Club Factory, which was one of the apps banned by the Centre, said that seller dues will not be settled until the ban was lifted.

Club Factory website displaying products
Atom Legal Friday, July 17, 2020 - 09:49

A day after Chinese e-commerce platform Club Factory told sellers that it will be putting settlements on hold till the ban on it is lifted, the All India Online Vendors Association (AIOVA) sent a legal notice to the platform for defaulting on its dues. 

This comes after Club Factory, which was one of the 59 Chinese banned by the Indian government, suspended operations on Tuesday. It also informed sellers that the settlement of their dues are being put on hold until the ban is lifted, invoking the ‘force majeure’ clause. The platform left thousands of sellers in the lurch due to pending payments. 

"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 said. 

AIOVA issued a legal notice to Club Factory for defaulting on dues, which it said was a violation of RBI’s circular pertaining to guidelines on the regulation of payment aggregators and payment Gateways. AIOVA said that they will initiate legal proceedings if the dues are not cleared within 48 hours. 

“ clients [AIOVA] have received numerous complaints from sellers selling on your platform about your alleged default in settling dues despite the delivery of goods to consumers,” the notice stated. 

The notice cites clause 8.4 of the RBI circular and added 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. 

“They said they are invoking the force majeure for the default of the payment to sellers. All we are saying is to the extent the force majeure clause itself is not applicable because the old contract is null and void as it is contrary to the legal provision that is the RBI circular,” AIOVA’s counsel Chanakya Basa told Financial Express.

Club Factory was one of India’s most popular e-commerce platforms and reportedly had nearly 30,000 sellers on its platform. Earlier, an AIOVA spokesperson told TNM that with the suspension of operations, payments of all sellers were impacted, with some having dues of a few lakh rupees.