In a twist that adds another layer to Coffee Day Enterprises Ltd (CDEL)’s ongoing saga, the National Company Law Tribunal (NCLT) in Bengaluru has sanctioned insolvency proceedings against the parent company of the famed Cafe Coffee Day chain. This move stems from an insolvency plea lodged by IDBI Trusteeship Services Ltd (IDBITSL), citing a staggering default of ₹228.45 crore.
Dated August 8, the NCLT’s directive not only validates IDBITSL’s claims but also appoints Ashish Chhawchharia as the Interim Resolution Professional (IRP) to steer CDEL through the murky waters of insolvency. To kickstart the procedural formalities—like public notifications and claim invitations—the tribunal has mandated IDBITSL to deposit ₹2 lakh for immediate expenses.
The financial quagmire traces its roots back to a Debenture Trust Deed inked in 2019. Under this agreement, IDBITSL subscribed to non-convertible debentures worth ₹200 crore, anticipating punctual repayments. However, CDEL stumbled, missing four scheduled payments between 2019 and 2020, setting the stage for the current debacle.
CDEL’s defense hinged on contesting IDBITSL’s locus standi as a debenture holder, arguing that such a position doesn’t confer the right to initiate a Corporate Insolvency Resolution Process (CIRP). The tribunal, however, wasn’t swayed. It clarified that, under Section 5(8)(c) of the Insolvency and Bankruptcy Code (IBC), debts arising from debentures are classified as ‘financial debts.’ Thus, debenture holders like IDBITSL squarely fit within the definition of financial creditors.
Reinforcing its stance, the NCLT spotlighted undeniable acknowledgments of the debt by CDEL, confirming both its existence and the default within the stipulated limitation period. “The threshold requirement is also fulfilled. Hence, the present petition is admitted,” the tribunal asserted.
This isn’t CDEL’s maiden voyage into insolvency waters. Back in July 2023, the NCLT had entertained a similar plea from IndusInd Bank. That order, however, was stayed by the National Company Law Appellate Tribunal (NCLAT) following an amicable settlement between the parties.
Founded by the late VG Siddhartha, whose untimely demise in 2019 sent shockwaves through the business community, Cafe Coffee Day has since been wrestling with financial headwinds, now intensified by this recent NCLT mandate.
On the legal front, Senior Advocate Srinivasa Raghavan, alongside Advocates Sankeerth V and Krishnavarna from Keystone Partners, represented IDBITSL. Advocate Chithra Nirmala stood counsel for CDEL.
