The judgement will ensure that there is fear of competition law and the SC in the mind and hearts of those who may be tempted to rob Indian consumers of their hard earned money
12 June 2013 would be remembered as a defining moment in the evolution of competition law jurisprudence in the country. In its judgement, the Supreme Court of India (SC), on 12 June 2013, had declined to interfere with the order of the Competition Appellate Tribunal (COMPAT) directing the 11 cement manufacturing companies to deposit 10% of the total penalty imposed on them by the Competition Commission of India (CCI), for allegations of cartelisation to fix cement prices, against which they had appealed before the COMPAT. The only relief given by the SC was to give time of one more week to these companies to deposit the amounts directed to be paid by COMPAT.
This is not the first time that the SC has come out a winner in a dispute relating to the interpretation of competition law—be it between the two bodies below it responsible for competition law enforcement (CCI) and competition law adjudication (COMPAT) respectively or between the affected parties and the enforcer of this law i.e. CCI. If I recall correctly, on 9 September 2009, in the case of the CCI versus SAIL, when a dispute arose between CCI and COMPAT about the issue as to whether an appeal can be filed before the COMPAT even if not expressly provided in the law, it was the Supreme Court which not only analysed the provisions of law very eloquently but also laid down the future boundaries of the practice of this new law in the country extremely well.
This time around, in the case of cement companies, the COMPAT was indicating its seriousness about an order passed by the CCI so that, as it happens in other judicial proceedings in the country, the affected parties do not take the legal system for a ride to their advantage by causing delays in the judicial delivery. As the impact of distortions in the market mechanism is suffered by millions and millions of helpless consumers and customers, the violations of competition law are taken very seriously, across the world. The direction of the COMPAT merely reflected the mood that cartelisation is a serious matter and would be accordingly dealt. From the perspective of the consumers, it was a welcome move.
It is really interesting to note that the CCI came with two orders in nearly quick succession. The first order related to the cement companies wherein allegations of cartelisation were made against these cement companies. A little after the order passed by the CCI in the case of cement companies, a new order was passed by CCI in the case of the tyre manufacturing companies. There was widespread speculation and surprise that, despite the nature of evidence being similar, the outcome in the two cases was not really same. In the case of cement companies, the information about the price movement was found to be in the nature of price parallelism and, coupled with some circumstantial evidence it was treated as a cartel.
The evidence marshalled by the director-general (DG) did indicate possibility of collusion but did not conclusively prove that the price rise was because of any concerted practices, brought on record through collection of irrefutable evidence, by different players in the market. On the contrary, in the order, there were numerous instances where the DG claims in the report that there was no evidence produced before him by the cement companies which proves that the price rise was happening because of demand and supply and not because of any other non economic factors. This logic can be questioned by the practitioners of the competition law across the globe.
Whether it is the job of investigator to bring evidence on record about the wrongdoing alleged to have been done or the alleged party to marshal and keep in readiness evidence to prove its innocence is a moot point. This does not call for a debate at all in Indian legal jurisprudence. The differing approach of the CCI in these two cases had a great potential of being exploited by the legal eagles to the advantage of their clients. This was a handle, enough to confuse the bench, by claiming it to be a case of price parallelism, and belittle circumstantial evidence used in the case of cement companies.
However, the SC has shown great maturity as well as a deep understanding of the subject of competition law itself which is badly needed in the country at this critical juncture that this new law is taking roots in the country. With this judgment the SC has proved that although the competition law implementation may be nascent in the country, its future is very strong. This augurs well for the economy as well. Internationally, there is a positive correlation between the implementation of the competition law and the growth of the economy in the country.
The SC has done well to steer clear of the possible legal wedges, during the course of arguments, in the implementation of the competition law on the ground by the agencies responsible for the job. The task of sorting out the legal issues in the order has been left to the COMPAT. What has been reaffirmed, by SC is that the competition law is here to stay in the country and the allegations of cartelisation will be taken seriously as in other countries. The judgment shall introduce seriousness into the entire discourse. It will ensure that there is fear of competition law and the SC in the mind and hearts of those who may be tempted to rob Indian consumers of their hard earned money. Jai Ho! for the Indian consumer and SC.
(The author is the chairman, KK Sharma Law Offices and former director general, CCI.)
