# In the matter of Arihant Retail Private Limited

> NCLT judgment dated 2024-02-16. Citation: TCN-2024-NCLT-02550. GIRIAS INVESTMENT PRIVATE LIMITED filed an application under Section 7 of the Insolvency and…

- **Court:** NCLT
- **Order date:** 16 Feb 2024
- **Citation:** TCN-2024-NCLT-02550
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/arihant-retail-private-limited-41a9ec32

## Summary

### Background

GIRIAS INVESTMENT PRIVATE LIMITED filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate Corporate Insolvency Resolution Process (CIRP) against ARIHANT RETAIL PRIVATE LIMITED. The application stems from a dispute over a security deposit initially provided by GIRIAS INVESTMENT to ARIHANT under a license agreement, which was later converted into a loan agreement. The financial creditor claimed default on the loan, while the corporate debtor did not file a reply despite multiple opportunities given by the Tribunal.

## Facts

GIRIAS INVESTMENT PRIVATE LIMITED (Financial Creditor) and ARIHANT RETAIL PRIVATE LIMITED (Corporate Debtor) entered into a License Agreement on 2014-11-15, where GIRIAS provided a security deposit of Rs. 44,50,000 to ARIHANT for utilizing a shop in Harbour Square. Later, a supplementary agreement was made on 2016-04-01, revising the license fee and providing an additional interest-free deposit of Rs. 2,25,00,000. Due to various issues, including unpaid dues and lack of maintenance, GIRIAS issued a notice on 2022-05-27 demanding repayment of the security deposit. ARIHANT expressed its inability to pay. Subsequently, on 2022-07-15, a Loan Agreement was executed, converting the security deposit and other outstandings into a loan of Rs. 2,71,00,000 with 12% interest,

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## Issues and analysis

### Issue 1: Whether the initial security deposit provided by the Financial Creditor to the Corporate Debtor …

**Ratio:** Section 5(8) of the IBC defines 'financial debt' as a debt along with interest, if any,

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**Reasoning:** The Tribunal reasoned that the original transaction, being an interest-free security

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**Interpretation:** The interpretation of 'financial debt' under Section 5(8) requires a direct

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**Application:** In this case, the security deposit was provided to secure the lease agreement.

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## Parties

- **Judges:** JYOTI KUMAR…; RAVICHANDRAN…
- **Appellants:** GIRIAS INVESTMENT…
- **Respondents:** Arihant Retail…

## Timeline

- **2014-11-15 — License Agr…**: GIRIAS INVESTMENT PRIVATE LIMITED and ARIHANT RETAIL PRIVATE LIMITED entered into a…
- **2016-04-01 — Supplementary Lease…**: A supplementary agreement was made, revising the license fee and providing an additional…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 5(8) — Definitions](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-5)

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