Timely Intervention Matters Address disputes promptly. The sooner you engage in ADR, the greater the chance of finding a resolution before tensions escalate. Early intervention can save time, costs, and relationships.
This dispute arose between a furniture emporium owner and an NBFC. The owner of the furniture emporium had both a retail front and a manufacturing unit, and both units were involved in B2B and B2C activities.
While the B2C part ran completely on a cash-and-carry model, the B2B activity involved a lot of credit-based trading. The company had availed certain credit lines line OD/CC and some non-fund-based limits from some banks. A recent influx in the order sent them looking for more credit. The company had bagged an order to furnish a large commercial complex that was in the vicinity, and they found themselves short on credit to complete the order.
The company then approached the NBFC for a bill discounting approach and after thorough vetting, received approval. Though the entire order was running into almost 5 million rupees, the discounting facility was extended to a maximum of Rs. 5,00,000/-. With a rolling credit to this count, the manufacturer was confident that he could complete the project and set out to deliver the order.
The manufacturer, who now started manufacturing, started delivering the products as ordered and did not have a problem making payments against the matured invoices on time.
The agreed terms were that the approved invoice would be submitted to the NBFC, which in turn would make a claim from the buyer and would then credit the differential amount to the respondent's account. The lean time given according to the agreement was 30 days from the date of invoice. The entire project was to be completed over a period of 8 months.
The issue started with the dishonouring of an invoice in the fourth month when the buyer's bank denied payments and informed the NBFC of certain irregularities in the buyer's account. The situation only worsened as another two batches of material were delivered, and invoices for the same were raised. When approached by the NBFC, the buyer's bank informed them that the accounts of the buyer were frozen due to some irregularities in GST payments.
This meant that a total outstanding of Rs. 2.68 lacs was pending payments and worse for the respondent as his total billing amount through other credit lines was higher. While there were claims raised on the bank accounts both by the borrower and the NBFC, the situation seemed to be too bleak.
As an empanelled agency, the NBFC contacted PrivateCourt to look at options to negotiate with the buyer and arrive at a settlement.
aprāpyaṃ nāma nehāsti dhīrasya vyavasāyinaḥ।
There is nothing unattainable to the one who has courage and who works hard.
जिसके पास साहस है और जो मेहनत करता है, उसके लिए कुछ भी अप्राप्य नहीं है।
PrivateCourt’s negotiating team looked at all the paperwork and the invoices raised and accepted. The payment track record of the buyer also was inspected and found satisfactory, which also showed a clear intent to pay the dues on time.
The negotiator then reached out to the buyer, who explained how the GST payments issue had affected him, and he was unsure of when the same could be resolved. It was quite obvious that there were other vendors who also were approaching him with all their ferocity.
As this was a case where there was a claim by the government, and there was no way to get around, the negotiating team had to come up with a solution that was more definite and had a clear timeline.
What came to light was that the builder had completed the project almost entirely and had only the finishing that needed to be completed. A part of the business complex had also received its Occupation Certificate. It was also known that there was a part of the property that was still not sold and was yet to be registered.
The resolution team, post discussion with the borrower, offered to take over a part of the property in lieu of the outstanding payments, which with a bit of persuasion, the builder agreed to.
The property, which was now in the custody of the borrower, was disposed to a third party, and the proceeds were used to settle all dues to the banks as well as the NBFC. The borrower also made sure to deliver the remainder of the project using the monetary gap, which was positive, and this ensured that the builder could deliver the project as promised to its buyers despite the legal trouble.
Timely action and out-of-the-box thinking created a solution that would bring around 360-degree satisfaction.
