Section 105 of the Insolvency and Bankruptcy Code, 2016: Repayment Plan
Section 105 sets out how a debtor prepares a repayment plan, in consultation with the resolution professional, to propose restructuring of debts or financial affairs. It identifies the powers that may be given to the resolution professional and the matters that must be addressed in the plan.
What is a repayment plan under Section 105?
A repayment plan is a proposal prepared by a debtor for restructuring debts or affairs in an insolvency resolution process under Part III of the Insolvency and Bankruptcy Code, 2016 (IBC). It may describe how creditors will be paid, what assets or income will be used and what responsibilities the resolution professional will have.
The provisions in Chapter III of Part III were brought into operation for personal guarantors to corporate debtors from 1 December 2019. Their application to other individuals or partnership firms must be checked against the relevant commencement notifications. In matters involving personal guarantors to corporate debtors, Section 60 provides the framework for the jurisdiction of the National Company Law Tribunal (NCLT), subject to the statutory conditions.
Section 105: Explanation of all three subsections
Section 105(1): Preparation by the debtor
The debtor must prepare the repayment plan in consultation with the resolution professional. The plan must contain a proposal addressed to creditors for restructuring the debtor's debts or affairs. This means the plan originates with the debtor but is developed with professional input rather than unilaterally imposed on creditors.
Section 105(2): Powers that the plan may give to the resolution professional
The repayment plan may authorise or require the resolution professional to undertake any of the following functions:
- Carry on business or trade: operate the debtor's business or trade on the debtor's behalf or in the debtor's name.
- Realise assets: take steps to realise the debtor's assets in accordance with the plan and applicable law.
- Administer funds: administer or dispose of the debtor's funds as authorised by the plan.
These powers are optional elements of a plan: Section 105(2) does not automatically transfer all control of the debtor's business, assets or funds to the resolution professional.
Section 105(3): Mandatory contents
The repayment plan shall include:
- Justification: the reasons for preparing the repayment plan and the grounds on which creditors may agree to it.
- Professional fees: provision for payment of the resolution professional's fee.
- Other specified matters: any further information or matters required by the applicable IBBI regulations and other binding legal requirements.
The first two items are expressly stated in Section 105(3); the third recognises that detailed requirements can be supplied by subordinate legislation. The operative regulations should always be checked before filing.
Practical contents of a workable repayment plan
Beyond the express minimum under Section 105, a well-supported proposal commonly addresses the following matters, as applicable to the debtor and the governing regulations:
- Identifying creditors, the nature of their claims and amounts proposed to be addressed.
- The debtor's income, assets, liabilities and expected cash flows, with supporting information.
- The proposed payment amounts, instalments, dates and sources of funding.
- Any proposed restructuring, settlement, sale or realisation of assets and the assumptions supporting it.
- The role, remuneration and proposed authority of the resolution professional.
- How the debtor proposes to implement and monitor the plan and respond to foreseeable risks.
These are practical planning considerations, not a claim that every item is separately mandated by the text of Section 105 itself.
How a Section 105 repayment plan moves through the IBC process
| Stage | Relevant provision | What happens |
|---|---|---|
| Application and admission | Sections 94, 95, 99 and 100 | An application is examined and the Adjudicating Authority decides whether to admit or reject it. |
| Moratorium | Section 101 | Upon admission, the statutory moratorium applies for the period prescribed by that section. |
| Claims and creditor list | Sections 102-104 | Public notice invites claims; the resolution professional prepares the list of creditors. |
| Drafting the plan | Section 105 | The debtor prepares the repayment plan in consultation with the resolution professional. |
| Review and creditors' meeting | Sections 106-111 | The resolution professional reports on the plan and the statutory provisions govern consideration and voting where applicable. |
| Authority's decision | Sections 112-114 | The outcome of creditor consideration is reported and the Adjudicating Authority makes the order contemplated by the Code. |
| Implementation and completion | Sections 115-118 | The approved plan is implemented, monitored and dealt with under the applicable statutory provisions. |
Under Section 111, where a creditors' meeting is convened, approval of a repayment plan requires a majority of more than three-fourths in value of creditors present in person or by proxy and voting, subject to the Code's applicable voting provisions. Creditor approval and the Adjudicating Authority's order are distinct steps.
Important legal terms and connected provisions
Debtor and creditor
For Part III, the relevant definitions appear in Section 79, read with other applicable provisions of the Code. A debtor is the person whose insolvency is the subject of the proceeding; a creditor is a person to whom a debt is owed, within the statutory meaning.
Resolution professional
An insolvency professional appointed under the relevant provisions of Part III to perform statutory functions in the resolution process. Sections 97 and 98 address appointment and replacement, while Sections 106 and 116 concern responsibilities connected with the repayment plan.
Adjudicating Authority
The forum empowered by the Code to make orders in the relevant insolvency proceedings. For personal guarantors to corporate debtors, the interaction of Sections 60 and 179 must be read with the commencement framework and binding judicial decisions.
Related sections
Section 100 concerns admission or rejection; Section 101 the moratorium; Sections 102-104 claims and the creditors' list; Section 106 the resolution professional's report on the repayment plan; Section 111 creditor voting; and Section 114 the Adjudicating Authority's order on the plan.
Frequently asked questions
Who prepares the repayment plan under Section 105?
The debtor prepares it, in consultation with the resolution professional. Section 105(1) does not assign sole responsibility for drafting to the resolution professional.
Can the resolution professional sell assets under the plan?
Section 105(2)(b) permits a plan to authorise or require the resolution professional to realise the debtor's assets. Any such action must follow the approved plan and applicable legal requirements.
Does preparing a repayment plan automatically stop recovery proceedings?
No. The statutory interim moratorium and moratorium arise under Sections 96 and 101, respectively, when their legal conditions are met. Merely preparing a draft plan is not itself a separate trigger.
Is the plan effective as soon as the debtor submits it?
No. The subsequent statutory steps concerning the resolution professional's report, creditors and the Adjudicating Authority must be followed.
Official legislation and regulatory resources
- India Code - Insolvency and Bankruptcy Code, 2016 (Act 31 of 2016)
- India Code - Central legislation and amendments
- Insolvency and Bankruptcy Board of India - Legal framework
- IBBI - Regulations and related legal materials
- e-Gazette of India - Notifications and commencement orders
For the consolidated legislative text and any amendments, notifications or regulations in force at the time of a proceeding, consult the official sources above.
Continue reading: The Insolvency and Bankruptcy Code, 2016 - Guide and provisions.
Legal information only. The applicable commencement notifications, regulations and case-specific orders should be verified before relying on a procedure or deadline.