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Online vendors’ collective sends legal notice to Club Factory for defaulting on dues to sellers


All India Online Vendors Association (AIOVA), a lobby of online retailers, sent a legal notice Thursday to Chinese e-tailer Club Factory — one of the 59 platforms blocked by the Indian governmentlast month over national security concerns — for defaulting on its dues to sellers. Club Factory on Wednesday reportedly suspended all payment settlements for its Indian sellers till it remains banned in the country. The platform had around 30,000 sellers in India.

The notice said that by defaulting on payments, it was violating the Reserve Bank of India’s Guidelines on Regulation of Payment Aggregators and Payment Gateways. AIOVA said that they will initiate legal proceedings if the dues are not cleared within 48 hours. “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 mis conduct,” AIOVA said in a statement to MediaNama.

AIOVA’s legal notice, which has been filed though its counsel Chanakya Basa, alleged that Club Factory sent an email to Indian sellers invoking the force majuere (unforeseeable circumstances that prevent someone from fulfilling a contract) clause, citing the Indian government’s decision to ban the platform along with several others as the reason.

Club Factory’s “present action of not settling the dues despite they delivering of  goods to consumers is a clear violation of Reserve Bank of India (RBI) circular dt.17.03.2020, “Guidelines on Regulation of Payment Aggregators and Payment Gateways”, the legal notice said. In particular, it said that Club Factory was in violation of clause 8.4 of these guidelines, which say that a payment aggregator cannot defer the settlement beyond the time period of one day beyond the date of confirmation by the merchant to the platform about the order’s delivery to the customer.

“The penalty for violation of the said act includes imprisonment upto 10 years along with monetary fines, making the director, manager, in charge personally liable  under whose supervision the contravention took place,” AIOVA said in the notice. It also said that Club Factory’s platform agreement was null and void since it is contrary to RBI’s payment merchant guidelines and the Payment and Settlement Act, 2007.

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