Case Summary
This dispute is between an Agro Products manufacturing company (Claimant) and a food exporting company (Respondent), both based in Rajasthan. While the Claimant is in the business of agro-based food production, the Respondent is a distributor for the same in the local and foreign markets.
The deal that was struck between the two companies was that the Claimant would supply the Respondent with export quality material, which in turn would be white labelled by the Claimant for the foreign market. A third-party company was assigned to approve quality while packing at the Claimant's premises.
The produce was to be supplied in three batches, and the total value of the products ordered was worth Rs. 1,00,00,000/-. While there were no advances paid and no letter of credit raised, the payments were to be made 15 days past the delivery of products at the Respondent's address. While the first couple of batches arrived and were paid for, the third batch was delivered but not paid for even post 30 days from the date of delivery.
The Issue
The Respondent had placed the order with the Claimant based on the LC received from his overseas buyer. This LC was to be encashed Freight On Board, which would take him a period of 10 days from the date of procurement of materials.
The issue arose when the materials of the last batch that were stored at his facility went bad, and the produce was rejected by his buyer. The initial objection that he raised was that the product was not up to standards; hence, he denied the payment.
When countered with the fact that there was a third-party quality approval given on his behest, the Respondent ducked the discussions. The issue was subsequently addressed to PDR COURT for settlement.
The Process
The Mediator established the legitimacy of the claim; while the discussions were initiated, the malice in the Respondent's approach was evident.
The Mediator then explained to the Respondent that the Claimant could approach the Exim bodies and lodge a formal complaint, and also alert the supplier's cooperatives — actions that would be detrimental to the image of the Respondent's company and hamper further business.
Realising the difficulties that he could face, the Respondent requested a deferred payment term, to which the Claimant agreed.
The Settlement Agreement
The Respondent agreed to pay the outstanding amount of Rs. 61,54,041/- within 6 months from December 2021, on or before the end of June 2022.
The Inference
Understanding the intentions of parties involved in a negotiation and then manipulating a settlement at times can be tricky and made possible only by a seasoned negotiator.
This case highlights how a mediator's grasp of commercial leverage — such as the reputational and relationship risks the Respondent stood to face with Exim bodies and supplier cooperatives — can move a reluctant party toward a fair and enforceable settlement without the need for prolonged litigation.
