# In the matter of Arihant Retail Private Limited

> NCLT judgment dated 2024-02-16. Citation: TCN-2024-NCLT-02558. 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-02558
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/arihant-retail-private-limited-9d561023

## 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 to ARIHANT under a license agreement, which was later converted into a loan agreement. The financial creditor claimed default on the loan repayment.

## 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 paid Rs. 44,50,000 as an interest-free refundable security deposit to ARIHANT for utilizing a shop in Harbour Square. Later, a supplementary agreement came into force on 2016-04-01, and the license fee was revised. GIRIAS also provided an additional Rs. 2,25,00,000 as an interest-free deposit. Due to issues like water and electricity disconnections and property tax demands, GIRIAS issued a notice to ARIHANT on 2022-05-27 demanding the security deposit back. ARIHANT expressed its inability to pay. Subsequently, on 2022-06-22, GIRIAS indicated its intention to vacate the property and demanded repayment.

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## Issues and analysis

### Issue 1: Whether the initial interest-free security deposit provided by the Financial Creditor to the …

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

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

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**Interpretation:** The interpretation of Section 5(8) requires a direct nexus between the

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**Application:** In this case, the security deposit was intended 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…**: Supplementary Lease Agreement came into force. The license fee was revised, and GIRIAS…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 7 — Initiation of corporate insolvency resolution…](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-7)

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