Interest Free Security Deposit Is An Operational Debt: NCLAT

Vibrus Homes filed an appeal under Section 61 of the Code before NCLAT against the order dated 21.12.2021 of NCLT New Delhi wherein NCLT initiated Corporate Insolvency Resolution Process against Vibrus Homes Pvt. Ltd.

Brief Facts

Ashimara Housing is engaged in the business of providing accommodation to students in the form of modern hostels and accordingly certain terms were agreed between the parties vide email dated 29.04.2019 wherein it was agreed that Vibrus will provide 136 beds facility at Shakti Nagar, New Delhi to Ashimara at the monthly license fee of INR 15.98 Lakhs and a security deposit in the form of 4 months license fee would be payable by Ashimara on 01.07.2019.

Simultaneously, an operation and management agreement was agreed upon between the parties and amount of INR 32.43 Lakhs was paid to Vibrus by Ashimara as an interest free security deposit towards advance license fee. Since, there was an unreasonable delay on the part of the Vibrus Homes to handover, Ashimara withdrew from the project and demands the payment of INR 32.43 lakhs from Vibrus Homes.

Thereafter, Ashimara filed a petition under Section 9 of IBC against Vibrus which was admitted by NCLT vide its order dated 21.12.2021

Contentions Of Vibrus Homes

It was contended that the amount claimed by Ashimara was only a security deposit which can be returned by the Vibrus only at the end of three years period and therefore, does not qualify as an operational debt.

Decision By NCLAT

NCLAT observed that it is open for the parties to take legal proceedings as permitted as permitted in law and in the payment made towards advance license fee is an operational debt.

"In view of the fact that the payment made was initially towards the advance license fee it was an operational debt, the Adjudicating Authority has rightly admitted the application under Section 9."

Accordingly, NCLAT dismissed the appeal filed by Vibrus.

Case title: Vibrus Homes Pvt. Ltd. versus Ashimara Housing Pvt. Ltd

Counsel for Appellant: Mr. Tarranjit Singh Sawhney and Mr. Udit Gupta, Advocates

Click Here To Read/Download Order