The case involves the question whether a moratorium on insolvency proceedings during the COVID-19 pandemic would be applicable in CCD’s case.
The Chennai Bench of the National Company Law Appellate Tribunal (NCLAT) has stayed the admission of a corporate insolvency plea by the National Company Law Tribunal (NCLT), Bengaluru against coffee chain company, Cafe Coffee Day (CCD).
A coram of judicial member Justice Rakesh Kumar Jain and technical member Shreehsa Merla has stayed the NCLT order against CCD until the next hearing of the appeal filed by CCD’s former director, Malavika Hedge.
The interim order of stay was passed this morning, when notice was also issued to IndusInd Bank, the financial creditor on whose application the NCLT order was passed.
“Since, we have found that there are arguable points involved in this appeal, therefore, we issue a formal notice to the Respondents who is 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.
IndusInd Bank had earlier approached the NCLT alleging that CCD defaulted on a loan amount of over ₹94 crore. Based on the petition, the NCLT admitted the petition for bankruptcy.
This order has been challenged before the NCLAT by Malavika Hegde, who was formerly the Director of Coffee Day and wife of late VG Siddhartha, who had promoted CCD prior to his untimely demise in 2019.
Hegde’s appeal involves a question of whether a moratorium imposed by the Central government on insolvency proceedings on account of the COVID-19 pandemic would be applicable in CCD’s case.
She has contended that the record of default (RoD) for one of CCD’s bank accounts cited as a non-performing asset (NPA) by IndusInd Bank falls on April 30, 2020, when the moratorium under Section 10A of the Insolvency and Bankruptcy Code (IBC) was in force.
The date of default, which falls between March 25, 2020 and March 25, 2021, falls within the moratorium period specified by the Central government through its June 5, 2020 circular, Hegde has asserted. As such, she has contended that the insolvency petition against CCD could not have been filed at all.
Hegde has further contended that the NCLT committed a patent error in changing the date of default from April 4, 2020 to February 28, 2020 to take it out of the purview of Section 10A IBC.
IndusInd Bank, however, has maintained that the record of default actually falls in February 2020, since the records reflect that the last date of payment was on February 27, 2020. The April date was mentioned earlier in a form to comply with certain Reserve Bank of India (RBI) norms, the Bank submitted.
The NCLAT further recorded the Bank’s submission that it later procured a fresh record of default from an information utility, the National E-Governance Services Limited (NeSL) following an amendment to the IBBI (Information Utilities) Regulation, 2017, and a consequent directive of the NCLT Delhi passed in April this year.
The Bank added that NeSL had also emailed CCD for its response in the matter in April, but such emails generated no response from the company.
As such, the Bank has contended that CCD cannot now dispute the date of default.
The NCLAT noted that it would have to decide on these rival contentions in the appeal, which is slated to be heard next in September.
“The issue arises for our consideration is as to whether the date of default once mentioned in Part IV by the Financial Creditor can be changed in view of a decision of the Hon’ble Supreme Court in the case of Ramesh Kymal (Supra) and as to whether the Financial Creditor (Bank) who has already furnished ROD can change the date of default by a subsequent ROD on the basis of circular dated 03.04.2023 issued by the NCLT,” the NCLAT order noted.
