NCLT Mumbai Rejects Resolution Plan Due to Retrospective PBG Modification and CIRP Regulation Non-Compliance

In a significant ruling, the National Company Law Tribunal (NCLT), Mumbai Bench-V, rejected the Resolution Plan proposed for Eagle Home Appliances Private Limited. The plan, submitted by Logenix Services Pvt. Ltd., had previously secured a 99.09% voting share approval from the Committee of Creditors (CoC). However, the Tribunal determined that the plan and the process leading to its approval violated critical provisions of the Insolvency and Bankruptcy Code, 2016 and the IBBI (CIRP) Regulations, 2016.

The primary grounds for rejection centered on the retrospective reduction of the Performance Bank Guarantee (PBG), the improper proposed utilization of the PBG to cover Corporate Insolvency Resolution Process (CIRP) costs, and the reliance on the Corporate Debtor's own funds to settle creditor claims. Consequently, the Adjudicating Authority ordered the liquidation of the Corporate Debtor under Section 33(1)(b) of the Code.

Factual Background of the CIRP

The CIRP against Eagle Home Appliances Private Limited (the Corporate Debtor) was initiated on 28.03.2024, following an order passed under Section 9 of the Insolvency and Bankruptcy Code, 2016 filed by Memoir, an Operational Creditor.

Following the initiation, public announcements were made, claims were collated, and the CoC was constituted. The Resolution Professional (RP) invited Expressions of Interest (EoI) in Form-G. After evaluating the submissions, Logenix Services Pvt. Ltd. emerged as the sole Prospective Resolution Applicant (PRA) in the final list published on 02.03.2025.

The PRA submitted its Resolution Plan on 30.04.2025. Following negotiations during the 14th CoC meeting, the plan value was enhanced to Rs. 3,85,00,000/-. The CoC subsequently approved this modified plan on 27.05.2025 with a 99.09% voting majority.

Asset Valuation and Plan Financials

As per the valuation reports, the average fair value of the Corporate Debtor's financial assets stood at Rs. 2,25,30,925/-, while the liquidation value was assessed at Rs. 1,15,80,860.50/-.