Online seller group AIOVA asks Chinese e-retailer Club Factory to clear dues in 48 hours; sends notice

Club Factory was among the 59 Chinese apps banned by the government recently.

Credit and Finance for MSMEs: Online sellers’ association All India Online Vendors Association (AIOVA) on Thursday sent a legal notice to now-banned Chinese e-commerce company Club Factory in India for putting on hold payments to its sellers despite orders being delivered to customers. The notice sent by AIOVA’s counsel Chanakya Basa to Futuretimes Technology India Private Limited, which operated Club Factory, said that the association has, “received numerous complaints from sellers selling on your platform about your alleged default in settling dues despite the delivery of goods to consumers.” A copy of the notice was reviewed by Financial Express Online.

Citing clause 8.4 of the RBI circular ‘Guidelines on Regulation Aggregators and Payment Gateways’, the notice added that no payment aggregator can defer the settlement beyond the time period of ‘Td+1’ in case of the seller is responsible for delivery. Td is the date of confirmation by the merchant to the intermediary about order 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,” Basa told Financial Express Online. AIOVA represents over 2,000 sellers selling on Amazon, Flipkart, Snapdeal, Club Factory etc.

AIOVA also asked Club Factory to clear sellers’ dues within 48 hours of receiving the notice “failing which my clients will initiate appropriate legal action against you making you liable of all costs and consequences thereof.” “In case they don’t settle dues, we will formally lodge a complaint with the RBI which is adjudicating authority in this case,” Basa added.

Comments from Club Factory for this story are awaited.

Also read: Now pay only partially while ordering on Flipkart as company launches new payment mode to reduce returns

The notice came just days after Club Factory, which has more than 30,000 sellers, had temporarily suspended its operations and stopped sellers’ payments – over two weeks after the government had banned it along with 58 other Chinese apps. The company in an email to sellers had told that their payments have been “put on hold until the ban of the Club Factory app and website is lifted.” However, it assured them that payments would remain safe without any impact of the ban. Other banned Chinese e-commerce companies including Romwe and Shein had also suspended their operations on July 7 and July 11 respectively, according to the information available of their respective websites.

Club Factory had collected amount from customers for their prepaid orders but couldn’t deliver them as sellers, who have pending dues, weren’t ready for delivery as they feared their payments won’t be cleared, a source aware of the matter had told Financial Express Online. The company also owed a large amount to multiple courier partners and had stopped making payments to them except few small payments released from time to time to portray that payments are being made, the source had said.