Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: VAT Audit :: list of goods taxed at 4% :: ARTICLES ON INPUT TAX CREDIT IN VAT :: due date for vat payment :: Central Excise rule to resale the machines to a new company :: TDS :: cpt :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: TAX RATES - GOODS TAXABLE @ 4% :: empanelment :: VAT RATES :: form 3cd :: ACCOUNTING STANDARDS :: ACCOUNTING STANDARD :: articles on VAT and GST in India
News Headlines »
 CBDT releases Income Tax Return statistics for last two fiscals
 CBDT issues second round of Certificates of Appreciation to tax payers for their contribution towards Nation building
 FinMin looks at cut in corporation tax
 Draft Rules for prescribing the method of valuation of fair market value in respect of the trust or the institution-Chapter XII-EB of the Income-tax Act, 1961- reg.
 India is moving towards a flawed GST
 ICAI to organise two-day international conference in Hyderabad
 Here's how to calculate tax payable on your capital gains
 Income Tax calculations for the financial year 2016-17
 CPE Events 17 October - 22 October 2016
 High Court raps I-T Department for wrong tax demand
  CBDT signs 5 advance pricing pacts with Indian taxpayers

Arbitration route for resolving rows
July, 05th 2006

If dispute resolution institutions are nominated even when customers enter into transactions with banks, NBFCs and other business enterprises, then the resolution process becomes simple, quick, efficient and less expensive than through traditional civil courts.

It has become increasingly common for business enterprises, especially those in the finance sector, to engage people who are euphemistically referred to as "debt collectors" or "bill collectors," to collect outstanding dues from customers.

The Tamil Nadu State Consumer Disputes Redressal Commission, in a judgment delivered last year, frowned on this practice and referred to such "Bill Collectors" as thugs and hirelings and lamented the propensity of even reputed business enterprises to not follow the course of law and instead hire such people to recover their dues.

A case in point

In the given case, the first complainant, an NRI, availed himself of credit card facility from a reputed bank. He always maintained sufficient amount in his balance and further issued standing instructions for payment of credit card dues in his wife's (the second complainant) name from his NRO account.

The second complainant was shocked to receive a telegram from the bank stating that a cheque for Rs 27,022.35 had been returned for insufficient funds. The complainants were sure that they had never issued any such cheque and informed the bank accordingly. The bank, however, sent its "bill collectors" to the complainant's house demanding payment and behaving in an undignified manner.

The complainants filed a complaint with the State Consumer Disputes Redressal Commission alleging deficiency in service and claiming compensation of Rs 20,00,000 from the bank. The Commission, finding that no valid defence was put forward by the bank, suggested that the bank ask the manager to tender an apology to the complainant in the open court. The manager did not appear before the Commission, which proceeded to pass an order holding the bank guilty of deficiency in service and directed the bank to pay a compensation of Rs 20,00,000. More than this order, the observations of the Commission on the general tendency of business enterprises to engage the so called "Bill collectors" to recover their dues is noteworthy.

TN Consumer Commission ruling

The Commission observed: "To employ thugs and hirelings and send them to the house of borrower and threaten them is a despicable act... that the Opposite Party has degraded themselves to such a low point would show that they do not believe in democratic ways or legal method but are only too happy to flex their muscles in their attempt to collect the amounts due to the banks. It is an exhibition of mafia mentality. It is high time the Reserve Bank of India takes note of it and comes down severely upon such banks. We would even suggest that they do not hesitate to cancel the licence of such banks."

The matter is now pending in appeal before the National Consumer Disputes Redressal Commission. However, the RBI has taken note of the observations of the State Commission and has, at least partly, responded by directing all NBFCs to compulsorily provide for dispute resolution mechanisms. One wonders why a similar directive has not been issued to nationalised and private banks.

It is disturbing that even reputed business houses are pushed to resorting to engaging "bill collectors" to recover dues, largely on account of loss of confidence in the legal system. True, that the conventional legal system hardly aids quick recovery. However, the facilities introduced through the Arbitration and Conciliation Act, 1996, particularly the recognition it has accorded to institutional dispute resolution, has largely passed unnoticed by industry.

Pros of institutional DR process

Business enterprises and commercial establishments would do well to take note of the advantages of the Institutional Dispute Resolution (DR) processes. The Nani Palkhivala Arbitration Centre, for instance, is a non-profit institution established to render assistance in resolving disputes, primarily through arbitration and other dispute resolution methods. It is recognised by the Madras High Court.

If such centres are nominated as dispute resolution institutions when customers enter into transactions with banks, NBFCs and other business enterprises, then if disputes occur, the resolution process becomes, simple, quick, efficient and less expensive than through traditional civil courts. Besides, under the Arbitration and Conciliation Act, 1996, a decree passed by the Arbitrators can be set aside only on very limited grounds. The other positive feature is that the decrees passed in arbitration proceedings may be executed as a decree in court.

In addition to all this, the real benefit of adopting such a system is that even within the broad framework of arbitration proceedings, parties can resolve disputes through mediation and conciliation. It is, therefore, better for industry to look at such means of resolving disputes with customers, rather than using strong-arm tactics, which in addition to inviting disrepute is blatantly illegal as the State Consumer Commission, Tamil Nadu, so effectively, pointed out.

Taking a cue, the Confederation of Indian Industry (CII) has arranged a workshop on "Resolving Disputes through Institutional Arbitration" in Chennai to create awareness among industrial establishments about the benefits of resorting to Institutional Dispute Resolution systems. This is a positive step forward, which hopefully other branches of industry will benefit from.

N. L. Rajah
(The author is a Director of Nani Palkhivala Arbitration Centre)

Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Software Development Software Programming Software Engineering Custom Software Development Requirement Based Software Development Software Solutions Software Serv

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions