The National Company Law Appellate Tribunal (NCLAT) in Chennai on Wednesday stayed the corporate insolvency resolution proceedings (CIRP) against Coffee Day Enterprises Ltd (CDEL), operator of the Cafe Coffee Day chain, until the next hearing, reported Bar and Bench.
A coram of judicial Member Sharad Kumar Sharma and Technical Member Jatindranath Swain granted an interim stay on the August 8 order from the Bengaluru bench of the National Company Law Tribunal (NCLT) that had initiated the insolvency process. The insolvency petition was filed by IDBI Trusteeship Services Limited (ITSL), one of CDEL’s creditors.
“In these eventualities, the respondents are directed to file counter affidavits within a period of three weeks. Till the next date of listing, the effect of the operation of the impugned order, admitting the appellant (CDEL) to Section 7 procedures will be kept in abeyance,” the bench said, as quoted by PTI.
Malavika Hegde, director at Coffee Day Enterprises, challenged the NCLT order, arguing that IDBI Trusteeship Services Limited lacked the authority to request Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, as ITSL was not a financial creditor.
The bench directed ITSL, the financial creditor claiming Rs 228.45 crore in default, to file a counter affidavit.
The bench did not address CDEL’s default status but noted that this will be considered later.
“At this stage, we are only consulting the argument extended by the parties pertaining to the procedural flaw committed by the respondent (IDBITSL) in drawing the proceeding under Section 7, which was mandatory going to the terms of the trust deed as relied on by the parties,” the bench said.
On August 8, the Bengaluru bench of the NCLT admitted IDBI Trusteeship Services Ltd (IDBITSL) plea claiming a default of Rs 228.45 crore and appointed an interim resolution professional for CDEL.
CDEL, which also operates a resort and engages in coffee trading, defaulted on payments for redeemable non-convertible debentures (NCDs).
CDEL’s financial troubles followed the death of founder Chairman V.G. Siddhartha in July 2019. The company is currently attempting to resolve its debts through asset sales and has significantly scaled down operations.