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)