NCLAT dismissed an appeal challenging the rejection of a Section ...

IFMS Security Deposits for Common Area Maintenance Not Considered Financial Debt Under IBC Section 5(8)

March 4, 2025

Case Laws IBC AT

NCLAT dismissed an appeal challenging the rejection of a Section 7 application regarding Interest Free Maintenance Security (IFMS). Following the SC's precedent in Global Credit Capital Limited, the tribunal examined whether IFMS constitutes a financial debt under IBC Section 5(8). The IFMS, paid by allottees for common area maintenance services, was determined not to be a financial debt as it lacked the essential element of "time value of money." The payment was merely a security deposit for future services to be provided by vendors/maintenance agencies. The tribunal upheld the Adjudicating Authority's finding that IFMS does not qualify as financial debt under IBC, as it fails to meet the fundamental requirement of disbursement against time value consideration.

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NCLAT dismissed an appeal challenging the rejection of a Section ...

IFMS Security Deposits for Common Area Maintenance Not Considered Financial Debt Under IBC Section 5(8)

March 4, 2025

Case Laws IBC AT

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