CCI Dismisses Complaint Against Indiabulls, Says Pre-Payment Penalty Not Anti-Competitive
Pranav B Prem
The Competition Commission of India (CCI), while rejecting allegations of abuse of dominance and anti-competitive practices against Indiabulls Housing Finance Limited (OP-1), has held that imposition of a pre-payment penalty by a finance company on the end-consumer does not amount to an anti-competitive agreement under the Competition Act, 2002.
The case arose from information filed under Section 19(1)(a) of the Act by Mr. Anil Bansal, director of M/s Karmyogi Hotels & Buildcon Ltd., who alleged contraventions of Sections 3(1), 3(2), 4(2)(a)(ii), and 4(2)(c) of the Act by OP-1 and its senior officers. The Informant stated that he had availed two loans against property from OP-1 at floating interest rates and alleged that OP-1 had unfairly increased the interest rates over time, levied a pre-payment penalty, refused to furnish loan account statements, and imposed excessive EMIs without prior intimation.
The Informant contended that the imposition of a penalty for foreclosure of the loan had the effect of restricting consumers from switching lenders, thereby creating a barrier for new entrants in the financial sector. He further alleged that OP-1 abused its dominant position by arbitrarily increasing interest rates, extending the loan tenure, and unjustly enriching itself through Electronic Clearance Services (ECS).
To evaluate these allegations, the Commission first delineated the relevant market as “provision of loan against property in India.” It considered the Informant’s claim that OP-1 was the largest lender in Delhi and NCR, but on reviewing public domain information, noted that the relevant market was populated by several banks, NBFCs, and housing finance companies, making it competitive in nature. The Commission observed that OP-1, though among the largest non-bank mortgage lenders, was not in a position of dominance in the relevant market.
The Commission also took into account similar earlier cases—Chirag S. Shastri v. Indiabulls Housing Finance Ltd., Onicra Credit Rating Agency v. Indiabulls Housing Finance Ltd. which involved comparable allegations. In both instances, the Commission had found no violation of the Competition Act.
As regards the allegation of anti-competitive agreements under Section 3 of the Act, the Commission clarified that agreements between a financial institution and an individual end-consumer, such as loan agreements, do not fall within the scope of anti-competitive agreements envisaged under that provision. It stated: “The agreement with an end-consumer like in the present case is not envisaged as an anti-competitive agreement under Section 3 of the Act.”
Rejecting the claims of aftermarket abuse, the Commission held that the nature of the loan services in question did not constitute a separate aftermarket and therefore the allegation was not tenable. It also held that the unilateral imposition of pre-payment penalties and interest increases, even if potentially unfair in contractual terms, do not by themselves attract provisions of the Competition Act unless they result from abuse of a dominant position or collusive conduct, which was not established in the present case.
The Commission held that there was no prima facie evidence of contravention of either Section 3 or Section 4 of the Competition Act by Indiabulls Housing Finance Ltd. Accordingly, it directed the matter to be closed under Section 26(2) of the Act.
Cause Title: Anil Bansal, Director of M/s Karmyogi Hotels & Buildcon Pvt. Ltd. V. Indiabulls Housing Finance Limited & Ors.
Case No: Case No. 34 of 2023
Coram: Ms. Ravneet Kaur [Chairperson], Mr. Anil Agrawal [Member], Ms. Sweta Kakkad [Member], Mr. Deepak Anurag [Member]
