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Chemical Manufacturer V. Food Processing Company

Date of Claim raised:08/04/2022
Date of Conciliation: 15/04/2022
Date of Settlement: 15/06/2022
Digest: Mediation/Conciliation/Dispute/Claimant/Respondent/Invoice/Settlement
Case Summary:

This is a case of a dispute between a Chemical manufacturer (the claimant) and a food processing company (the respondent). The companies in question here are both Private limited in their constitution and are based out of Madhya Pradesh.

The claimant is a chemical manufacturing company that supplies chemical preservatives of food grade required for preservatives. The respondent is a food processing company, which is in the business of frozen food products.

The relationship between the two was quite recent, and this dispute occurred on the third batch of deliveries that were against a purchase order. The respondent, defending his stance, states that the chemical supplier has overcharged and double-charged for orders, has not met chemical grade specifications, and has then charged again when the supply of the food preservatives was corrected. The total invoice value of delivery was Rs. 1,30,000/-, which the respondent refused to pay; the claimant threatened legal action if the outstanding isn’t paid.

The Issue

The Claimant accepted that there was a mistake in the calculation of the amount of the invoice and had raised a credit note for adjustment of the amount. Though this meant an overall reduction of the invoice by Rs. 10,000/- the respondent remained unconvinced on the same. The respondent in fact claims that he would like to revisit earlier invoices as they accused the claimant of malpractice.

The parties agreed to mediate through PrivateCourt and provided a large number of documents to justify their positions. These included: Invoices, E-mails, WhatsApp chats, Purchase orders, Food Grade Specification list, purchase orders, etc.

The Process:

After the first round of discussions with the respondent, the mediator took it upon himself to look at all the invoices that were raised and found no discrepancies. The same was presented to the team of the respondent including the final corrected invoice post consideration of the credit note. The respondent was assured that no intentional malpractice was in play and it was only a clerical error. With these facts in play, both parties agreed to settle

Settlement Terms:

The Respondent has agreed to pay the settled amount of Rs.1,20,000/- to the Claimant on or before 15th June 2022, in three equal instalment of Rs. 40,000/- each to be payable as below:

  • The first instalment on or before 15th April 2022, amounting to Rs. 40,000/-.
  • The second instalment on or before 15th May 2022, amounting to Rs. 40,000/-.
  • The third instalment on or before 15th June 2022, amounting to Rs. 40,000/-.

Failing to comply with the same would attract a penal interest of 18% p.a. for the outstanding amount post the last date of payment.

The Inference:

In certain cases, an audit and explanation given by a third party like a mediator assure both parties of the fairness of the settlement. Though the mediator in this case only communicated what the claimant had been saying, the fact that there was an audit and explanation by a third party helped in settling the issue.