Insolvency proceedings against Coffee Day resume after NCLAT delay

The insolvency proceedings against Coffee Day Enterprises Ltd (CDEL), the parent company of the Cafe Coffee Day chain, have resumed as the National Company Law Appellate Tribunal (NCLAT) failed to pass an order within the Supreme Court's deadline of February 21, according to a report by the news agency PTI.

 

Last week, the Chennai bench of NCLAT completed its hearing on an appeal filed by a director of CDEL’s suspended board and reserved its order.

 

In a regulatory filing, CDEL stated, "Since the appeal has not been disposed of until February 21, 2025, as per the instruction of the Supreme Court, the order passed by NCLAT regarding the stay on the CIRP of the Corporate Debtor stands vacated. Therefore, the CIRP of the Corporate Debtor recommences/resumes and the powers of the IRP are hereby reinstated with effect from 22, February 2025."

 

The company further added, "However, the order has been reserved by NCLAT, and yet to be pronounced."

 

The insolvency proceedings against CDEL began when the Bengaluru bench of the National Company Law Tribunal (NCLT) admitted a plea filed by IDBI Trusteeship Services Ltd (IDBITSL) on August 8, 2024. The plea cited a default of Rs 228.45 crore, leading to the appointment of an interim resolution professional (IRP) to manage the operations of the financially-troubled company.

 

Following this, CDEL’s suspended board challenged the NCLT’s order before NCLAT, which granted a stay on the Corporate Insolvency Resolution Process (CIRP) on August 14, 2024. However, IDBITSL took the matter to the Supreme Court, which ruled on January 31, 2025, that NCLAT must dispose of the pending appeal before February 21, 2025.

 

The Supreme Court had also made it clear that "in the event the appeal is not disposed of by then, the impugned order passed by the Appellate Tribunal shall stand vacated automatically."

 

CDEL is the flagship company of the Coffee Day Group, which operates the Cafe Coffee Day chain. Apart from running the popular cafe brand, CDEL also owns and operates a resort, provides consultancy services, and is involved in the sale and purchase of coffee beans.

 

The financial troubles for CDEL escalated after the demise of its founder and chairman, V G Siddhartha, in July 2019. Since then, the company has been working on reducing its debts through asset resolutions and has significantly downsized its operations to manage the financial crisis.

 

[With inputs from PTI]