A group of Indian sellers through Aiova — an association of online merchants — has sent a legal notice to Chinese e-tailer Club Factory for suspending all payment settlements till the ban on the platform continues here. Club Factory is one of the 59 Chinese apps banned by the government. On Tuesday, 14th July, Club Factory, which has now temporarily paused operations here, told its Indian merchants that it will settle existing dues only after the ban is lifted, triggering anger and anxiety from sellers. It has about 30,000 registered Indian sellers.
Aiova’s legal counsel Chanakya Basa said they have asked Club Factory to settle dues in 48 hours. Failing which, the association will have to consider the next course of action. He also felt pausing settlements until the ban is lifted could be a ploy to nudge the government to exempt the platform’s operations.
According to the notice, putting all settlements on hold due to the ban is in violation of the Payment and Settlements Act, 2007 and as well as against an RBI circular issued in March, which says payments to merchants need to be settled within one day of delivery confirmation of goods.
“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. Therefore, you are hereby called upon by my clients to settle the pending dues to the sellers within 48 hours,” the notice sent on Thursday said. An email to Club Factory did not elicit any response.
Since Tuesday’s development, sellers have expressed concern online over their dues, critical capital for them amid the pandemic. Typically, these are third-party independent sellers of smaller scale, unlike entities like Cloudtail or Tech Connect, that are one of the largest sellers on Amazon India and Flipkart, respectively.
“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,” a spokesperson of Aiova said.