Online vendor body issues notice to Club Factory over non-payment of dues

All India Online Vendors Association (AIOVA), the trade body for online sellers, has served a legal notice to banned Chinese ecommerce app Club Factory to clear the dues it owes its sellers within 48 hours. 

In an email earlier this month, Club Factory told the sellers on its platform that it had to invoke force majeure, suspending the settlement of their dues till the issue of the June 29 ban by the Indian government was resolved. 

The legal notice by AIOVA states that the action undertaken by Club Factory is in violation of a circular issued by Reserve Bank of India on March 17 under the Payments and Settlement Systems Act. Failure to comply with the settlement of dues will invite legal action by AIOVA against the company, said the notice, a copy of which was reviewed by TechCircle. 

Club Factory did not respond to email queries sent by TechCircle. The news was first reported by The Economic Times.

To be sure, TechCircle in June reported that payments for Club Factory’s vendors, which include affiliate partners, logistics companies as well as sellers, have been irregular since Covid-19 broke out in China around January. The company cited the pandemic as the reason for delay and promised to pay its partners by June. 

The Hangzhou headquartered company, which launched its operations in India in 2018, is also being probed by the Directorate General of GST Investigation over alleged non-payment of GST on sales, tax evasion and bogus invoicing, among other charges. Earlier this month, officials from the department questioned top executives at Club Factory in this regard and extended the investigation to the company’s logistics partners, confirmed sources directly aware of the developments. 

Specific email queries sent to Club Factory regarding the ongoing investigation did not elicit a response till the time of publication.

Additionally, the company suffered huge losses about a year ago for misusing the ‘gift-route’ to evade paying customs duties on imports from China. A complaint on a FEMA violation was also filed with the Enforcement Directorate against Club Factory in June.