A security deposit lacking the characteristics of financial debt under the Insolvency and Bankruptcy Code cannot be classified as such due to absence of commercial effect and time value of money.

JUDGEMENT

(13.02.2025)

NARESH SALECHA, MEMBER (TECHNICAL)

1. The present appeal has been filed by the Appellant i.e., Global Indian School Education Services Pvt. Ltd. under Section 61 (1) of the Insolvency and Bankruptcy Code, 2016 ("Code") against the Impugned Order passed in Interlocutory Application No.2376 of 2020 by the National Company Law Tribunal, Mumbai Bench (‘Adjudicating Authority’) on 28.03.2023.

2. Mr. Abhay Narayan Manudhane who is the Resolution Professional of Housing Development and Infrastructure Ltd. (Corporate Debtor) is the Respondent No.1 herein.

3. The Appellant submitted that on 19.12.2015, a Memorandum of Understanding (‘MoU’) was duly executed between the Appellant and the Corporate Debtor concerning the land identified as CTS No. 551/27, 552 (PT), 552/1, 552/5 to 552/12, situated in Village Nahur, Taluka Kurla, M.S.D. LBS Marg Mulund (West), Mumbai. This land measures approximately 7632.10 square meters and is referred to as the “said Land”. The MoU stipulated that the Corporate Debtor is responsible for constructing a "built to suit" building on the said Land, which is intended for the establishment and operation of a school by the Appellant. The Appellant emphasizes that this MoU outlines the mutual obligations and expectations of both parties.

4. The Appellant submitted that, as per clause 8.1(i) of MoU, the Appellant was obligated to pay a sum of Rs. 2,37,61,440 to the Corporate Debtor which is undisputed fact.

5. The Appellant submitted that, in accordance with the terms of the MoU, the Corporate Debtor was required to fulfil certain Conditions Precedent to the satisfaction of the Appellant prior to the demising of the said Land, along with the Building constructed thereon, in favor of the Appellant which was Conditions Precedent, essential prerequisites needed to be met before any transfer of rights could take place regarding the said Land and Building.

6. The Appellant submitted that, as stipulated in clause 3.3 of MoU, in the event where the Corporate Debtor fail to fulfil the Conditions Precedent to the satisfaction of the Appellant by June 1, 2016, or within any mutually agreed timeframe, the Appellant retains the right to terminate the MoU at its discretion by providing written notice to the Corporate Debtor. Furthermore, upon receipt of such notice, the Corporate Debtor is obligated to refund all amounts paid by the Applicant up to the date of termination within 30 days, including interest at a rate of 9% per annum.

7. The Appellant submitted that, despite the passage of nearly 3 years since the execution of the MoU, the Corporate Debtor failed to fulfil any of the Conditions Precedent which is violation of the obligations set forth in the MoU. 8. The Appellant stated that he sent several emails to the property consultants, Jones Lang LaSalle Property Consultants India