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The Respondent, a toy store owner, had been running her business for over five years. She had a small shop in the market, and her business was doing reasonably well. However, she wanted to expand her business by setting up a kiosk in the nearby shopping mall. The kiosk would give her more visibility and attract more customers, which would ultimately help her business grow. But, to set up the kiosk, she needed a loan of Rs. 2,50,000/-. She approached the Claimant NBFC, and her loan application was approved.
The Respondent started the kiosk with high hopes and expectations. She invested the loan amount in setting up the kiosk, purchasing inventory, and marketing the business. However, things did not go as planned, and her business did not generate the expected revenue. She started facing financial difficulties and struggled to repay the loan. As a result, she defaulted on her loan payments.
Upon further investigation, it was found that there were several reasons for the default. The Respondent had invested a significant portion of the loan amount in marketing the business, which did not yield the expected results. Additionally, she had underestimated the costs of running the kiosk, including rent, utilities, and staff salaries. She had also failed to implement proper financial management practices and had not maintained proper records of her expenses and revenue.
The Claimant NBFC had been sending reminders to the Respondent regarding the outstanding loan amount, but she had not been able to make any payments. The Claimant NBFC then decided to take legal action against her to recover the loan amount. However, instead of going to court, the Claimant NBFC suggested mediation through PrivateCourt, an online dispute resolution platform.
The parties agreed to mediate the dispute, and a mediator was appointed by PrivateCourt. The mediator first met with the Claimant NBFC's representatives and the Respondent separately to understand their perspectives on the matter. The mediator then conducted joint sessions, where both parties were able to express their concerns and suggest possible solutions.
The PrivateCourt Mediator helped the parties identify the underlying issues that led to the default and explored various options to resolve the dispute. The mediator suggested that the Claimant NBFC could provide the Respondent with an extension on the loan repayment period and waive the interest and penalty charges.
The mediator also suggested that the Respondent could implement proper financial management practices and seek the help of a financial advisor to manage her business finances better.
After several rounds of discussions and negotiations, the parties were able to reach a settlement agreement. The Claimant NBFC agreed to provide the Respondent with an extension on the loan repayment period for six months and waive the interest and penalty charges.
In return, the Respondent agreed to implement proper financial management practices and seek the help of a financial advisor to manage her business finances better. She also agreed to make regular payments towards the outstanding loan amount during the extended repayment period.
The settlement agreement was documented and signed by both parties, and the mediator provided a copy to each party. The settlement agreement was enforceable under the Indian Arbitration and Conciliation Act, and the parties agreed to abide by its terms.
The case study highlights the challenges faced by a toy store owner who failed to repay a loan amount borrowed to set up a kiosk. The reasons for defaulting were attributed to professional and personal factors, including underestimating the costs of running the kiosk and failing to maintain proper financial records. The dispute was resolved through mediation by PrivateCourt, which helped the parties identify the underlying issues and explore possible solutions. The settlement agreement provided a win-win solution for both parties, and the case was resolved amicably without going to court.