NCLAT Quashes Insolvency Proceedings Against Cafe Coffee Day’s Parent Company

The National Company Law Appellate Tribunal (NCLAT), Chennai Bench, on Thursday set aside the insolvency proceedings against Coffee Day Enterprises Ltd (CDEL), the parent company of Cafe Coffee Day (CCD).

A Bench of Justice Sharad Kumar Sharma (Judicial Member) and Jatindranath Swain (Technical Member) quashed the National Company Law Tribunal (NCLT)’s earlier order that had admitted CDEL into the corporate insolvency resolution process (CIRP).

A detailed judgment is awaited.

Background of the Case

• In August 2024, the NCLAT had stayed the NCLT order that initiated insolvency proceedings against CDEL.
• The stay was granted after Malavika Hegde, a director at CDEL, filed an appeal challenging the NCLT decision.
• Hegde contended that IDBI Trusteeship Limited (ITSL), which had filed the insolvency petition, was not a financial creditor and lacked the authority to trigger CIRP under Section 7 of the Insolvency and Bankruptcy Code (IBC).

What Led to the Insolvency Petition?

• ITSL filed the insolvency petition in September 2023, claiming that CDEL defaulted on a payment of over ₹228 crore.
• ITSL and CDEL had entered into a Debenture Trust Deed in 2019, under which ITSL subscribed to ₹200 crore worth of non-convertible debentures (NCDs) issued by CDEL.
• CDEL failed to make payments on four occasions between 2019 and 2020.

NCLT’s Ruling (Now Overturned)

The NCLT had ruled in favor of ITSL, holding that:

• Debenture Holders Qualify as Financial Creditors: Under Section 5(8)(c) of IBC, debenture holders have financial debt, making them eligible to file for CIRP.
• Debt Acknowledged: The NCLT found clear evidence of debt acknowledgement by CDEL.
• DEL’s Argument Rejected: The Tribunal dismissed CDEL’s claim that ITSL did not qualify as a financial creditor.

NCLAT’s Intervention & Final Verdict

• In August 2024, the NCLAT stayed the NCLT order, giving relief to CDEL.
• On February 27, 2025, the NCLAT quashed the insolvency proceedings, agreeing with Malavika Hegde’s argument that ITSL was not a financial creditor under IBC regulations.

Previous CCD Insolvency Case

• In 2023, the NCLT admitted an insolvency plea filed by IndusInd Bank against Coffee Day Global, the parent company of CCD.
• However, the order was set aside after the parties reached a settlement.