Coffee Day bankruptcy process: Application filed under IBC Section 7, hearing likely this month

As part of the ongoing bankruptcy process of coffee chain firm Cafe Coffee Day (CCD), an application has been filed against the company under Section 7 of the Insolvency and Bankruptcy Code (IBC). According to a regulatory filing by Coffee Day Enterprises to the stock exchanges September 8, the application is filed by IDBI Trusteeship Services before National Company Law Tribunal (NCLT) for alleged default of ₹228 crore. The coffee major is seeking appropriate legal advice to protect its interest, it said in its filing.

Last month, the Chennai Bench of National Company Law Appellate Tribunal (NCLAT) had stayed the admission of corporate insolvency case brought by NCLT Bengaluru against the the coffee chain firm.

The NCLT order against CCD had been put on hold until the next hearing of the appeal filed by Malavika Hedge, the former director of CCD, by Justice Rakesh Kumar Jain, a judicial member, and Shreehsa Merla, a technical member, according to NCLT's notice.

"Since, we have found that there are arguable points involved in this appeal, therefore, we issue a formal notice to the Respondents who is already on caveat, enabling it to file its reply.

‘’Let the reply be filed within two weeks i.e. up to 25th August, 2023 and rejoinder, if any, be filed by the Appellant within two weeks thereafter i.e up to 14th September, 2023. List for hearing on 20th September, 2023. In the meanwhile, till the next date of hearing, operation of the impugned order shall remain stayed," said the NCLT order.

Malavika Hegde, former director of Coffee Day and the late VG Siddhartha's wife filed an appeal against this order before the NCLAT. In Hegde's appeal, the issue of whether CCD would fall under the COVID-19 pandemic-related insolvency moratorium imposed by the Central government is at stake.

According to Hegde, the date of default, which occurs between March 25, 2020 and March 25, 2021, occurs during the moratorium period that the Central government set forth in its June 5, 2020 circular. She has argued that the insolvency petition against CCD was invalid to begin with.

In July, IndusInd Bank filed a complaint with the NCLT, stating that CCD had defaulted on a loan of more than ₹94 crore. The NCLT approved the bankruptcy petition based on the petition.

According to a regulatory filing by Coffee Day Enterprises, parent company of Coffee Day Global from July, the Bengaluru bench of the NCLT passed an order over a plea brought by a financial creditor of the business who sought payment of ₹94 crore in unpaid debts.

On Fiday, September 8, shares of Coffee Day Enterprises settled 1.41 per cemt higher at ₹53.07 apiece on the BSE.