Case Title: Vibrus Homes Pvt. Ltd. v. Ashimara Housing Pvt. Ltd
The National Law Company Tribunal has observed that an interest-free security deposit towards an advance license fee qualifies as an operational debt under the Insolvency & Bankruptcy Code, 2016.
The brief facts of the case are that the Respondent 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.
Accordingly, a sum of Rs.32,43,000/- as an interest-free deposit towards the advance license fee was given to the Appellant by the Respondent/ Operational Creditor. The same was contemplated to be interest-free till the end of the license period.
Due to certain lags on the part of the Appellant as alleged, the Respondent withdrew from the arrangement and demanded an immediate refund of the security amount. The same was denied by the Appellant so the Respondent had to move u/s 9 IBC and his application has also been admitted by the Adjudicating Authority.
However, it is the case of the Appellant that according to clause 5 of the Agreement, the security fee had to be refunded at the end of 3-year period and it is wrong to state that the project/agreement was abandoned. Therefore, he has moved the Appellate Tribunal against the admission of application u/s 9 IBC by the Adjudicating Authority.
Clause 5 of the Agreement read thus:-
"5. That the licensee shall pay a sum of Rs.32,43,000 (Rupees Thirty-Two Lacs and Forty-Three Thousand) and interest-free deposit towards the advance license fee and the same will be retained as a security deposit by the licensor till the end of the license period. The security deposit shall be refunded at the end of 3 years i.e. once the entire payment of 3 years is received & under no circumstances shall be adjusted to the licensee at the end of 3 years. In case both parties wish to extend the contract then agreement can be extended with mutual consent."
The Tribunal however observed that an instant case is a situation where although Agreement took place between the parties, but the project could not take off and was abandoned. The fact that it was abandoned is very strongly disputed by the Appellant.
The Tribunal also observed that there is nothing they can do in the instant appeal, and it is upon the Appellant to find a remedy out of this Agreement and approach a forum competent to deal with the said dispute. It has been stated by the Respondent and also admitted by the Appellant that the disputed proceeds were made as an Advance License Fee which forms a part of Operational Debt under IBC. Accordingly, it was found that the Adjudicating Authority was correct in admitting the section 9 application.