The National Company Law Tribunal (NCLT) Bengaluru bench comprising of Ajay Kumar Vatsavayi ( Judicial Member) and Manoj Kumar Dubey ( Technical Member) has dismissed the insolvency petition filed against the parent company of Cafe Coffee Day namely Coffee Day Global Limited ("Coffee Day") by Cooperative Rabobank U.A. ("Rabobank"). Brief Factual Background Rabobank which is...
The National Company Law Tribunal (NCLT) Bengaluru bench comprising of Ajay Kumar Vatsavayi ( Judicial Member) and Manoj Kumar Dubey ( Technical Member) has dismissed the insolvency petition filed against the parent company of Cafe Coffee Day namely Coffee Day Global Limited ("Coffee Day") by Cooperative Rabobank U.A. ("Rabobank").
Brief Factual Background
Rabobank which is registered as an overseas company in Hongkong extended two loan facilities of Rs. 330.66 Crores to Coffee Day from 29.07.2015 to 27.03.2018. Since mid-2019, Coffee Day had defaulted on various payments due to Rabobank and therefore, Rabobank filed a petition under Section 7 of the Insolvency & Bankruptcy Code, 2016 against Coffee Day for a default of Rs. 109.79 Crores as on 06.01.2021.
Contention Of Rabobank
Rabobank/Financial Creditor argued that Coffee Day failed to deny that it owed a financial debt to Rabobank and it has defaulted on the repayment obligations which is more than Rs. 1 crore. Rabobank also contended that in a petition under Section 7 of the Code, a financial creditor has to establish the very limited case of there being existence of default of a financial debt equivalent to or greater than Rs. 1 crore.
Financial Creditor contended that Section 10A of the code does not apply to the defaults which had occurred prior to 25.03.2020. It was also contended that there is no embargo on a financial creditor to proceed under Section 7 of the code pending consideration of the debt resolution process by the Lenders of Coffee Day as per RBI Circular dated 07.06.2019 under the Prudential Framework for Resolution of Stressed Assets.
Contentions Of Coffee Day
It was contended by Coffee Day/Corporate Debtor that it has already taken effective steps to restructure its business and assets to pay its dues. It was also stated by Coffee Day that it is making efforts to sell one of the business verticals, viz, "Coffee vending machine business". Debt of Rs. 54 crores fell due during the suspension period as mentioned under Section 10A of the code and therefore, it's not maintainable.
It was further contended that it is already undergoing debt resolution process as per RBI Circular dated 07.06.2019 under the Prudential Framework for Resolution of Stressed Assets which as been agreed by 75% of its lenders in value and 60% of lenders in number and the present petition is filed by Rabobank despite being aware of the same.
During the pendency of the Section 7 Petition, Coffee Day had also filed an application under Section 65 of the Code alleging that the present petition was filed with malicious intent to use the Code as money recovery forum as Rabobank took a U-turn when the resolution process under the Prudential Framework for Resolution of Stressed Assets was in advanced stage as they refused to release their respective charge over the Corporate Debtor's charge.
Finding Of The Tribunal
NCLT has observed that other lenders of the Coffee Day initiated the resolution process of Coffee Day under RBI's circular and Rabobank has not agreed to give a formal no dues certificate to release the charge over the vending machine vertical of Coffee Day.
NCLT has further observed that the correspondence between the lenders clearly established that Coffee Day suffered because of COVID-19 and sudden demise of its chairman and since then Coffee Day is taking bona fide and sincere efforts to restructure its debts. NCLT added that the Supreme Court in the case of Swiss Ribbons versus Union of India, (2019) 4 SCC 17 explicitly opined that the primary focus of IBC is to ensure the revival and continuation of the Corporate Debtor and not simply the recovery of debt by a Creditor.
It has been held that the conduct of Rabobank of taking a U-turn at the advanced stage of the resolution process under the RBI Framework puts a question on the bona fides of the instant petition. Rabobank is trying to use NCLT and Insolvency and Bankruptcy Code as a money recovery mechanism and not the resolution of the Corporate Debtor which is impressible under the provisions of the Code and dismissed the petition filed under Section 7 of the Code.
Case Title: M/s Cooperative Rabobank U.A vs Coffee Day Global Limited
Counsel for the Financial Creditor: Rajiv Nayar, Sr.Adv.
Counsel for the Corporate Debtor: A. Murali Adv