The National Company Law Appellate Tribunal (NCLAT) on Wednesday stayed insolvency proceedings against Coffee Day Enterprises till the next date of hearing.
Coffee Day Enterprises operates the Cafe Coffee Day chain.
Passing an interim order, the Chennai-based bench of the appellate tribunal stayed the operations of the NCLT order.
NCLAT also directed the financial creditor of CDEL — IDBI Trusteeship Services Ltd (IDBITSL) claiming a default of Rs 228.45 crore, to file a counter affidavit over the submissions of the company.
NCLAT order came over a petition filed by Malavika Hegde, Executive Director-CEO of the suspended board of the company.
NCLT Order
Last week NCLT ordered insolvency proceedings against Coffee Day Enterprises.
NCLT is the initial adjudicating body for matters related to company law, including insolvency and disputes under the Companies Act, 2013. NCLAT, on the other hand, is the appellate authority that hears appeals against decisions made by the NCLT, reviewing and potentially overturning its rulings.
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.
For that CDEL executed and agreed with IDBITSL agreeing to appoint as the debenture trustee for the debenture holders.
However, CDEL defaulted in paying the accrued aggregate coupon payments due on various dates between September 2019 and June 2020.
Consequently, the debenture trustee, on behalf of all the debenture holders, issued a notice of default on July 28, 2020 to CDEL and approached NCLT.
CDEL opposed the move claiming that IDBITSL is not authorised to initiate CIRP (Corporate insolvency resolution process) as the Debenture Trustee Agreement and Debenture Trust Deed do not grant powers to it to initiate CIRP.
It has not sought written instructions from debenture holders and only upon receipt of relevant instructions from the majority debenture holders (of the aggregate amount representing not less than 51 per cent of the value of the nominal amount of the debentures) is entitled to exercise its rights, CDEL contended.
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.
“Thus, this is a clear-cut acknowledgement of the debt in the name of debenture holder and satisfies the requirement of the acknowledgement of the debt for the purposes of determining the fulfilment of limitation,” said NCLT.
It further said: “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 and the moratorium is declared in terms of Section 14 of the Code.”
Coffee Day Enterprises is in trouble after the death of founder Chairman V G Siddhartha in July 2019. It is paring its debts through asset resolutions and has significantly scaled down from the time the trouble started.
On July 20, 2023, the same Bengaluru bench of NCLT had admitted an insolvency plea against CDGL, over a plea filed by IndusInd Bank, claiming dues of Rs 94 crore.
However, it was stayed by the appellate tribunal NCLAT on August 11, 2023, and later both the parties settled.
Moreover, the company on August 13 settled a case about violation of disclosure norms with markets regulator Sebi on payment of Rs 7.52 lakh towards settlement charges.
The regulator had initiated adjudication proceedings against Coffee Day Enterprises for the alleged violation of provisions of Sebi’s LODR (Listing Obligations and Disclosure Requirements) rules.
(With agency inputs)
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