NCLT admits Coffee Day Global for bankruptcy process, says report

Cafe Coffee Day operator Coffee Day Global was admitted for corporate insolvency by the Bengaluru bench of National Company Law Tribunal (NCLT), Economic Times reported on Monday.

Last week, the bankruptcy court passed an oral order in which it admitted the unlisted company for insolvency based on a petition filed by IndusInd Bank. Till now, there has been no official statement by the Coffee Day Group.

Coffee Day Global, which is part of listed Coffee Day Enterprises, was promoted by VG Siddhartha, who died of suicide in 2019. It was reported that he had left behind a suicide note addressed to the board of directors and Coffee Day family wherein he revealed that he was in deep debt.

According to the latest annual report of the company, its outstanding debt stood at Rs 67.3 crore from IndusInd Bank as on March 31, 2022.

The tribunal admitted the company after the negotiations deal between the IndusInd bank and Coffee Day Global collapsed, the report said.

According to the official order released by NCLT, Skanda Legal and Tatva Legal are the two counsels in the case.

In January 2023, the Securities and Exchange Board of India (Sebi) had slapped a penalty of Rs 26 crore on the company for “diversion of funds from subsidiaries to a company related to promoters”.

Sebi, in its order, noted funds worth Rs 3,535 crore were diverted that the diversion of funds from seven subsidiaries of Coffee Day Enterprises Ltd (CDEL) to Mysore Amalgamated Coffee Estates Ltd, an entity related to promoters of CDEL.

The company has seven subsidiaries: Coffee Day Global, Tanglin Retail Reality Developments, Tanglin Developments, Giri Vidhyuth (India) Ltd, Coffee Day Hotels and Resorts, Coffee Day Trading and Coffee Day Econ.

The company Rs 960 crore debt as of March 2022, which includes bank loans and inter-corporate deposits of Rs 119 crore to Tanglin Development, a group entity, the report said.

"The money that was transferred from the seven subsidiaries to MACEL has gone to the personal accounts of VGS (VG Siddhartha), his family and related entities and thus remains in the system," Sebi said.

Sebi also directed Coffee Day Enterprises Ltd to take all necessary steps for recovery of entire dues from Mysore Amalgamated Coffee Estates Ltd (MACEL) and its related entities along with due interest that are outstanding to the subsidiaries.

Sebi asked the company in consultation with the NSE to appoint an independent law firm to take effective steps for recovery of the outstanding dues.

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