NCLT declares Coffee Day Enterprises to be insolvent.

In addition to owning and running a resort, CDEL also sells and buys coffee beans. However, CDEL has fallen behind on coupon payments for redeemable non-convertible debentures (NCDs).

The parent company of the Coffee Day Group, which runs the Cafe Coffee Day network of coffee shops, Coffee Day Enterprises Ltd. (CDEL), has been ordered to begin bankruptcy proceedings by the Corporate Dispute Tribunal NCLT.

On August 8, the IDBI Trusteeship Services Ltd. (IDBITSL) case, which claimed a default of Rs. 228.45 crore, was accepted by the Bengaluru bench of the National firm Law Tribunal (NCLT). An interim resolution specialist was designated to oversee the management of the indebted firm. In addition to owning and running a resort, CDEL also sells and buys coffee beans. However, CDEL has fallen behind on coupon payments for redeemable non-convertible debentures (NCDs).

In March 2019, the financial creditor paid Rs 100 crore for the subscription of 1,000 NCDs in a private placement. In exchange, CDEL agreed to designate IDBITSL as the debenture trustee on behalf of the debenture holders in an agreement that it executed and signed. Nevertheless, CDEL neglected to make the cumulative coupon payments that were expected on different dates from September 2019 o June 2020.As a result, on July 28, 2020, the debenture trustee contacted NCLT and sent a notice of default to CDEL on behalf of all debenture holders. CDEL objected to the action, arguing that the Debenture Trustee Agreement and Debenture Trust Deed did not provide IDBITSL the authority to start the Corporate Insolvency Resolution Process (CIRP).It has not requested written instructions from holders of debentures, and CDEL argued that it is only entitled to exercise its rights upon receiving pertinent instructions from the majority of holders (of the aggregate amount representing not less than 51 per cent of the value of the nominal amount of the debentures).

Additionally, CDEL argued that although the date of default is September 30, 2019, IDBITSL submitted the application on September 7, 2023. The application was submitted over a year beyond the September 29, 2022, deadline, as required by law. Clause 10.1 of the Debenture Trust Deed, according to IDBITSL’s attorney, states that it can exercise its rights without the debenture holders’ express consent.The petition stated that debenture trustees are now able to submit applications under Section 7 of the Insolvency & Bankruptcy Code (IBC) after the government issued a notification in February 2019. A two-member NCLT bench rejected CDEL’s petitions, stating that CDEL had recognized in its annual reports for the FY20, FY21, FY22, and FY23 that it was in default of repaying interest of Rs 14.24 crore. This is a clear confession of debt, the bench noted, and as such, the matter of limitation has been appropriately addressed.”Therefore, this satisfies the requirement of the acknowledgement of the debt for the purposes of determining the fulfilment of limitation and is a clear-cut acknowledgement of the debt in the name of the debenture holder,” the NCLT stated.”We are of the considered opinion that there is a debt” and “default” existing in this matter; and the petition is filed within the limitation period,” the statement continued. Additionally, the threshold condition is met.