Section 111 of the Insolvency and Bankruptcy Code, 2016: Approval of Repayment Plan by Creditors
Section 111 sets the voting threshold for approving a repayment plan, or any modification to it, at a creditors' meeting. Approval requires more than three-fourths in value of the creditors present in person or by proxy and voting on the resolution.
The threshold is more than 75% in value of eligible creditors who are present and actually vote on the resolution. It is not simply 75% of the number of creditors, nor automatically 75% of all outstanding debts.
Section 111: Statutory provision and explanation
Section 111 - Approval of repayment plan by creditors.
The repayment plan or any modification to the repayment plan shall be approved by a majority of more than three-fourth in value of the creditors present in person or by proxy and voting on the resolution in a meeting of the creditors.
This provision applies to both the original repayment plan and any proposed amendment to that plan. A modification is not automatically effective merely because the creditors discuss it: the voting threshold under Section 111 must be satisfied, alongside the other applicable procedural requirements.
Meaning of the more-than-75% voting threshold
Majority in value refers to the voting value assigned to eligible creditors, rather than a headcount. Present and voting identifies the creditors participating in the relevant vote, whether personally or through a valid proxy. A creditor who does not cast a vote is not treated as having voted in favour.
| Illustrative voting result | Approval under Section 111? |
|---|---|
| Eligible votes cast have a total value of 100; 76 vote in favour. | Yes. 76% is more than 75%. |
| Eligible votes cast have a total value of 100; 75 vote in favour. | No. Exactly 75% does not meet a threshold of more than three-fourths. |
| Eligible votes cast have a total value of 80; 61 vote in favour. | Yes. 61/80 = 76.25%, subject to correct determination of voting shares and eligibility. |
Examples are explanatory only. The resolution professional must determine voting shares and exclusions under the applicable law and IBBI framework.
Who is entitled to vote at the meeting?
Section 109 governs creditor voting rights and requires the resolution professional to determine each creditor's voting share in the manner specified by the Insolvency and Bankruptcy Board of India (IBBI). Under that section, voting restrictions include claims for unliquidated amounts, creditors not included in the list prepared under Section 104, and associates of the debtor.
Section 110 deals separately with secured creditors. Their participation, security enforcement rights, any affidavit concerning the unsecured portion of debt, and required concurrence must be evaluated under that provision. The voting calculation should not disregard these statutory conditions.
How a repayment plan is considered and approved
- Plan preparation: The debtor prepares a repayment plan in consultation with the resolution professional under Section 105.
- Professional report: Under Section 106, the resolution professional submits the plan and a report to the Adjudicating Authority, addressing compliance, feasibility and whether a creditors' meeting is necessary.
- Meeting notice: Where a meeting is convened, Section 107 requires at least 14 days' notice and prescribed accompanying documents, including the plan, statement of affairs, professional report and proxy-voting forms.
- Consideration and modifications: Under Section 108, creditors may approve, modify or reject the plan. The debtor's consent is required for each modification suggested by creditors.
- Voting: Apply the eligibility and voting-share rules of Sections 109 and 110, then test whether affirmative votes exceed three-fourths of the value of eligible creditors present and voting under Section 111.
- Further statutory steps: Creditor approval is not the final Adjudicating Authority order. Subsequent reporting and the Authority's decision are governed by Sections 112 to 114.
Connected provisions of the IBC
| Provision | Subject and relevance |
|---|---|
| Section 104 | Preparation of the list of creditors used to identify relevant creditors. |
| Section 105 | Debtor's repayment plan and its essential contents. |
| Section 106 | Resolution professional's report on the plan. |
| Section 107 | Summoning the creditors' meeting and proxy-voting information. |
| Section 108 | Conduct of the meeting and debtor's consent to modifications. |
| Section 109 | Voting shares and creditors who cannot vote. |
| Section 110 | Special rights of secured creditors. |
| Sections 112-114 | Post-meeting reporting, consideration of the plan and the Adjudicating Authority's order. |
Applicability and jurisdiction
Section 111 belongs to Part III of the IBC, dealing with insolvency resolution of individuals and partnership firms. Its operational application must be read with commencement notifications: the relevant Part III framework was brought into force from 1 December 2019 for personal guarantors to corporate debtors. It should not be assumed that the same provisions have generally commenced for every individual or partnership firm. For qualifying personal-guarantor matters, Section 60 provides for the National Company Law Tribunal as the Adjudicating Authority in the applicable circumstances.
Frequently asked questions
Is a simple majority sufficient to approve the repayment plan?
No. Section 111 requires affirmative votes representing more than three-fourths in value of creditors present and voting on the resolution.
Does exactly 75% approval satisfy Section 111?
No. The words more than three-fourth require a percentage strictly greater than 75%.
Can creditors vote through a proxy?
Yes. Section 111 expressly recognises creditors present in person or by proxy. Section 107 addresses proxy-voting forms and the applicable procedure.
Can creditors approve changes to a repayment plan?
Yes, but Section 108 requires the debtor's consent for each creditor-suggested modification, and Section 111 applies its voting threshold to any modification.
Does a successful creditors' vote itself make the plan binding?
No. The later statutory steps, including consideration and orders under Sections 112-114, must also be followed.
Official legal sources and further reading
- India Code - Insolvency and Bankruptcy Code, 2016 (primary legislative text and amendments).
- India Code - IBC Act PDF (check the latest amendments and commencement status).
- IBBI - Legal framework (notifications, rules, regulations and circulars).
- IBBI - Regulations (consult the current applicable personal guarantor insolvency resolution regulations).
- The Insolvency and Bankruptcy Code, 2016 - LawDadi guide.
This article is general legal information, not case-specific legal advice. Statutory commencement, subsequent amendments, regulations and binding decisions should be checked before relying on a provision in proceedings.