NCLT orders insolvency proceedings against Coffee Day Enterprises

Corporate dispute 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.

CDEL, 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).

The financial creditor had subscribed 1,000 NCDs through private placement and paid Rs 100 crore towards the subscription in March 2019.

CDEL also contended that the application has been filed by IDBITSL on September 7, 2023 while the date of default is September 30, 2019.

The application has been filed almost a year later than the deadline of September 29, 2022 as per rule. 

IDBITSL's counsel said clause 10.1 of the Debenture Trust Deed says it does not require any specific authorization from the debenture holders to exercise its rights.

The government through a notification issued in February 2019 has permitted debenture trustees to file applications under Section 7 of the Insolvency & Bankruptcy Code (IBC), the petition said. 

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