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NBFC V. Small Business Owner

Date of Claim raised:15/02/2022
Date of Conciliation: 02/03/2022
Date of Settlement: 15/04/2022
Digest: Mediation/Conciliation/Dispute/Claimant/Respondent/Invoice/Settlement
Case Summary:

This case is a dispute between an NBFC and an individual based out of Delhi. The Claimant is an NBFC, which is in the business of giving unsecured loans to small business owners, and the Respondent is an individual running a grocery shop in the northern part of the city. While the loan of Rs. 5,00,000/- was given to the respondent basis his turnover for a period of 5 years in 2019, he stopped paying his EMIs in late 2021 as he ran into some health issues. The NBFC had approached him for repayment, and post three missed EMI payments, the loan got marked as a Non-Performing Asset. The NBFC did give him some respite as he was hospitalised and did not charge a penal interest during the period of his hospitalisation. However, post six months of non-payment of EMIs, the company had no option but to move into legal litigation, and PrivateCourt was approached to mediate a settlement before moving to court.

The Issue:

While the borrower had every intent to pay, he had been struggling with his health and had to go into long-drawn therapy for recovery. While both parties had genuine consideration for each other, no midway could be achieved.

The Process:

In this case, there were very minimal interactions required with parties, and the mediator had to come up with a way to resolve the issue. What the mediator established was that unless the repayment started quickly, the loan would become bad debt and would affect the books of the NBFC and its standing, therefore. The respondent had every intention to pay and had requested some reprieve. The mediator suggested some changes, and an agreement was reached.

The Settlement Terms:

The NBFC agreed to write off all interest charges and only collect the remaining principal amount. Hence, the agreed amount to be repaid was Rs. 1,60,000/- instead of Rs. 2,23,325/-, the same to be paid in two equal instalments on or before 15th April 2022, and the dues to be written off in the books.

  • The first instalment of Rs. 80,000/- payable on 15th March 2022
  • The second instalment of Rs. 80,000/- payable on 15th April 2022

The same was accepted gladly by the respondent.

The Inference:

In this case, writing off a bad debt meant that the loan would be substandard at even 50% of the principal value, and it would have been a bane on the respondent's side as well. The Mediator understood this and made sure that both parties came out of the deal with minimum losses.