NCLAT sets aside insolvency process against Cafe Coffee Day's parent company
28 Feb 2025
The National Company Law Appellate Tribunal (NCLAT) has set aside an order of the National Company Law Tribunal (NCLT) that allowed corporate insolvency resolution process (CIRP) against Coffee Day Enterprises Ltd (CDEL), the operator of the Cafe Coffee Day chain.
A two-judge panel of the Chennai bench of the NCLAT, comprising Judicial Member Justice Sharad Kumar Sharma and Technical Member Jatindranath Swain, on Thursday quashed the NCLT order.
The appellate tribunal had, in August 2024, stayed the order of NCLT initiating CIRP against the company.
NCLAT passed the order on an appeal filed by Malavika Hegde, a shareholder and director of the company, challenging the NCLT order that allowed a bankruptcy petition filed by IDBI Trusteeship Ltd claiming a Rs228 crore default by CDEL.
She had argued that IDBI Trusteeship Limited (TSL) was not a financial creditor and hence was not qualified to seek CIRP against Coffee Day Enterprises under the bankruptcy code.
IDBI Trusteeship had, in September 2023, approached the Bengaluru bench of the NCLT seeking insolvency proceedings against CDEL over coupon payment dues on debentures.
IDBI Trusteeship had, in March 2019, invested Rs100 crore in CDEL through subscription to 1,000 NCDs tby way of a private placement. CDEL, however, defaulted on coupon payments due between September 2019 and June 2020.
NCLT allowed insolvency proceedings against Coffee Day Global on 8 August 2024, and appointed Shailendra Ajmera as the interim resolution professional.
On 9 August 2024, CDEL informed stock exchanges that it was exploring legal options to contest the case.
Malavika Hegde, a shareholder and director of CDEL, moved the NCLAT challenging the NCLT order that had admitted IDBI Trusteeship’s insolvency plea against the company.
Although NCLAT provided interim relief by staying the proceedings on 14 August 2024, the CIRP proceedings resumed temporarily as the NCLAT failed to pass its final order within the Supreme Court’s deadline of 21 February 2025.
The appellate tribunal eventually issued its final order on Thursday, fully setting aside the insolvency case against CDEL.
Coffee Day Global had faced a similar insolvency petition from IndusInd Bank, claiming default in payment of Rs94 crore. It was, howevt, mutually steeled.
Founded in 1996 by VG Siddhartha, Cafe Coffee Day collapsed under a Rs7,000-crore debt burden. Siddhartha’s death in July 2019 deepened the crisis. His wife, Malavika Hegde, then stepped in, initiating asset sales to reduce the financial burden.
CCD’s business has shrunk, leaving it with 450 cafes in 141 cities against 495 cafes in 158 cities earlier (FY22). Its vending machine business, however, expanded to 52,581 by September 2024 from 38,810 in FY22.
