DLF did not officially comment. Sources close to the development said the company was to give possession to the buyers in a few weeks but this would now be delayed by a few months, as the company would have to re-apply for CRZ clearance.

Kerala Chief Minister Oommen Chandy and state environment minister T Radhakrishnan told the legislative assembly on Wednesday the earlier clearance order from the environment department last April had been quashed. The chief secretary is to look into all aspects and file a report within five days.

Earlier, the opposition Left Democratic Front (LDF) in Kerala slammed the Congress-led United Democratic Front regime of showing “undue favour” in regularisation of the DLF project. Raising the issue, Communist Party of India (Marxist)-led LDF members alleged corruption and political favouritism in giving “hasty clearance” to the project. They sought to link this to Robert Vadra, son-in-law of Congress President Sonia Gandhi.

C Divakaran, CPI leader in the House, sought to know why the government turned nervous when Vadra’s name was mentioned in connection with the project. This, he said, was an important matter, one that had to be discussed in the House.

In an apparent move to pre-empt the LDF charge, Radhakrishnan said the government had, on Tuesday, decided to quash the clearance order and asked the chief secretary to inquire into the matter.

Chandy said the government would take stern action on the matter, after the chief secretary’s report on this was out. The five-acre project is located at Vytilla, on the banks of the Chillavanor river. It boasts of luxury homes priced at Rs 1.5-4 crore. It was launched in 2007. DLF has one other project in Kochi, called New Town, launched in 2009 and under construction.

The Vytilla project has 172 apartments, of which 70 per cent have been sold and the project is almost completed. DLF had been earlier penalised by the Competition Commission of India (CCI) for misusing its dominant position in the market. Last month, the Competition Appellate Tribunal dismissed a DLF plea against the Rs 630-crore penalty imposed by CCI two years earlier in a case related to a Gurgaon housing complex. DLF had said the company would be challenging this in the Supreme Court.

CCI had imposed the penalty on DLF on a petition by flat buyer associations of two if its projects in Gurgaon, DLF Park Palace and The Belaire. The buyers had alleged delays in the project and increase in the number of floors over what had been earlier stated. CCI had also asked the company to modify the apartment buyers agreement.

The company has been reeling under huge debts and is on a divestment spree to reduce its debt. DLF reduced its net debt by Rs 2,500 crore to Rs 17,400 crore, following proceeds from sale of luxury hotel chain Amanresorts, and a refund from Delhi Development Authority (DDA) earlier this year.

At the end of the December quarter 2013-14, DLF’s net debt had increased to Rs 19,926 crore, from Rs 1,9508 crore as on September 30. It also sold off NTC Mill land in Mumbai to Lodhas for about Rs 2727 crore.

DLF’s shares were down by 2.33% today and closed at Rs 207.60 at Bombay Stock Exchange.