Craft Clear Agreements: When an agreement is reached, ensure it's crystal clear. Clearly articulate the terms, responsibilities, and consequences. Clarity prevents future disputes and lays a solid foundation for cooperation.
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In 2019, a scrap dealer, in this case, the Respondent, approached a small-sized NBFC the Claimant NBFC for a loan of Rs. 1,50,000/- to purchase a go-down/storage area to expand his business. The Claimant NBFC agreed to lend the money with an interest rate of 12% per annum, and the Respondent agreed to repay the loan within 18 months.
However, after a few months, the Respondent started facing financial difficulties and was unable to repay the loan. The Claimant NBFC approached PrivateCourt, a dispute resolution organisation, to resolve the matter.
During the course of the proceedings, the Respondent cited several reasons for his inability to repay the loan. Firstly, he explained that due to the outbreak of Covid-19 in early 2020, his business was severely affected, and he was unable to generate enough revenue to repay the loan.
Secondly, he mentioned that he had incurred significant medical expenses due to his wife's illness, which further impacted his finances.
Lastly, he stated that he had defaulted on a few other loans, both professional and personal, which had made it difficult for him to manage his finances effectively.
PrivateCourt assigned the dispute to one of its negotiating teams to facilitate negotiations between the parties. The mediating team first sought to understand the issues faced by both parties and suggested various options for resolving the matter.
During the mediation phase, the Respondent agreed to repay the loan in instalments, and the Claimant NBFC agreed to waive off a portion of the interest amount.
However, both parties were unable to reach a mutually agreeable settlement.
The PfivateCourt mediating team then suggested that the matter be referred to an arbitration proceeding, which is a formal legal process for resolving disputes outside of court. The parties agreed to the suggestion, and an arbitrator was appointed by PrivateCourt.
The arbitrator heard the case and examined the evidence presented by both parties. After a thorough review of the facts and evidence, the arbitrator made a ruling in favour of the Claimant NBFC and ordered the Respondent to repay the loan amount along with interest.
Following the arbitrator's ruling, PrivateCourt facilitated negotiations between the parties to arrive at a mutually agreeable settlement. Eventually, the Respondent agreed to repay the loan amount along with interest in instalments over a period of 12 months.
The Claimant NBFC agreed to waive off a portion of the interest amount, and both parties signed a settlement agreement to that effect.
In this case, the borrower, the Respondent, faced financial difficulties due to Covid-19, medical expenses, and other loans. However, with the help of PrivateCourt, the matter was resolved through negotiations and arbitration, and the parties arrived at a mutually agreeable settlement. This case highlights the importance of alternative dispute resolution mechanisms such as mediation and arbitration, which can help parties resolve disputes in a cost-effective and timely manner.