PRO TIP when you face a Business Conflict

Craft Clear Agreements: When an agreement is reached, ensure it's crystal clear. Clearly articulate the terms, responsibilities, and consequences. Clarity prevents future disputes and lays a solid foundation for cooperation.

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Trading Company V. NBFC

Date of Claim raised:15/02/2022
Date of Conciliation: 10/03/2022
Date of Settlement: 16/04/2022
Digest: Mediation/Conciliation/Dispute/Claimant/Respondent/Invoice/Settlement
Case Summary:

This dispute arose between a trading company and an NBFC, both based in Uttar Pradesh. The Claimant is an NBFC in the business of providing packing credit and bill discounting services to SMEs. The Respondent is a trading company, which is in the business of distributing sodium bicarbonate to plastic product manufacturers in the north of India. The respondent had borrowed an amount of Rs. 1,63,000/- from the claimant for a consignment imported against a purchase order of Rs. 2,86,000/-. While the credit was given for a period of 90 days, the respondent failed to pay back, stating reasons for the non-receipt of payments from his buyer. Courtesy of another 30 days extension was given by the claimant, which again was breached.

The Issue:

The claimant, in good faith, had agreed not to levy any extra penal interest for the credit line extension for 30 days. Despite this gesture, the respondent did not make good on his promise and defaulted further with only a part payment of Rs. 30,000/- with a further request for an extension, with no clear date of closure. The Claimant approached PrivateCourt for settlement.

The Process:

The negotiator, in this case, went through all agreed terms and conditions between the parties and concluded that the respondent had indeed overshot all deadlines of payment and did not have a clear plan for repaying his debts. The loan being unsecured had also aided in his complacency. The negotiator, in his conversation with the respondent, made it clear to him that there could be an impact on his credit scores in the future, and the claimant could inform his other creditors, where he enjoyed credit limits, to make his account substandard. This, in the long run, would affect his ability to procure any credits from the market, which is essential in his line of business. The respondent was asked to settle the amount in full, which he agreed to.

The Settlement Terms:

The following terms were agreed upon:

The respondent to pay the remainder i.e. Rs. 1,33,000/- of the amount in two equal instalments of Rs. 66,500/- each on 16th March 2022 and on 16th April 2022 respectively.

The Inference:

At times, effectively communicating the ill effects of payment default to respondents with legal and business precedents helps settle issues effectively and quickly.