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NBFC V. A self-employed resident of India

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

Arbitration is a part of any dispute arising between parties to an agreement. Courts also encourage this practice like this, to some extent, as it helps issues and disputes to be resolved without clogging the already burdened legal system. PrivateCourt, in this case, goes even further to help the cause as the courts do not have to even appoint an Arbitrator.

In this case, the claimant is a Private Limited Company incorporated under the Companies Act, 1956; it is registered as an NBFC as per the provisions of the Reserve Bank of India Act, 1934. The business revolves around giving out secured and unsecured loans to individuals and businesses. Arbitration arises mid-way, especially in cases of loan defaults as this is where even the borrower gets to put through his points and access his records and see the charges or penalties levied on him.

The respondent, in this case, is an individual resident of India who is self-employed. The NBFC lends him an unsecured loan of Rs. 5,00,000/- for a period of 5 years @10.99%/year. The respondent had managed to pay EMIs regularly for most of the loan tenure but, as in many cases post-pandemic, could not manage to keep up, leading to an unpaid dispute amount of Rs. 48, 468/-. In this case, the individual had also opted for the moratorium extended by RBI during the lockdown. While he had been avoiding calls and all initiations from the NBFC’s side to come to a settlement, he was avoiding all such advances. It is also noteworthy that he had missed 3 previous dates for arbitration on this case, even with PrivateCourt.

The Process

The Arbitrator looked at all documents submitted in this case, viz. the statement of claim, loan agreement, board resolution, statement of accounts, and notice of invocation of arbitration. Once the claim was established and the respondent made himself available, the arbitrator explained the details to him. He was made to understand the repercussions of not paying his dues and the compounding interest, which he would have to pay.

The Award

The NBFC’s claim being accurate, the claim was awarded 18% interest p.a. with a penalty @0.5% p. a. Also, Rs. 15,500/- as the cost of arbitration proceedings was added to the outstanding amount. However, considering the request of the respondent, he was allowed to pay the total outstanding in 3 equal instalments with no additional levy for this period.

The Inference

This case, if it had proceeded to the legal system, would have been dragged on for months, and special courts that are set up for such disputes are also generally overcrowded, especially in this post-pandemic phase. The arbitrator here was able to resolve the matter quickly, helping the claimant reduce the cost and time for the same.