Section 108 of the IBC, 2016: Conduct of Meeting of Creditors
Section 108 of the Insolvency and Bankruptcy Code, 2016 governs how creditors consider a debtor's repayment plan at a creditors' meeting. It identifies the decisions creditors may make, requires the debtor's consent to proposed modifications, and limits each adjournment of the meeting.
Section 108: Conduct of meeting of creditors
The section contains four subsections. The following is a plain-language explanation preserving the requirements of each.
Section 108(1): Governing provisions for the meeting
The meeting of creditors must be conducted in accordance with Section 108 and Sections 109, 110 and 111 of the Code.
Meaning: Section 108 does not operate alone. The linked provisions deal with voting rights, rights of secured creditors and approval of the repayment plan. Meeting procedure must also comply with applicable rules and regulations.
Section 108(2): Creditors may approve, modify or reject the repayment plan
At the meeting, creditors may decide to approve, modify or reject the repayment plan.
Meaning: The creditors evaluate the plan prepared by the debtor in consultation with the resolution professional under Section 105. Any decision must follow the voting and approval requirements of the Code; merely discussing a proposal does not make it binding.
Section 108(3): Debtor's consent to every modification
The resolution professional must ensure that, if creditors suggest changes to the repayment plan, the debtor's consent is obtained for each modification.
Meaning: Creditors cannot simply rewrite the debtor's proposal without securing the debtor's consent to the changes. The resolution professional should clearly record the proposed changes and the debtor's response.
Section 108(4): Adjournment for sufficient cause
The resolution professional may adjourn a creditors' meeting for sufficient cause, but for not more than seven days at a time.
Meaning: A meeting may be postponed or continued when justified, such as to obtain necessary clarification or consider proposed changes. The seven-day limit applies to each adjournment; it is not an unrestricted power to delay the process.
How a meeting of creditors is conducted
| Stage | Legal basis | Practical requirement |
|---|---|---|
| Prepare the repayment plan | Section 105 | The debtor prepares a plan in consultation with the resolution professional. |
| Submit report | Section 106 | The resolution professional submits the plan and report to the Adjudicating Authority and states whether a meeting is needed. |
| Summon the meeting | Section 107 | Where a meeting is to be held, the resolution professional issues notice at least 14 days in advance and supplies the prescribed documents and proxy forms. |
| Consider proposals | Section 108(2)-(3) | Creditors consider approval, changes or rejection; debtor consent is required for each suggested modification. |
| Exercise voting rights | Sections 109-111 | Eligibility, secured-creditor treatment and the statutory approval threshold govern the vote. |
| Record and report outcome | Sections 112-114 | The meeting outcome is recorded and the plan proceeds for the Adjudicating Authority's consideration in accordance with the Code. |
Under Section 106(4), where a meeting is recommended, the proposed meeting date is not less than 14 and not more than 28 days from submission of the resolution professional's report, with creditor convenience taken into account. Under Section 107(1), notice of the meeting must be issued at least 14 days before the meeting date.
Voting rights and effect of a decision
Who votes at the meeting?
Section 109 governs voting rights at the meeting, including statutory exclusions. The resolution professional should determine participation and voting entitlement by reference to the Code, the creditor list and applicable regulations rather than assuming every person named in the list has an identical right to vote.
How are secured creditors treated?
Section 110 sets out special rules affecting secured creditors and their participation in relation to security interests. A secured creditor should examine the consequences of voting and the treatment of its security under that section before making an election.
Does a simple majority approve the repayment plan?
No. Section 111 requires approval by a majority of more than three-fourths in value of the creditors present in person or by proxy and voting on the resolution at the meeting. This is a value-based statutory test, not merely a count of the number of creditors attending.
Does creditor approval automatically make the plan operative?
No. The subsequent report and consideration by the Adjudicating Authority are governed by Sections 112 to 114. Creditors' approval and judicial approval are separate steps.
Important terms and connected legal provisions
- Repayment plan: The debtor's proposed arrangement to restructure debts or affairs, prepared in consultation with the resolution professional under Section 105.
- Resolution professional: The insolvency professional appointed to perform statutory functions in the individual insolvency resolution process, including preparing the report and managing creditors' meeting procedures.
- Creditor: A person to whom a debt is owed, subject to definitions and qualifications under the Code.
- Secured creditor: A creditor with a security interest securing a debt, subject to the Code's definitions and Section 110.
- Adjudicating Authority: The forum empowered to consider the insolvency application and repayment plan; for personal guarantors to corporate debtors, read the jurisdictional provisions including Section 60.
Sections 104-107 cover preparation of the list of creditors, repayment-plan preparation, the resolution professional's report and notice summoning the meeting. Sections 109-114 address voting, secured creditors, plan approval and subsequent judicial consideration.
Frequently asked questions
Can creditors change a repayment plan without the debtor's agreement?
No. Under Section 108(3), the resolution professional must obtain the debtor's consent for each modification suggested by creditors.
How long may a creditors' meeting be adjourned?
Section 108(4) permits adjournment for sufficient cause for no more than seven days at a time.
Must a creditors' meeting always be convened?
Not necessarily. Section 106 requires the resolution professional's report to state whether a meeting is necessary and to provide reasons if a meeting is not recommended. The subsequent process depends on the Code and the Adjudicating Authority's directions.
Can creditors reject a repayment plan?
Yes. Section 108(2) expressly permits creditors to decide to reject the repayment plan. Any legal consequences and further proceedings are governed by the other applicable provisions of the Code.
Official legal text and regulatory references
- India Code - Insolvency and Bankruptcy Code, 2016
- India Code - IBC, 2016 (PDF)
- IBBI - Legal framework and regulatory amendments
- IBBI - Applicable rules
Consult the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 and the IBBI (Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Regulations, 2019, as amended, when dealing with an actual proceeding.
Read more: The Insolvency and Bankruptcy Code, 2016 - overview and provisions.
This article is for general legal information. The operative statutory text, commencement notifications, regulations and relevant orders govern individual cases.