Applicability of competition law to State instrumentalities

The National Company Law Appellate Tribunal, New Delhi Bench, in Competition Appeal (AT) 4 of 2026, has passed an order dated 26.02.2026 (“order”) granting interim relief to Confederation of Real Estate Developers Association of India-NCR (“CREDAI NCR”). The NCLAT has stayed the order dated 16.12.2025 (“Impugned Order”) passed by the Competition Commission of India in Information Case No. 16 of 2025 filed by CREDAI NCR and directed that no coercive steps will be taken by the Department of Town and Country Planning, Haryana, in respect of licences issued to developers in the Sohna Region, Gurugram, Haryana.

The order assumes significance in the evolving interface between Competition law and regulatory functions in the real estate sector, particularly concerning the levy of External/Internal Development charges (“EDC/IDC”) without corresponding infrastructural development.

The dispute arose from the long-standing practice of DTCP and Haryana Shehri Vikas Pradhikaran (“HSVP”), of charging and collecting EDC/IDC from developers without undertaking commensurate External/Internal Development Works (“EDW/IDW”). This practice has had a cascading effect on thousands of Developers and homebuyers, as essential infrastructure such as roads, sewage etc. have not been developed despite substantial collection from the Developers.

The issue, therefore, transcended contractual or statutory obligations and raised concerns of abuse of dominant position under Section 4 of the Competition Act, 2002. As a corollary, a key legal issue also arose regarding the scope of applicability of the Act over the activities being carried out by instrumentalities of state.

The gravamen of CREDAI NCR’s case in the first round of litigation was the abuse of dominant position by DTCP and HSVP under Section 4 of the Act. CCI passed an order dated 06.04.2018 (“prima-facie order”) holding that there was a prima-facie contravention of the Act. This was followed by Interim directions on 01.08.2018 restraining DTCP and HSVP from taking coercive action against developers. The findings of CCI were fortified in the investigation report by the Director General (“DG Report”).

The CCI, therefore, relied upon Section 2(h) of the Act and exercised its jurisdiction over DTCP and HSVP to observe that the Act defines ‘enterprise’ as a person or department of government which is engaged in any activity relating to the production, storage, supply, distribution, acquisition or control of goods or provision of services. The only exception which is carved out in the definition is the sovereign functions of the government, including all activities carried on by the department of the Central government dealing with atomic energy, currency, defence and space.

The core finding of CCI was based on the deliberately expansive definition of the term ‘enterprise’, focusing on the nature of activity rather than the identity of the actor. This legislative design of the Act, and its application by CCI, reflected a conscious shift from a status-based exemption to an activity-based test.

The case before CCI was later withdrawn in view of the Relief Policy of DTCP seeking to implement the interim directions of CCI. The subsequent withdrawal of the Relief Policy prompted CREDAI NCR to approach the High Court of Delhi. Upon directions of the Hon’ble DHC on 07.04.2025, the CCI was required to treat the writ petition of CREDAI NCR as fresh information under the Act.

In the fresh proceedings, CCI passed the impugned order without hearing the parties while holding that DTCP and HSVP perform statutory functions, and are therefore, not amenable to CCI’s scrutiny. Further, CCI held that the issue of levy of EDC/IDC is already settled by the judgment of Hon’ble High Court of Punjab and Haryana in M/s VPN Buildtech Pvt. Ltd. v. State of Haryana, CWP No. 9558 of 2015. Having so concluded, CCI declined to examine dominance, competitive effects or the findings of the DG Report.

This marked departure from its earlier stance was anti-thetical to established principles of law governing quasi-judicial decision making and the settled jurisprudence on the scope of “enterprise” under Section 2(h) of the Act. Over years, the Supreme Court of India ranging from its decision in Competition Commission of India v. Coordination Committee of Artists and Technicians, (2017) 5 SCC 17 to its Judgment in Coal India Limited and Another v. Competition Commission of India and Anr., (2023) 10 SCC 345, has reiterated the settled position of law that any entity, irrespective of form, constitutes an ‘enterprise’ within only if it is engaged in economic activity.

