PRO TIP when you face a Business Conflict

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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NBFC (Claimant) V e-Cycle Manufacturer (Respondent)


This is a dispute between an NBFC and a Cycle manufacturer. While the borrower, in this case, a partnership concern, has been into the manufacturing and distribution of cycles in small cities of Northern India for over two decades, they had mostly carried on their business supplying their material to small dealers in semi-urban and rural areas. The younger generation of the family then took over this business, and they aspired to enter into a bigger space and get into license-based manufacturing for some of the larger players in the market.

This meant that they needed to have a larger facility and also meant that they needed to modernize their manufacturing to meet the demands of modern trade. They had been in negotiations with a few cycle brands and got lucky with one of the top brands, who agreed to give them an opportunity to manufacture e-cycles on a decent scale.

The problem this company faced is that over the years, though they had managed their cash flow well, they had not built any major assets that could, in turn, help them in raising capital. The company managed to raise some capital from friends and family but still needed money to upgrade machinery and also to hire better-skilled labor.

The NBFC, in this case, after looking at the contract, allowed them a line of credit with the types of equipment that were purchased and used as collateral. The stock in hand of the existing business was also logged in, and proceeds from the sales of these were to be used to service the EMIs.

While non-fund-based limits would have been the safest route to take in the financing, the lender, being an NBFC, could comply with this.


The manufacturer took up the project and the stock in hand, and the sales of the same managed to pay for the EMIs for the first few months of business.

However, the company started running into trouble as the summer months saw a lack of power supply, and hence, increased cost of production, which they had not accounted for.

The factory that was laid out was not exactly in a business district ,and hence, faced a lot of problems with power and water supply. The company also lost one of its subject matter experts as he found a better opportunity in the city. This slowly started crippling the operations. While the company did manage the EMIs through delayed payments, they voluntarily approached the NBFC to give them some respite

Our Philosophy

न हि सुप्तस्य सिंहस्य प्रविशंति मुखे मृगाः।

कोई भी काम उद्यम ( मेहनत ) से ही पूरा होता है, बैठे-बैठे हवाई किले बनाने से नहीं अर्थात सिर्फ सोचने भर से नहीं। ठीक उसी प्रकार सोते हुए शेर के मुंह में हिरण खुद नहीं चला जाता।

Any work is accomplished by hard work, not just by thinking. In the same way, As the deer does not enter the mouth of the sleeping lion.

PrivateCourt Proceedings

The case was now allocated to PrivateCourt to negotiate a settlement and find a mid-way.

As in this case, there was no default there, and there were quite a few options that were explored by the team within the NBFC, PrivateCourt's negotiating team had to come up with a solution that was a win-win for both parties.

An open discussion with the borrowers revealed that they had to have solutions for their production issues and cost management. What also came to the fore was that their margins were still good enough, and if they could manage their deliveries, they would be able to generate revenues on time to service the loan.

The suggestion that the negotiating team came up with was that the borrower should hire a third-party consulting firm on a retainer to provide the production expertise and also have a redundancy plan built in for the transfer of knowledge.

For the power issue, the negotiating team tracked down a solar farm that could provide cheap power if the borrower could spend some capital to lay down the basic connectivity required, which meant that they could reduce their dependency on generators and hence save a lot of costs.

At the end of the NBFC, the skilled negotiators suggested a reduced EMI for a quarter so that the borrower may be given some time to settle into the new plan and increase output.

The Settlement Agreement

The company agreed to the terms, and the negotiating team from PrivateCourt was made a part of the negotiations with the solar farm and the consulting firm. The NBFC agreed to the restructuring of the loan, and this ensured that the business relationship was profitable on all ends.