HUDA is an’ enterprise’ under Section 2(h) of Competition Act, not guilty of abuse of dominance: CCI

The Competition Commission of India (CCI) has held that the Haryana Urban Development Authority (HUDA) is an enterprise under Section 2(h) of the Competition Act, 2002..The finding was made in a complaint alleging abuse of dominance on the part of HUDA in the supply and sale of institutional plots in urban estates in Haryana..While arriving at its conclusion, the CCI noted,“While examining whether an entity is an enterprise for the purposes of the Act, regard be had to its functional aspects as opposed to its form or constitution. Undoubtedly, HUDA established under the HUDA/HSVP Act, 1977 is a statutory authority inter alia mandated to perform certain statutory and regulatory functions, within the ambit of such Act. But nevertheless, all its functions may not be classifiable as statutory functions more so of a sovereign nature, especially when it allots various types of plots to third parties for a consideration.”.It further noted that in the present case, the CCI noted that allotment of institutional plots is undertaken in Haryana even by private developers.“Thus, such an activity is not an inalienable function of the State of Haryana, relatable to a sovereign function, merely because such an activity is being undertaken by HUDA under the statute passed by the state legislature.”.The informant in this case was Gurgaon Institutional Welfare Association, an association of individual allottees/purchasers of institutional plots in Gurgaon. The Association alleged that HUDA enjoys monopoly status and dominant position in the market for supply and sale of institutional plots in urban estates in the State of Haryana..It was alleged that members of the Association were allotted institutional plots in various sectors of urban estates in Gurgaon ‘on a freehold basis’. The allottees paid the entire consideration as demanded by HUDA and completed construction of buildings on the plots allotted to them. However, when the allottees approached HUDA for execution of conveyance deeds, HUDA allegedly imposed additional illegal terms and conditions for execution of conveyance/sale deed in favour of the allottees..Further, HUDA allegedly imposed an illegal and void condition restricting the rights of the allottees to further sell, mortgage, lease out the plots purchased and buildings constructed by them.The informant thus contended that this action of HUDA was in contravention of Sections 4(2)(b), 4(2)(c), 4(2)(d) and 4(2)(e) read with Section 4(1) of the Competition Act, 2002..In 2017, the CCI directed the Director General (DG) to carry out a detailed investigation into the complaint..DG findings.The DG found that in a cumulative period of 9 years, HUDA had a market share of 78% which was highest among all its other competitors. In respect of year-wise allocation of area for institutional plots, HUDA had a market share of 81.18% and had more financial resources than its competitors. It was thus concluded that HUDA is dominant in the suggested relevant market..To ascertain whether the conduct of HUDA amounts to abuse, the DG looked at:Whether the allottees can be said to have absolute ownership over the institutional plots allotted by HUDA on a freehold basis.Whether HUDA has imposed any unfair and/or discriminatory conditions restricting transfer by way of sale/mortgage/lease of the institutional plots and buildings constructed on such plots..The DG noted that the contention of the informant Association that it has absolute ownership over institutional plots allotted by HUDA on a freehold basis is not tenable. Further, the imposition of certain conditions by HUDA did not put any absolute restriction on transfer of institutional plots and were neither unfair nor discriminatory in terms of Section 4 of the Act..However, it concluded that the conduct of HUDA in not allowing transfer of institutional plots was unfair as it led to exit barriers by closing the opportunities for allottees to resell those institutional plots..It was further noted that an arbitration clause in the conveyance deed between HUDA and the allottees left the latter with no right to challenge the appointment of the arbitrator. The decision of the arbitration being final and binding, took away the right of the Association members to appeal. Therefore, the DG concluded that such condition was not equitable and would amount to contravention of Section 4(2)(a)(i) of the Act..CCI order.Before the Commission, the informant Association contended that the policy of HUDA in not allowing the owners of institution plots to transfer/sell, besides being in contravention of Section 4(2)(a) of the Act, was incongruent with Section 10 of the Transfer of Property Act, 1882..On the other hand, HUDA stifled such restrictions on the anvil of public interest. It stated that such institutional plots have been allotted for specific purposes, at a price much below the then prevailing market prices and the owners of such plots cannot be allowed to profit from the sale/transfer of such plots.From the outset, HUDA claimed that it was never its objective to allow sale of such institutional plots. For this precise reason, these plots were given to seekers, satisfying the eligibility conditions, at concessional rates..The CCI agreed with this submission, noting in its order,“The Commission is persuaded by the submissions made by HUDA that the purpose of allotment of institutional plots, in the facts and circumstances of the present case, was not to allow the allottees to transfer them subsequently, with a view to earn profits out of the same. This important fact in the view of the Commission cannot be lost sight of…”.On the point of the HUDA’s policy being contrary to the provisions of the Transfer of Property Act, it was held,“The Commission does not propose to enter this thicket, to hold as to which Act, may have primacy over the other, or as to whether the conveyance deed or other documents executed/issued by HUDA are violative of provisions of any of the Acts, enumerated above.”.With respect to the point of abuse emanating from the arbitration clause, the Commission noted that the Association did not place any significant emphasis on the same while advancing its arguments. It took the view that aspects relating to appointment of arbitrator, etc., can be suitably dealt under the provisions of Arbitration and Conciliation Act, 1996..Thus, it was concluded that HUDA cannot be said to have contravened the provisions of Section 4 of the Act..[Read the order]