The mysterious bill for a real estate regulator, which is not in the public domain is a big move forward in protecting buyers, but will require some debugging. One of the area of confusion would be the definition of promoter which includes bulk buyers who will also be allottees, says realty expert Pranay Vakil
Investors or bulk buyers of property, who have always anchored large property deals, will have to be very careful about the implications of the new regulations proposed under the draft bill for a realty regulator, says Pranay Vakil, founder-chairman of Praron Consultancy. Mr Vakil was addressing a packed audicence at the seminar “Decode the Realty Regulator” organised by Moneylife Foundation in Mumbai on 13th June.
Interestingly, the Real Estate (Regulation and Development) Bill 2013 that actually received Cabinet clearance is not in the public domain, nor is a draft that was circulated to industry associations in 2012 (Click here for draft bill obtained by Moneylife). Mr Vakil, who is also the former chairman of Kinght Frank India further said, “Even a buyer who is purchasing in bulk for resale is a promoter, my question is, is he the one who is paying for the land or engaging the contractors? No, all that he is doing is a simple purchase”. This could cause some confusion until the implications are clearly sorted out. The bill defines developers as promoters.
“One will have to be extremely cautious henceforth in doing such a stock purchase if he/she is going to be clubbed with the definition of a promoter, as the promoter has a huge number of responsibilities under the proposed bill, as the promoter as we understand is the developer”, warns Mr Vakil.
Further complications are the fact that an ‘allottee’ as defined by the bill does not merely include the first buyer but may also include subsequent ones. Further, even an individual who receives a flat as a gift or under some kind of a transfer (which may not be for consideration) will also be considered as an allottee.
For instance, Mr Vakil said, “If a developer sells a flat to a certain prospect A, and during construction A sells the flat to B, and then B in turn sells it to prospect C, then under the new bill, prospects A and B will also be held responsible and will be considered as allootees. In short every subsequent buyer of a flat will be considered as an allottee under the definition making it irrelevant”.
Some of the most positive aspects of the bill are the fact that every last detail about the project including the registered real estate brokers will have to be uploaded on a website at the time of registering the project, and advertisements for sale and marketing can commence only thereafter. An allottee is entitled to ask the developer for anything and everything that affects his title to the property. This includes entitlement to possession as promised by the developer, for failure to deliver or even delay in giving possession. For the first, time the realty regulatory bill also defines the obligations of an allottee to the developer—mainly to make payments as agreed, including including registration charges, stamp duty or other levies as agreed in the original agreement.
Adding his voice to Mr Vakil’s, Mr Parimal Shroff, one of the brightest and best known names in realty laws said, “If tomorrow I try to purchase certain premises in bulk and later decide to sell them off, I too will become a promoter” under the draft bill. His view is that this is a welcome move and explained why such bulk buyers had been included in the definition of allottees.
Mr Shroff said, “Developers often resort to bulk sale for the purpose of tax planning within the group and to avoid their responsibility under the Maharashtra Ownership Flats Act, 1963 (MOFA). The flats are first sold to an investor or bulk buyer using just an allotment letter. The investor later sells it to a customer. When there is a problem, the builder throws up his hands and calls the purchase a second sale to evade responsibility under the Act. This is the situation in Maharashtra, which is among the few states that have comprehensive, if faulty, legislation covering the realty business. The draft Union Bill however plugs the loophole of builders or developers evading responsibility for those consumers who make a purchase from bulk buyers. In the light of what the experience in Maharashtra, this is a positive move from the consumers perspective and will have to be harmoniously considered with other definitions under the Bill, said Mr Shroff.
An allotment letter is just a temporary arrangement between the developer and investor, which is not covered under the MOFA, and therefore not legally binding, until both the parties intent to convert it into a stamped and registered agreement. Under the MOFA, when a buyer terminates the contract to buy the apartment if developer does not commence project construction within a year of allotment letter, the builder had to refund the amounts paid by the buyer with simple interest of 6% per annum. In addition, in case the project is abandoned for any reason other than force majeure or on failure to give possession to the buyer, the developer is expected to refund the amount paid by the customer with 9% interest under the MOFA in Maharashtra.
Read more about the Real Estate Regulation Bill:
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