The All India Online Vendor Association (AIOVA), a body representing over 2,000 sellers on various online platforms, has issued a legal notice to Chinese ecommerce firm Club Factory to settle all pending dues within 48 hours, failing which it would initiate legal action against the company.
This comes two days after Club Factory suspended its services in India and invoked the ‘force majeure’ clause, putting on hold the settlement of all dues owed to sellers on its platform. The Chinese online retailer did this a fortnight after India banned access to its app and website over security concerns.
The legal notice issued to Club Factory, a copy of which ET has reviewed, said that withholding payments to sellers is in contravention to the Payment and Settlements Act, 2007. It further added that as per a Reserve Bank of India circular dated March 17, 2020, payment aggregators cannot defer settlements to sellers beyond one day after delivery confirmation.
“That your defence to continue this illegal act further by invoking Force Majeure…is contrary to RBI circular dated 17.3.2020 and Payments and Settlement Systems Act, 2009,” the legal notice issued by AIOVA read. “You are hereby called upon by my clients to settle the pending dues to the sellers within 48 hours.”
Several sellers have voiced their concerns over Club Factory’s decision stop settlement of dues until the ban on its app and website is lifted. A person with the knowledge of the matter said that the firm owes around Rs 60 crore to sellers, and over Rs 100 crore to logistics partners it worked with.
AIOVA’s legal counsel Chanakya Basa said that some of the sellers to whom Club Factory owes dues were of the opinion that the Chinese ecommerce firm was using them as bait to mount pressure on the Indian government to reverse the ban on its app and website.
Club Factory did not respond to ET’s query until the time of publishing this piece.
“Marketplaces are bound by RBI directives to keep money collected on sellers’ behalf in escrow. No force majeure can be applied to escrow. In case of non-compliance, we shall be forced to go to court against this misconduct,” an AIOVA spokesperson told ET.
Also Read: Club Factory suspends India business, stops payments to sellers
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