NCLT Mumbai Rejects Resolution Plan for PBG Breach; Orders Corporate Debtor Liquidation

Memoir Vs Eagle Home Appliances Pvt Ltd (NCLT Mumbai)

Summary: NCLT Mumbai Bench-V rejected the Resolution Plan submitted by Logenix Services Pvt. Ltd. for Eagle Home Appliances Private Limited, despite its approval by the Committee of Creditors with 99.09% voting share. The Tribunal examined the Request for Resolution Plans, the treatment of the performance bank guarantee and the proposed use of the Corporate Debtor’s own funds. It held that the post-submission reduction of the performance security from Rs.77 lacs to Rs.35 lacs was contrary to Regulation 36B(5), because a modification of the RFRP is deemed to be a fresh issue and must precede submission of the Resolution Plan.

The Tribunal also found the proposal to use the cash PBG towards CIRP costs inconsistent with Regulation 36B(4A) and the RFRP, since performance security was intended to remain available to secure implementation of the Plan. It further noted that the Plan contemplated using approximately Rs.3.15 crores already available with the Corporate Debtor towards creditor payments, while the SRA was hardly infusing funds towards those payments.

Relying on the treatment of surplus generated during CIRP as part of the insolvency estate, the Tribunal concluded that the Plan was not compliant with Section 30(2)(e) and (f) of the Code and Regulations 36B(4A) and 36B(5). The Plan was therefore rejected and liquidation was ordered under Section 33(1)(b). The source order’s consequential directions are reproduced verbatim below, including the names and descriptions exactly as printed in the PDF.