NCLT Approves Insolvency Proceedings Against CCD's Parent Company Due To Rs 228 Cr Default
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The National Company Law Tribunal (NCLT) has approved the initiation of insolvency proceedings against Coffee Day Enterprises (CDEL), the parent company of the Cafe Coffee Day chain. This decision was made by the Bengaluru bench of the NCLT on 8 August, following a petition from IDBI Trusteeship Services (IDBITSL), which claimed a default of Rs 228.45 crore. An interim resolution professional has been appointed to manage the company's operations during the insolvency process.
CDEL, which also operates a resort, provides consultancy services and trades in coffee beans, defaulted on payments for redeemable non-convertible debentures (NCDs). IDBITSL had subscribed to 1,000 NCDs through a private placement in March 2019, paying Rs 100 crore. CDEL, however, failed to make the necessary coupon payments between September 2019 and June 2020.
As a result, the debenture trustee, representing the debenture holders, issued a default notice to CDEL on 28 July 2020 and subsequently approached the NCLT. CDEL argued against the insolvency proceedings, claiming that IDBITSL was not authorised to initiate the Corporate Insolvency Resolution Process (CIRP) under their agreement. However, IDBITSL countered that a government notification from February 2019 allowed debenture trustees to file applications under Section 7 of the Insolvency & Bankruptcy Code (IBC).
The NCLT rejected CDEL's objections, noting that the company had acknowledged its debt in annual reports for FY20, FY21, FY22 and FY23, with an outstanding interest of Rs 14.24 crore, thus fulfilling the requirement for debt acknowledgement.
Following the death of its founder, VG Siddhartha, in July 2019, Coffee Day Enterprises has been working to reduce its debt through asset resolutions and has scaled down operations significantly. Previously, on 20 July 2023, the same Bengaluru bench of the NCLT had admitted an insolvency plea against Coffee Day Global (CDGL), another entity in the group, based on a petition from IndusInd Bank, which claimed Rs 94 crore in dues.