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NBFC V. Businessman

Date of Claim Raised: 19/10/2020
Conciliation / Arbitration Date 1st Hearing: 25/11/2020
Date of order / Settlement: 07/05/2021

A self-employed businessman (the respondent) from Andhra Pradesh, India, entered into a financial loan agreement with a Mumbai-based NBFC (claimant). A Personal loan for financial assistance was taken by the respondent from the claimant, following which a dispute regarding the non-execution of the agreement and related financial loss cropped up; the parties initiated mediation, and PrivateCourt was appointed as the mediation channel due to their strong experience in financial contracts mediation.

The Covid wave has shown a spike in the number of defaults in loan repayments and more so in cases of unsecured loans. Though the NBFC has been cognizant of the fact that most people are struggling and have been compassionate regarding the imposition of the penal charges, the respondent seems inclined to not pay the amount back.

The Issue

Despite repeated reminders and, at times, personal visits by the company's employees, the respondent did not respond. There was an offer from the company to restructure the balance due, which was accepted by the respondent and yet remained unpaid.

The claimant approached PrivateCourt to arbitrate the issue for the loan to be settled soon as this case was lingering for over a year and a half.

PrivateCourt, in this case, had to coax the respondent to make himself available for the discussion. The dates were set, and the arbitrator made himself available post-working hours to make sure that the respondent did not have a reason not to attend.

The respondent started the discussions with his appeal for a time as he was apparently trying to come out of his downfall due to the pandemic, which the arbitrator did take cognizance of. He explained the dues, and all calculations of the loan statements were explained; a total outstanding of Rs. 2,23,554/- was also explained, including the break-up of the principal amount, interest and penalties.

The Award

The arbitration concluded that the claimant had done everything in his power to be considerate towards the respondent, and no further leeway could be given. It was agreed that the respondent would pay the total dues i.e. a sum of Rs. 2,23,554/- together with 18% interest p.a. till realization of the dues, and additionally, Rs.15,000/- towards charges of arbitration in three equal installments failing which the respondent would face legal charges under willful default. The first payment was to be due immediately, and the remaining within 30 and 60 calendar days from the same.

The Inference

In most cases of unsecured loans, the borrowers tend to ignore advances from the employee/collection agents of lenders as they feel there would not be much of a legal impact on them. However, arbitration documents, all communication, and agreements made in such cases are more impactful.