NCLT Bengaluru Admits Insolvency Petition Against Coffee Day Enterprises

NCLT Bengaluru Admits Insolvency Petition Against Coffee Day Enterprises

The National Company Law Tribunal (NCLT), Bengaluru, has initiated insolvency proceedings against Coffee Day Enterprises Ltd. (CDEL), the parent company of the Cafe Coffee Day chain.

On August 8, the NCLT Bengaluru admitted an insolvency petition filed by IDBI Trusteeship Services Ltd. (IDBITSL), one of CDEL’s financial creditors, due to an alleged default of ₹228.45 crores.

Judicial Member K Biswal and Technical Member Manoj Kumar Dubey appointed Ashish Chhawchharia as the interim resolution professional (IRP) to manage CDEL's operations. IDBITSL is required to deposit ₹2 lakhs to cover expenses related to public notices and claim invitations.

IDBITSL's petition, filed in September 2023, claims that CDEL defaulted on payments exceeding ₹228 crores. The petition states that CDEL and IDBITSL entered into a Debenture Trust Deed in 2019, where IDBITSL subscribed to non-convertible debentures worth ₹200 crores, with CDEL agreeing to make payments in return.

CDEL defaulted on these payments on four occasions between 2019 and 2020. CDEL contended that IDBITSL, as a debenture holder, had no authority to file for the Corporate Insolvency Resolution Process (CIRP). However, the NCLT disagreed, ruling that debenture holders qualify as financial creditors under Section 5(8)(c) of the IBC.

The Tribunal affirmed that there was a valid debt and default, and the petition was filed within the limitation period, thus meeting the threshold requirements.

Previously, on July 20, 2023, the NCLT Bengaluru had admitted an insolvency plea against CDEL filed by IndusInd Bank, but this order was stayed by the NCLAT on August 11, 2023, and a settlement was later reached between the parties.

Cafe Coffee Day was founded by the late VG Siddhartha, who passed away in 2019.