NCLT Bengaluru Allows Change In Default Date In Insolvency Plea Against Cafe Coffee Day Parent

The National Company Law Tribunal (NCLT) at Bengaluru recently allowed an amendment to the date of default in an insolvency petition against Cafe Coffee Day parent Coffee Day Global Ltd, permitting the date to be changed from November 27, 2020, to September 30, 2019.

A bench of Judicial Member Sunil Kumar Aggarwal and Technical Member Radhakrishna Sreepada held that the proposed amendment merely aligned the date of default with the factual foundation already set out in the pleadings and did not amount to introducing a new cause of action.

“The alteration is permissible as per the dictum of Hon'ble the Apex Court relied upon by the Petitioner and does not displace the Respondent from its disclosed standpoint,” the tribunal observed.

The application was filed by the insolvency administrator of Austria-based Coffee Day Gastronomie und Kaffeehandels GmbH, which has instituted insolvency proceedings against Coffee Day Global. The insolvency administrator sought permission to amend the date of default in Form-5 from November 27, 2020, to September 30, 2019.

The insolvency administrator submitted that Coffee Day Global had issued a Letter of Comfort on May 2, 2019. Payments were thereafter made through AM Coffee Day International Ltd until August 2019. The last payment was made on August 28, 2019.

According to the insolvency administrator, no payments were made after that date. It contended that the first default occurred on September 30, 2019, when the next payment fell due.

The insolvency administrator submitted that November 27, 2020, came to be reflected in the insolvency petition because the Vienna Commercial Court awarded interest from that date while decreeing its claim. It maintained that the actual first default had occurred on September 30, 2019, after payments under the Letter of Comfort stopped.

According to the application, the proposed amendment did not introduce any new facts or claims. The insolvency administrator argued that the material supporting the earlier date of default was already on record. It also relied on a Supreme Court judgment to contend that amendments can be permitted in appropriate insolvency proceedings.

Coffee Day Global opposed the amendment application. The company argued that the plea was an afterthought filed after it pointed out that the originally pleaded date of default fell within the period covered by Section 10A of the Insolvency and Bankruptcy Code.

The company further contended that the insolvency petition and the record of default relied upon by the insolvency administrator referred to November 27, 2020, as the date of default. Coffee Day Global also argued that the insolvency administrator had relied on the same date before the Vienna Commercial Court while claiming interest. According to the company, permitting the amendment would amount to introducing a new case.

Rejecting the objection, the tribunal noted that there was no apparent basis for treating November 27, 2020 as the date of default. It observed that the Vienna Commercial Court had awarded interest from that date and that this, by itself, did not justify treating it as the date of default.

“Only the factors that the amendment is relevant and aimed at putting forth the facts that will assist in real, effective and complete adjudication of disputes between the parties. Of course, generally it should not tantamount to withdrawal of admission or setting up an altogether new cause of action,” the bench held.

The tribunal concluded that the proposed amendment appeared to align the date of default with the case already pleaded by the insolvency administrator. It held that the amendment did not shift the cause of action.

The bench clarified that issues concerning the efficacy of the Letter of Comfort, implementation of the foreign judgment and authority of the signatory were not relevant for deciding the amendment application. Those issues would be examined during the hearing of the main insolvency petition.

“The efficacy of Letter of Comfort, implementation of foreign judgement, authorisation of signatory to petition etc. are not germane for being discussed herein and better left for being taken up at the time of hearing on the main Petition,” the tribunal observed.

Holding that the amendment would not cause irretrievable prejudice to Coffee Day Global, the tribunal allowed the application. It permitted the insolvency administrator to amend the date of default in the insolvency petition to September 30, 2019.

For Applicant: Prerna Rawat

For Respondent: Skanda Legal