NCLAT Chennai stays NCLT Bengaluru order on Cafe Coffee Day, stock surges 2%

The Chennai bench of the National Company Law Appellate Tribunal (NCLAT) has issued a stay order on the initiation of a corporate insolvency case brought by the National Company Law Tribunal (NCLT) Bengaluru against Coffee Day Global Limited (CDGL) that owns the popular coffee chain Cafe Coffee Day.

Malavika Hegde, the suspended Director of CDGL and wife of late VG Siddhartha, moved the Chennai bench of NCLAT against the NCLT order. Coffee Day Global, a subsidiary of listed Coffee Day Enterprises, was promoted by the late VG Siddhartha, who committed suicide in 2019.

The shares of Coffee Day Enterprises Ltd closed at Rs 36.90 apiece, up by 2.07 per cent.

Hedge in her appeal raised the issue of whether CCD would fall under the Covid-19 pandemic-related insolvency moratorium imposed by the Central government.

NCLAT on Friday stayed the order adding that it would hold the process until the next hearing of the appeal filed by Hedge. The next hearing has been scheduled for September 20. 

"Since we have found that there are arguable points involved in this appeal, therefore, we issue a formal notice to the Respondents who are already on caveat ... List for hearing on 20th September, 2023. In the meanwhile, till the next date of hearing, operation of the impugned order shall remain stayed," stated the NCLAT order. 

The company has an outstanding debt of Rs 94 crore from IndusInd Bank as on March 31, 2022, according to the latest available annual report. The Bangalore bench of the tribunal admitted the company after negotiations on a one-time settlement between IndusInd Bank and the company collapsed.

"The application filed by one of the lenders against the material subsidiary Coffee Day Global before NCLT, Bengaluru, has been admitted (oral order) under Section 7 of Insolvency and Bankruptcy Code, 2016 for initiating CIRP for Rs 94 crore," the regulatory filing said from July. 

The NCLT website showed that IndusInd had appointed Skanda Legal while Coffee Day Global had Tatva Legal as their counsels.

According to the company's annual report for FY22, unlisted Coffee Day Global owns 495 Cafe Coffee Day outlets in 158 cities and 285 CCD Value Express kiosks. Additionally, it has installed 38,810 coffee vending machines in corporate workplaces and hotels.