession of the flats even after lapse of almost 10 years. While it had set August 2009 as the deadline to deliver the project, it failed to do so and extended the deadline to March 2016.

Passing the order, the CCI said that consumers belonging had been made to suffer due to the “abusive conduct” of the development body. The competition watchdog also said that the GDA's condition for levying penal interest of 10.5 per cent per annum in case of delay in the payment of the quarterly instalments by the allottees without a corresponding provision for GDA in case delay of in giving possession of the flats is abusive, being one sided and unfair.

According to the order, GDA's conduct in raising the price of EWS flats from the initial price without any enabling provision on "the pretext of miscalculation of cost of the project" can only be explained as a case of abuse of dominant position by it in the relevant market.

With inputs from Housing News