NCLT approves bankruptcy proceedings against Cafe Coffee Day’s parent company
Business: NCLT approves bankruptcy proceedings against Cafe Coffee Day’s parent company Coffee Day Enterprises The National Company Law Tribunal (NCLT) has ordered the initiation of bankruptcy proceedings against Coffee Day Enterprises Ltd (CDEL), the parent company of the Coffee Day Group, which operates the 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 default of Rs 228.45 crore and appointed an interim resolution professional to look after the operations of the debt-ridden company. Coffee Day Enterprises Ltd, which also owns and operates a resort, provides consultancy services and is engaged in the sale and purchase of coffee beans, had defaulted in payment of coupon payments of redeemable non-convertible debentures (NCDs). CDEL entered into an agreement with IDBITSL
IDBITSL had subscribed 1,000 NCDs through private placement and paid Rs 100 crore for the subscription in March 2019. For this, 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 total coupon payments due on various dates between September 2019 and June 2020. Consequently, the debenture trustee issued a notice of default to CDEL on July 28, 2020, on behalf of all debenture holders and approached the NCLT. CDEL opposed IDBITSL’s plea, claiming that it is not authorised to initiate corporate insolvency resolution process (CIRP) as the debenture trustee agreement and debenture trust deed do not give it power to initiate CIRP. IDBITSL, in its reply, said the government had in a notification issued in February 2019 permitted debenture trustees to file applications under Section 7 of the Insolvency and Bankruptcy Code (IBC).
Rejecting CDEL’s arguments, a two-member NCLT bench said
the company has admitted default in repayment of interest of Rs 14.24 crore in its annual reports for FY20, FY21, FY22 and FY23, which is a clear admission of debt. “Thus, it is a clear admission of debt in the name of the debenture holder and meets the requirement of admission of debt for the purpose of determining fulfilment of the limit,” the NCLT bench said. Coffee Day Enterprises has been reducing its debt through asset resolution following the death of its founder chairman VG Siddhartha in July 2019 and has substantially de-leveraged since the time the troubles began. On July 20, 2023, the same Bengaluru bench of the NCLT had admitted the bankruptcy petition against Coffee Day Global Ltd (CDGL), which owns and operates the Cafe Coffee Day chain, on a plea filed by IndusInd Bank, which claimed dues of Rs 94 crore.
