CaseStudy

Synopsis

This dispute is between an NBFC as the Claimant and the owner of a small-sized transport company as the Respondent. While the Claimant is in the business of providing small ticket-size loans to the blue-collar industry, the respondent owns a private limited transport company. The respondent approached the claimant company to avail of a loan amounting to eight lakhs as he was falling short of this value to add another pair of service cabs to the existing fleet.

Facts

The claimant in this case is an RBI-certified non-banking finance company (NBFC) enabling direct, faster and easier credit access to the blue-collared workers in India. It provides small-sized loan amounts to customers whose requirement is genuine and who exhibit the intention to pay.

If the borrower maintained a clean history of repayments, the claimant NBFC could grant them an opportunity to increase their credit limit which would further improve their credit score and chance to avail of larger loan amounts. The claimant company is now foraying to provide a digital credit card experience for the same target customers through their financial products.

The respondent, a cab driver and now the owner of a private limited company ventured into business by setting up his transport cab service company. The company’s growth plan was to add a pair of cabs to the existing fleet every six months.

For about three years, the business proceeded as per the plan on paper. From starting with three cabs, the company now had a fleet of 15 cars under its ownership. The time had come to add another pair to keep up with this plan.

However, the company faced a huge business crisis when the lockdown struck in the Corona-pandemic phase. There was a sudden shortage of drivers who had to flee town without intimation securing shelter in their hometown. Revenue generation was cut to one-third and even lower and the additional maintenance cost added financial pressure.

It was during the post-pandemic phase when things started getting back to normal that business picked up once again. The respondent with a sharp business acumen realised that demand for private travel would increase and decided to add two more cabs. He fell short of a few lakhs in spite of borrowing from a number of business community friends, and relatives and drawing from personal savings.

Not to compromise on the opportunity, the respondent approached the Claimant company for a loan amounting to 8 lakhs. He was accepted by the Claimant company within 24 hours as he had a very clean financial record and part borrowings showed a clear repayment track.

The repayment plan was structured, and the loan was sanctioned.

The Respondent company paid EMIs per the loan structure and managed to clear the loan amounting to Rs. 6,43,186 plus the corresponding interest. However, payments stopped suddenly and there was no response from the respondent company despite being served several notices and reminders by the claimant.

PrivateCourt was approached by the Claimant by invoking the arbitration clause per the agreement signed between the parties.

PrivateCourt Proceedings

The PrivateCourt team set to work immediately after receiving the invocation notice from the respondent. All aspects of the case were thoroughly vetted by the panel of experts by requesting and reviewing all the relevant documents, including the loan agreement, email exchanges, bank account details, bank statements, WhatsApp notifications, etc.

It was clear that the claimant had complied and taken all the measures required to screen the loan applicant, in this case, the respondent, before sanctioning the loan.

A discussion with the respondent was initiated by the PrivateCourt Case manager. At this stage, it was discovered that the Respondent was kept blinded by his team about the loan repayment and the reminders and notices sent.

On further investigation as advised by PrivateCourt Team, an internal fraud was caught at the respondent’s end. A corrupt accounts official was held responsible and held for siphoning the company’s money, manipulating the account documents, and masking the communication from the owner.

While vetting and scrutinizing the documents, the PrivateCourt team empathised with the respondent and the predicament he was facing. Holding a reputed name in the market, the respondent immediately agreed to settle the matter and requested to pay the outstanding amount with interest in three equal installments.

After a detailed and in-depth discussion with PrivateCourt, the Claimant agreed to restructure the outstanding loan repayment.

PrivateCourt made the Claimant NBFC clear about the respondent’s intention to pay, and a clause was added to the new repayment agreement that with the clearance of this due without any default, the respondent would not be barred from applying for larger loans in the future.

The agreement was gladly accepted and entered into.

The Settlement Agreement

The Respondent agreed to pay the dues of Rs. 1,56,814/- plus 18 percent interest p.a. in three equal instalments on or before 22 November 2022.