Cash crunch leads to defaults

New Delhi

July 7, 2008

In view of the increase in payment defaults that is further leading to credit
crunch in the market, Progressive Channel Association of Information Technology
(PCAIT) has circulated a mail among its members warning them not to extend
credit without proper financial planning and thorough information about the
concerned party. In addition, PCAIT is assisting another Delhi-based association
Computer Media Dealers Association (CMDA) Delhi to lodge a complaint with
Economic Offence Wing (EOW) against a Janakpuri-based partner who allegedly
duped certain members of CMDA to the tune of Rs 50 lakh.

Sharing details about the mail, Saket Kapur, Secretary, PCAIT mentioned, “There
have been several instances in the recent past when IT associations across the
country informed PCAIT about fraud cases and problems that their members are
facing. These problems were pertaining to lack of liquid cash in the market. So
we resolved to circulate a mail warning our members to be cautious before give
out goods on credit.”

Kapoor mentioned that the cost of doing business is going up as the rent for
premises has increased by two to three times in the past. Not to mention, the
cost of hiring employee is also increasing. “Inflationary pressure, rising
cost of fuel and electricity is leading to a massive credit crunch in the IT
market and there have been instances of fraud and payment defaults in the last
few months,” he added.

CMDA Delhi on the other hand is making every effort to support those members
who have been allegedly duped.

Citing instances of a Janakpuri-based partner and a similar instance in Nehru
Place, the parties that have defaulted payments and in turn filed cases against
the members who raised their voice against their faulty practices, V Krishnan,
Executive Secretary, PCAIT stated, “The Nehru Place partner allegedly duped a
group of partners in New Delhi and then leveled allegations of harassment and
threat to life and property against them. The Janakpuri-based partner allegedly
failed to pay back amounts to the tune of Rs 50 lakh to certain members of CMDA
Delhi. Further more the proprietor has also filed a case against partners
mentioning that they have been threatening and harassing him.”

Krishnan further added that when approached by CMDA Delhi members, PCAIT
assisted them in bringing the matter to the notice of EOW.

Elaborating further, Puneet Singhal President, CMDA shared, “The payment
default and credit crunch matter is worsening with every passing day and hence
the association resolved to warn its members before extending credit to anyone
in the industry. He further added that the vendors and the distributors would
have to look into the situation and revise the targets so that there is less
pressure on tier-2 partners. With rising inflation, hike in the lending rate of
banks and shrinking margins, dealers are being left with no choice but to look
at businesses other than IT.”