Cafe Coffee Day insolvency: NCLT initiates insolvency proceedings against parent company of CCD

The National company Law Tribunal (NCLT), Bengaluru, has triggered insolvency proceedings against Coffee Day Enterprises Ltd (CDEL), the parent company of the Coffee Day Group that runs the Cafe Coffee Day chain of coffee houses..In an order passed on August 8, the NCLT Bengaluru admitted an insolvency petition filed by IDBI Trusteeship Services Ltd (IDBITSL), one of CDEL’s financial creditors, over an alleged default of ₹228.45 crore and as a consequence, triggered the insolvency proceedings under the Insolvency and Bankruptcy Code (IBC)..A corum of judicial member K Biswal and technical member Manoj Kumar Dubey have appointed an interim resolution professional (IRP) to take control of the operation of the debt-ridden CDEL.The NCLT has appointed Ashish Chhawchharia as the IRP and directed IDBITSL to deposit Rupees Two lakh to meet the expenses that the IRP will have to bear towards issuing public notices, inviting claims etc..IDBITSL had filed the insolvency petition against CDEL in September 2023 claiming that the latter had defaulted on the payment of over ₹228 crore.As per the petition, IDBITSL the financial creditor (FC) in the case, and CDEL, the Corporate Debtor entered into a Debenture Trust Deed in 2019. The FC agreed to subscribe to non-convertible debentures worth ₹200 crore and CDEL agreed to pay the FC in lieu of the subscription money raised.However, CDEL defaulted in payment if such money on four occasions between 2019 and 2020 that were the scheduled dates of payment as per their agreement..CDEL had argued before the NCLT that IDBITSL was a debenture holder and thus had no power to file any application seeking CIRP against the Corporate Debtor.The NCLT however, disagreed. It held that as per the definition under Section 5(8)(c) of the IBC the debt which exists pursuant to the debenture was also a ‘financial debt.’.“Debenture Holders are considered Financial Creditors and therefore, Debenture Holders holding a Financial Debt is covered within the meaning of Section 5(8) of the IBC. Hence the allegation of the Corporate Debtor regarding the Debenture Holder not being Financial Creditor is not tenable,” the NCLT said.The Tribunal further said that there existed a “clear-cut acknowledgement of the debt in the name of debenture holder.”.“In view of the above discussion, we are of the considered opinion that there is a 'debt' and 'default' existing in this case; and the petition is filed within the limitation period. The threshold requirement is also fulfilled. Hence the present petition is admitted,” the Tribunal said..On July 20, 2023, the NCLT Bengaluru had admitted an insolvency plea against CDEL over a plea filed by IndusInd Bank. However, that order was stayed by the NCLAT on August 11, 2023, and later both the parties had reached a settlement.Cafe Coffee Day was promoted by late VG Siddhartha who died in 2019. .Senior Advocate Srinivasa Raghavan and Advocates Sankeerth V and Krishnavarna Of Keystone Partners appeared for IDBITSL. Advocate Chithra Nirmala appeared for CDEL..[Read Order]