Cafe Coffee Day faces bankruptcy proceedings under IBC Section 7
What's the story
Cafe Coffee Day (CCD), a popular coffee chain in India, is facing bankruptcy proceedings under Section 7 of the Insolvency and Bankruptcy Code (IBC).
IDBI Trusteeship Services has filed an application against CCD before the National Company Law Tribunal (NCLT) for an alleged default of Rs. 228 crore.
The coffee chain is seeking legal advice to protect its interests, while the insolvency case admission has been temporarily stayed by the NCLT.
Scenario
Malavika Hegde appeals NCLT order
Malavika Hegde, former director of Cafe Coffee Day, has filed an appeal against the NCLT order before the National Company Law Appellate Tribunal (NCLAT).
The issue of whether CCD would fall under the COVID-19 pandemic-related insolvency moratorium imposed by the Center is at stake.
According to Hegde, the date of default occurs during the moratorium period that the Central government outlined in its June 5, 2020 circular. She has argued that insolvency petition against CCD was invalid to begin with.
Details
NCLT temporarily stays insolvency case admission
The NCLT has stayed the admission of the insolvency case against CCD brought by NCLT Bengaluru.
The order against CCD has been put on hold until the next hearing of the appeal filed by Hedge.
The NCLT order was stayed by Justice Rakesh Kumar Jain and Shreehsa Merla. The next hearing is scheduled for September 20, 2023, and until then, the operation of the impugned order shall remain stayed.
Insights
IndusInd Bank reports CCD loan default
In July, IndusInd Bank filed a complaint with the NCLT, stating that CCD had defaulted on a loan of more than Rs. 94 crore.
The NCLT approved the bankruptcy petition based on the petition.
According to a regulatory filing by Coffee Day Enterprises, the parent company of Coffee Day Global, the Bengaluru bench of the NCLT passed an order over a plea brought by a financial creditor of the business who sought payment of Rs. 94 crore in unpaid debts.