Hon’ble NCLAT held that:
(i) The Security Deposit had been advanced as interest free Security Deposit. The Security Deposit was never disbursed or deposited against consideration for time value of money. Only in the event of failure to refund the Security Deposit from the date such refund was due that the deposit was to be returned with interest of 18%. It was bereft of all elements of commercial borrowing. Clearly therefore, the present transaction was not disbursement for time value of money and does not fall within the canvas of financial debt as defined under Section 5(8) of the IBC.
(ii) The sum of Security Deposit made in the facts of the present case which was given in the form of advance by the Appellant to the Corporate Debtor for prospective occupation of the leased premises on rent, this deposit was in the nature of advance for use of the premises. Hence, the payment of Security Deposit as advance for use of the Leased premises is clearly included in the “provision of services” and therefore falls within the purview of operational debt.