NCLAT shelves bankruptcy proceedings against coffee day businesses

The National Corporate Legal Appeal Tribunal (NCLAT) on Thursday put aside bankruptcy proceedings against Coffee Day Enterprises Limited (CDEL), the parent company of Coffee Day (CCD), dismissing the IDBI custodian’s alleged bankruptcy request. ₹22.8 billion default value.

The ruling is in response to a petition by CDEL shareholder and director Malavika Hegde, challenging the National Corporate Law Tribunal (NCLT) August 8, 2024 order that acknowledged IDBI Truckeship’s plead guilty to the company’s bankruptcy.

NCLAT has continued its lawsuit on August 14, 2024 and has provided interim relief. However, the lawsuit resumed as NCLAT was unable to pass the final order within the Supreme Court deadline of February 21, 2025.

IDBI Truckeship Services Ltd (IDBITSL) has escalated the matter to the Supreme Court, which directed NCLAT on January 31, 2025 to resolve the pending appeal by February 21. However, the bankruptcy process has been temporarily resumed as the Court of Appeal failed to reach this deadline.

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The Court of Appeal finally issued a final order on Thursday, putting aside the bankruptcy case against CDEL completely.

Medical record

The dispute dates back to September 2023, when IDBI custodians contacted NCLT’s Bengaluru bench for bankruptcy proceedings against CDEL’s unpaid dues. On August 9, 2024, CDEL informed the stock exchange that it was exploring legal options for litigation.

This issue stems from CDEL’s default payment for coupons for redeemable non-convertible bonds (NCDs). In March 2019, IDBI Truckeship subscribed to 1,000 NCDs through private placement, investing ₹1 million. However, CDEL defaulted on coupon payments that expired from September 2019 to June 2020.

On July 28, 2020, the IDBI Thors issued a default notice to CDEL and later filed a bankruptcy filing, resulting in NCLT’s admission of the case in August 2024.

Industrial Bank Bankruptcy Cases

Meanwhile, CDEL’s subsidiary Coffee Day Global faces another bankruptcy petition from Indusind Bank that seeks bankruptcy lawsuits ₹940 million default.

On July 20, 2024, NCLT acknowledged Coffee Day global bankruptcy and appointed Shailendra Ajmera as an interim resolution professional to oversee the company’s business.

However, Indusind Bank then settled the matter friendly and revoked its bankruptcy filing. The debt has been transferred to asset reconstruction company ASREC (India) Ltd, resulting in a settlement between the parties. NCLAT’s Chennai bench then put aside the bankruptcy proceedings.

The rise and fall of coffee day

Founded by VG Siddhartha in 1996, Coffee Day has rapidly grown into one of India’s largest coffee chains, opening its first hotel in Bangalore.

But by 2019, CCD is battling financial distress, burden ₹Debt of 70 million. After Siddhartha died in July 2019, the crisis deepened. His wife, Malavika Hegde, stepped in to lead the company, launching asset sales to stabilize its financial position.

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As of September 2024, the existence of CCD has shrunk from 495 cafes in 158 cities (FY22) to 450 cafes in 141 cities. However, its vending machine business has expanded significantly, with the number of operating machines rising from 38,810 to 52,581 during this period. Located in corporate offices and hotels, these machines remain a key revenue driver for the brand.