Rama Krishna Sangem
The National Company Law 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 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 entered into an agreement 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.
Coffee Day opposed the plea
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.
Siddhartha suicide in 2019
Coffee Day Enterprises is in trouble after the suicide 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 Coffee Day Global Ltd (CDGL), which owns and operates Cafe Coffee Day chain, over a plea filed by IndusInd Bank, claiming dues of Rs 94 crore. However, the plea has been resolved through a settlement. Whether the present process of insolvency too would be averted is to be seen.