Aggrieved by the impugned order, CREDAI NCR approached Hon’ble NCLAT. After hearing all parties extensively, NCLAT has passed the landmark interim order. The following infirmities in the impugned order were pointed out by CREDAI NCR during the course of arguments:

CCI’s failure to maintain consistency in quasi-judicial decision making

In the first round of litigation, CCI delineated the relevant market, held DTCP and HSVP to be ‘enterprises’ within the meaning of the Act and directed investigation under the Act. This view was reversed in the impugned order by CCI without identifying any material change in law.

DTCP and HSVP are covered within the definition of ‘enterprise’ under the Act

The observations in the impugned order are in contravention of the findings in the prima facie order as well as the law settled by the Supreme Court in Coal India (Supra), wherein the Supreme Court held that even government departments have been included in the said definition, as long as they are engaged in providing services

The VPN Judgment does not operate as a bar on CCI’s jurisdiction

The impugned order was premised on an incorrect appreciation of the VPN judgment, as in that case, the P&H HC was merely concerned with the “contractual liability” of the petitioners therein to pay EDC and did not deal with broad contours of abuse of dominant position under the Act.

The NCLAT, in appeal, found favour with the argument of CREDAI NCR that if CCI was to take a different view, the rule of natural justice ought to have been followed. Therefore, during pendency of the appeal, DTCP has been directed not to take any coercive steps qua the licenses issued to Developers in the Sohna Region.

The assumption of jurisdiction by Hon’ble NCLAT while passing the Interim directions in favour of CREDAI NCR, reinforces the primacy accorded to due process of law in the Indian judicial system. The order becomes ever so important as the Hon’ble NCLAT has recognized the applicability of this principle even in a case where CCI comes to two different conclusions between the same set of parties without there being a change in either law or facts. 

Applicability of the principles of natural justice and due process of law in proceedings under the Act

The Supreme in a catena of Judgments ranging from Olga Tellis & Ors., v. Bombay Municipal Corporation & Ors., (1985) 3 SCC 545 to Steel Authority of India v. Competition Commission of India, (2010) 10 SCC 74 (“SAIL Order”), have held that in proceedings that affect the rights of parties, an opportunity of hearing must be provided to the concerned party.

The applicability of Act over the instrumentalities of State and functions performed by them

The concept of enterprise has undergone a change under the Act from purely commercial activities to also include economic activities (whether for profit or not for profit). As noted by the High Court of Delhi in Uttarakhand Agricultural Marketing Board v. CCI, LPA 674 of 2017, only inalienable activities of the government i.e., atomic energy, defence, currency and space are categorized as sovereign functions and hence excluded from the purview of the Act. The imposition of EDC/IDC and the subsequent development of infrastructure is manifestly a “commercial activity”.

The sum conclusion of the position of law, as it stands today, is that merely because an impugned act is done under a statutory authority, it does not alter its essential commercial character in so far as the applicability of the Act is concerned. When the dominant purpose of the activity is supported by consideration, it assumes a commercial character irrespective of the identity of the authority under whose name and banner it is purportedly done.

The NCLAT’s order marks a crucial checkpoint in the evolving jurisprudence on the applicability of competition law to state instrumentalities. By questioning the CCI’s abrupt jurisdictional retreat and emphasising procedural discipline, the NCLAT has restored balance in a dispute with far-reaching consequences for developers, homebuyers, and regulatory governance.

About the authors: Manoranjan Sharma is a Partner, Deeptanshu Jain is a Principal Associate and Raghav Dembla is a Senior Associate at KNM & Partners.

Disclaimer: The opinions expressed in this article are those of the author(s). The opinions presented do not necessarily reflect the views of Bar & Bench.

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