NCLAT Turns Down Insolvency Proceedings Against Café Coffee Day Enterprises

Café Coffee Day

The National Company Law Appellate Tribunal (NCLAT) has annulled the insolvency proceedings against Coffee Day Enterprises Ltd (CDEL), the parent entity of Café Coffee Day (CCD), following allegations by IDBI Trusteeship that the company defaulted on a ₹228 crore repayment obligation.

This resolution emerged after Malavika Hegde, a director and shareholder of CDEL, legally contested an earlier ruling by the National Company Law Tribunal (NCLT) on August 8, 2024, which had sanctioned the initiation of insolvency proceedings.

On August 14, 2024, NCLAT provisionally halted the insolvency case.

However, due to its failure to render a final verdict before the Supreme Court’s stipulated deadline of February 21, 2025, the proceedings were temporarily reinstated.

Subsequently, IDBI Trusteeship escalated the matter to the Supreme Court, which, on January 31, 2025, directed NCLAT to resolve the dispute by the February deadline. Following the lapse of this timeframe, the insolvency proceedings were briefly revived. Ultimately, on Thursday, NCLAT delivered its definitive ruling, formally terminating the insolvency proceedings against CDEL.

Case Background

The controversy originated in September 2023, when IDBI Trusteeship petitioned NCLT’s Bengaluru bench to commence insolvency proceedings against CDEL for outstanding financial obligations. By August 9, 2024, CDEL publicly declared that it was actively considering legal avenues to contest the case.

The financial dispute arose due to CDEL’s non-payment of interest on redeemable non-convertible debentures (NCDs). In March 2019, IDBI Trusteeship had invested ₹100 crore through the acquisition of 1,000 NCDs via private placement. However, between September 2019 and June 2020, CDEL defaulted on the associated interest payments.

Following this lapse, IDBI Trusteeship issued a formal default notice to CDEL on July 28, 2020, and subsequently initiated insolvency proceedings, culminating in NCLT’s admission of the case in August 2024.

IndusInd Bank Insolvency Case

Parallel to this dispute, CDEL’s subsidiary, Coffee Day Global, encountered financial distress, prompting IndusInd Bank to file an insolvency petition over an alleged ₹94 crore default.

On July 20, 2024, NCLT admitted the case and designated Shailendra Ajmera as the interim resolution professional to oversee corporate operations.

However, IndusInd Bank later reached a resolution and withdrew its insolvency petition. The liability was transferred to ASREC (India) Ltd, a specialized asset reconstruction company, facilitating a mutual settlement. Consequently, the Chennai bench of NCLAT dismissed the insolvency proceedings against Coffee Day Global.

Background Of Café Coffee Day

Established in 1996 by V.G. Siddhartha, Café Coffee Day (CCD) rapidly expanded to become one of India’s premier coffee chains, with its inaugural outlet on Bengaluru’s Brigade Road.

However, by 2019, CCD faced acute financial challenges, accumulating a staggering ₹7,000 crore debt burden. The crisis deepened following Siddhartha’s untimely demise in July 2019. Subsequently, his wife, Malavika Hegde, assumed leadership and initiated a series of strategic asset sales aimed at stabilizing the company’s financial position.

With the latest dismissal of insolvency proceedings, CDEL has secured a crucial legal reprieve, affording it the opportunity to recalibrate its financial strategies and work toward sustainable recovery.