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Textile Manufacturer V. Wholesaler

Date of Claim raised: 09/07/2021
Date of Conciliation: 06/08/2021
Date of Settlement: 06/08/2021
Digest: Mediation/Conciliation/Dispute/Claimant/Respondent/Invoice/Settlement
Case Summary:

This dispute arose between a Pvt. Ltd. company, referred to herewith as the Claimant, based in Mumbai, engaged in textile manufacturing, and a wholesaler based in West Bengal, referred to herewith as the Respondent, engaged in wholesale trade.

Credit-based sales are a norm in the industry, and payments are received 30 to 60 days post-delivery of products. The parties involved in the dispute have had a long-standing business relationship and have been transacting for a few years now. The respondent has been reasonably responsible for paying dues on time with give or take a few days. This dispute occurred as the respondent tried his hand at exporting the products with not much payment securities and lost the consignment putting a wrench in his cash flow. The claimant approached PrivateCourt to settle this issue.

The Issue:

The respondent saw an opportunity at exploring a new market overseas, and without too much thought and plan at hand, he tried to export products abroad. The dispute arose when the respondent got duped in his export order and did not receive payments from his buyer. Things got worse for the respondent as he had not insured the deal and had no way of getting his money from the buyer. The claimant now had no other way but to look at litigation or hope that the dispute be settled via mediation.

The Process:

The negotiator ascertained the basis of the dues by closely reviewing documents submitted by both parties. The documents included the Bill of lading, Ledger accounts, Outstanding invoices, Email conversations, Purchase orders, Whatsapp chats, etc.

The liability on the part of the respondent was established, and his intention to almost delay payments indefinitely was established. The negotiator, in this case, explained to the respondent how this can lead to litigation and more so, tarnishing his image in the market would restrict his ability to procure any credit from the manufacturers in the future. The respondent, after explaining his predicament, asked for a differential payment option. The same was extended to him post consultation with the claimant, following which the terms of settling the payment were agreed upon.

Terms of Settlement

The Respondent has agreed to pay the outstanding amount of Rs. 51,713/- by a bank transfer to the Claimant’s bank account on or before 06/10/2021. The schedule of payment is as below:

Rs. 25,000/- on or before 06th September 2021
Rs. 26,713/ on or before 06th October 2021.
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.

The Inference:

The negotiator here could bring sense to the respondent that avoiding payments can be damaging for his business as manufacturers' associations can take cognisance of his default and make business difficult for him. The negotiator also advised him to go to organisations like the ECGC to ensure payment guarantees in the future if he undertook any export orders.