In the last one year, defaults in the industry have been increasing and touched over ₹6,500 crore
Manoj Shekhani, Proprietor of Gold Coin, a Mumbai-based manufacturer of ladies’ bottom wear is a relieved man as he has managed to recover ₹6 lakh out of ₹10 lakh default accumulated due to Covid disruptions. He is expecting to receive another ₹1.5 lakh in next two months as the industry is slowly limping back to normalcy.
“We are completely dependent on the distributors appointed in each State. After the Covid outbreak, some of the small retailers have shut shop and many threatened to return the goods if deep discounts are not offered,” said Bagga.
Traditionally, the micro and small manufacturers-led domestic garment industry is plagued by extended credit terms, often accompanied by unfair and arbitrary return of goods and unauthorised deductions made during final payments.
The series of Covid pandemic induced lockdown and sharp fall in demand has hit the ₹6.5 lakh crore garment industry. In the last one year, defaults in the industry have been increasing and touched over ₹6,500 crore.
Most of the dues are foregone by clothing manufacturers as they do not have the financial power to take a legal recourse. In order to provide a helping hand, CMAI had formed an internal committee to effectively handle the crisis.
However, the absence of legal backing to orders pronounced by the committee has been one of the big challenges and most often delayed the entire recovery process.
Taking a step forward amid increasing defaults, CMAI will launch a separate Arbitration Cell led by Committee Chairman Nirav Sanghavi with legal assistance of Shaunak Thakker, Lawyer and Fellow of the UK Arbitrators. The Association also plans to include retired Supreme Court and High Court judges to provide legal assistance.
Rajesh Masand, President, CMAI said the Panel of Arbitrators will also include leading members of the industry with impeccable credentials, legal luminaries and individuals of high repute besides members from other Trade Associations from across the country.
The Arbitral Institutions do not require a license or court permission but have to frame its Rules of Procedure for arbitration hearings, administration to assist the process and associated cost.