Choose the Right ADR Method: Different conflicts require different approaches. Whether it's mediation, arbitration, or negotiation, select the ADR method that aligns with the nature of your dispute. One size doesn’t fit all.
A loan agreement was entered into between an NBFC and an individual. Headquartered in Gurgaon, this new-age Private limited finance company provides business loans to small and micro enterprises across India. The individual needed the fund to expand his business at a new location and scale his business rapidly. The loan was procured in 2018 for a sum of Rs. 6,00,000/-. For two years, the business owner managed to pay off the monthly instalment as agreed upon; shortly thereafter, the payments stopped altogether.
The NBFC filed an action for breach of contract against the business owner after receiving no response to the notices and payment reminders sent to him repeatedly.
Realising his financial default and liability and the impact that it would have on his business, the individual decided to settle the matter through a Mediation partner.
The finance party accepted the request and decided to resolve the dispute by mediation with PrivateCourt.
If you run a business, there are several reasons why you may need a loan. In 2018, a small enterprise owner needed extra capital to open a new branch in another potential city. He decided to procure a Business loan as it would help in meeting his working capital requirements and expanding the business. In addition, it would help him in maintaining the cash flow.
In 2018, the business owner, having a clean financial record, managed to get the funding through a well-established NBFC, for a sum of Rs. 6,00,000/-. For two years, the monthly installments were paid timely. However, in 2020, the borrower's business was hit by the global pandemic; overnight, his business witnessed a revenue drop of 70 percent, following which the claimant was unable to clear a single instalment. This led to an outstanding amount of Rs. 3,62,000/.
In this case, Mediation was initiated by the business owner as he wanted to settle the matter amicably and didn't want this financial default to tarnish his name, reputation and future business in the market.
PrivareCourt was approached for Mediation. After an in-depth discussion with the applicant, PrivateCourt requested a discussion with the NBFC. The NBFC reluctantly agreed as the applicant had a decent track record until leading up to the pandemic.
The mediator went through the outstanding loan statements and payment history. What he was able to establish was that there was a flaw in the way the interest and outstanding were calculated and that NBFC had not accounted for the RBI-issued moratorium of 6 months with no penal interest toward the account. This discovery itself sent the NBFC on its back foot. Besides, the mediator explained the situation of the customer and asked for a small discount on the loan requesting a lump sum settlement of Rs. 3,00,000/- towards the loan. The NBFC was also convinced by the negotiator that it was in its best interest to collect the dues at this stage as the borrower would need to liquidate some assets at distress value and soon go under the post for which recovery of unsecured loans may become an issue.
A settlement was reached with the correction of the moratorium interest of Rs. 32,800 and another risk of Rs. 30,000 towards penal interest charges. The remaining Rs. 3,00,000/ is to be paid in 2 equal instalments within 30 days of each other.
The first instalment of Rs. 1,50,000/- to be paid on or before 15th April 2022
The second instalment of Rs. 1,50,000/- is to be paid on or before 15th March 2022.
The terms also included: If the Respondent breached the above-mentioned terms, then he shall be labelable to pay the entire amount from the date of default along with 18% interest p.a.
In this case, the initiation for mediation was made by the borrower, which is seldom the case. However, he benefited as PrivateCourt helped him spot an error at the lender's end, which helped ease negotiations.
