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NBFC (Claimant) V Grocery Shop Owner (Respondent)


This case is a dispute between a grocery shop owner and an NBFC. The borrower, in this case, is a local grocery store owner who had been running the store for almost half a century. Due to age and health conditions, the store was now being run by the second generation of owners.

As the world started shifting to online stores, they also started facing the heat of depletion of order size and numbers. To turn things around, they decided to upgrade the store to a supermarket and also decided to add Stock Keeping Unit like organic vegetables and better brands of chocolates and much better products.

In this attempt, they did manage to upgrade the look and feel of the store through existing credit lines but had a shortage of working capital. Through their chartered accountant, they managed to convince the NBFC to provide a term loan to plug this financing gap.

With the money raised, they added the SKUs that they planned and tried to expand their business through POP ads and using modern systems like SMS and WhatsApp-based broadcasting offers and discounts from time to time. Though there was an initial rush and business picked up, there seemed to be a flattening of sales in a while.

The Facts

The borrowers, without too much research, decided to add many SKUs that were possibly not what the local market was not looking for. While the first half of the year post upgradation looked good, and the borrower did pay the EMIs on time, there was an issue with the piling up of dead stock. The problem also increased as the borrower did not have ''return to manufacturer agreements'' with many of these high-end brands.

Eventually, the borrower started defaulting on his payments and ended up being an NPA. The issue that made things more complicated was that they had offered a part of their new shop as collateral, and the annexation of that part would mean that their entire business would be impacted.

While the NBFC and the borrowers had a few rounds of discussions, there was no clear idea of how this issue could be resolved.

PrivateCourt was now contacted to try and resolve the matter

Our Philosophy

नास्ति सत्यसमो धर्मो न सत्याद्विद्यते परम्।

न हि तीव्रतरं किञ्चिद् नृतादिह विद्यते।।

Nāsti Satyasamo Dharmo Na Satyādvidyate Paraṁ.

Na hi Tīvrataraṁ Kiñchid Nr̥tādih Vidyate.

There is no other religion like truth. nothing but the truth. Nothing is more intense than a lie.

सत्य जैसा अन्य धर्म नहीं। सत्य से पर कुछ नहीं। असत्य से ज्यादा तीव्रतर कुछ नहीं।

There is no other religion like truth. nothing but the truth. Nothing is more intense than a lie.

सत्य जैसा अन्य धर्म नहीं। सत्य से पर कुछ नहीं। असत्य से ज्यादा तीव्रतर कुछ नहीं।

PrivateCourt Proceedings

The PrivateCourt Negotiating team, during the assessment, went through the documentation and also understood the decision-making process at the NBFC end during the pre-disbursal period.

What was clear was that the team at the NBFC believed in the borrowers' capabilities and his intent. They also seemed to be quite sympathetic to their ordeal and were open to an amicable solution.

The Negotiating team now took up the discussions with the borrower, and, after a few rounds of discussions, realised that they seemed to have understood the issue and now understood the stock management requirements, though a bit late.

What was also established was that if the tenure of the loan was increased, the respondents would be capable and willing to service the loan and honour their commitments. Having established this, PrivateCourt experts now suggested the restructuring of the loan with an increase of term for 8 months, which would take care of both the missed EMIs and the interest and other charges levied.

The same was presented as a solution to the NBFC and was accepted

The Settlement Agreement

The total outstanding loan of Rs. 3,85,000/-, which was to be paid off within the next 3 years, was now extended further by 8 months, and interest and penalty of Rs. 64,000/- was added on to the same with an increase in EMI of Rs. 4680/- per month.