On Friday, the appellate tribunal of the bankruptcy court issued a stay on the admission of Coffee Day Enterprises Ltd (CDEL). This action came about due to a challenge presented by the promoter, Malavika Hedge. The challenge highlighted that the default, which took place during the “calm period” in March 2020 amid the global pandemic, occurred while lenders were prohibited from approaching the National Company Law Tribunal (NCLT) regarding loan defaults.
Starting from March 25, 2020, due to the spread of Covid-19, the government implemented a one-year prohibition on lenders from initiating insolvency proceedings against companies for defaults that occurred during that period.
On July 20, 2023, the Bangalore NCLT admitted CDEL to corporate insolvency, following a petition filed by IndusInd Bank, as reported by SnackFax.
Read More: Coffee Day Global enters bankruptcy proceedings following NCLT’s decision
The Café Coffee Day chain, originally initiated by the late founder V G Siddhartha, is under the ownership of CDEL. Shailendra Ajmera, the interim resolution professional supported by EY, refrained from providing a comment.
While IndusInd Bank asserted that the default transpired on February 28, 2020, the company contended that it took place on April 30, 2020. CDEL’s promoter alleges that the lenders altered the default date subsequent to filing the insolvency application.
The National Company Law Appellate Tribunal (NCLAT), in its ruling dated August 11, has directed the respondent (bank) to submit a response by August 25. The applicant (the promoter) has been given the opportunity to file a rejoinder by September 14. As part of the granted stay, the tribunal has set the next hearing for September 20.
As per the directive, the bank classified the accounts as non-performing loans on June 30, 2020. Subsequently, on December 7, 2020, the lender initiated the loan recall, urging the borrower and guarantor to settle the loan within a 15-day timeframe.
The borrower says that default occurred on April 30, 2020 – which is the period from March 25, 2020 to March 25, 2021 and ‘thus the petition could not have been filed.’
After providing six opportunities for the company to respond, IndusInd Bank reported the default date as February 28, 2020 to the National e-Governance Services (NeSL).
As of March 31, 2022, Coffee Day Global held a debt of INR 960 crore, encompassing an inter-corporate deposit of INR 119 crore obtained from Tanglin Development Ltd, an affiliated entity. According to the company’s FY22 annual report, it possesses 495 café outlets in 158 cities and 285 CCD Value Express kiosks.