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FMCG Manufacturer V. Distributor

Date of Claim raised: 24/06/2021
Date of Conciliation: 02/07/2021
Date of Settlement: 02/07/2021
Digest: Mediation/Conciliation/Dispute/Claimant/Respondent/Invoice/Settlement
Case Summary:

The parties to this dispute are a Pvt. Ltd company (the Claimant) involved in manufacturing FMCG products, largely frozen foods and ready-to-serve food products, and a distributor (the Respondent) for West India based in Gujarat. While the business is largely cash-and-carry, the long-standing relationship and the sheer volume of products that the respondent pushed warranted supplies of goods on credit. The credit period extended was 15 days from the date of delivery, and often, overlapping supplies were made. The dispute came up when there was a continuous default on 3 bulk orders back to back when the claimant was forced to halt further supplies to mitigate risks. The respondent was offended by this and stopped making any further payments. PrivateCourt was approached when all efforts of discussions failed between both parties.

The Issue:

The payment defaults by the respondent put the claimant at risk as two further deliveries were expected post the invoice default. The supply was done in good faith considering the long-standing relationship and the market demand. The default in payments and the subsequent halt of supply meant that both the company and the distributor stand to lose business.

The Process:

The Bills, Ledger accounts, Outstanding invoices, Email conversations, and Purchase orders, including the acceptance of delivery records, were examined in-depth by the Negotiator to establish the legitimacy of the claims. Once the negotiation began, the negotiator addressed the issue of the feeling of being offended by the distributor by explaining how overexposure of credit was a risk the claimant was not ready to take, and how it was only a business call. It was also explained to the respondent that the Brand of products now had an established market, and the claimant would be forced to go to his competition to make sure that the distribution channel was kept alive. The respondent, over the course of negotiations, did seem to soften his stand and agreed to settle payments.

Settlement Terms

The Respondent agreed to pay the outstanding that is due for a long time and has agreed to settle the amount of Rs. 2,76,910/- by a bank transfer in four instalments starting from 16th August 2021 till the end of November 2021.

The Inference:

At times, there needs to be an undertone of a threat of loss of business to remedy payments. Here, the negotiator was able to establish that while there might be a loss in the short term to the claimant, the respondent stands to lose a market that would otherwise benefit him immensely.