NCLT okays insolvency proceedings against Cafe Coffee Day's parent company over Rs 228 crore default

NCLT okays insolvency proceedings against Coffee Day Enterprises, parent company of Cafe Coffee Day 

The National Company Law Tribunal (NCLT) has ordered initiating insolvency proceedings against Coffee Day Enterprises Ltd (CDEL), the parent company of Coffee Day Group, which operates Cafe Coffee Day chain of coffee houses. 

The Bengaluru bench of the NCLT (National Company Law Tribunal) on August 8 admitted the plea filed by IDBI Trusteeship Services Ltd (IDBITSL) claiming a default of Rs 228.45 crore and appointed an interim resolution professional to take care of the operation of the debt-ridden company. 

Coffee Day Enterprises Ltd, which also owns and operates a resort, renders consultancy services and is engaged in the sale and purchase of coffee beans, had defaulted in the payment of coupon payments of redeemable non-convertible debentures (NCDs). 

IDBITSL had subscribed 1,000 NCDs through private placement and paid Rs 100 crore towards the subscription in March 2019. For that CDEL entered into an agreement with IDBITSL agreeing to appoint it as the debenture trustee for the debenture holders. However, CDEL defaulted in paying the accrued aggregate coupon payments due on various dates between September 2019 and June 2020. 

Consequently, the debenture trustee, on behalf of all the debenture holders, issued a notice of default on July 28, 2020 to CDEL and approached NCLT. 

CDEL opposed the IDBITSL plea claiming that is not authorised to initiate Corporate insolvency resolution process (CIRP) as the Debenture Trustee Agreement and Debenture Trust Deed do not grant powers to it to initiate CIRP. 

IDBITSL said in its counter said that the government in a notification issued in February 2019 permitted debenture trustees to file applications under Section 7 of the Insolvency & Bankruptcy Code (IBC),

Rejecting the submissions of CDEL, a two-member NCLT bench said the company in its annual reports for the FY20, FY21, FY22 and FY23 acknowledged default in repayment of interest of Rs 14.24 crore, which is a clear acknowledgement of debt. 

“Thus, this is a clear-cut acknowledgement of the debt in the name of debenture holder and satisfies the requirement of the acknowledgement of the debt for the purposes of determining the fulfilment of limitation,” the NCLT bench said. 

After the death of its founder Chairman V G Siddhartha in July 2019 Coffee Day Enterprises is paring its debts through asset resolutions and has significantly scaled down from the time the trouble started. 

On July 20, 2023, the same Bengaluru bench of NCLT had admitted an insolvency plea against Coffee Day Global Ltd (CDGL), which owns and operates Cafe Coffee Day chain, over a plea filed by IndusInd Bank, claiming dues of Rs 94 crore. 

(With inputs from PTI)