Insolvency and Bankruptcy Code, 2016 | Part III, Chapter III

Section 118: Repayment Plan Coming to an End Prematurely

Section 118 of the Insolvency and Bankruptcy Code, 2016 (IBC) explains when an approved repayment plan is treated as prematurely ended, what the resolution professional must report, how the Adjudicating Authority responds and when bankruptcy proceedings may be pursued.

Key rule: A repayment plan is deemed to end prematurely when it is not fully implemented for every person bound by it within the time specified in that plan. Incomplete implementation can lead to a formal order and eligibility to seek bankruptcy under Chapter IV, subject to the applicable provisions.

Section 118 - Statutory provisions explained

Subsection (1): When a plan ends prematurely

A repayment plan is deemed to have come to an end prematurely if it has not been fully implemented in respect of all persons bound by it within the period stated in the plan.

Subsection (2): Report by the resolution professional

Where the plan ends prematurely, the resolution professional must submit a report to the Adjudicating Authority stating:

the receipts and payments made under the repayment plan;
the reasons why the plan ended prematurely; and
details of creditors whose claims have not been fully satisfied.

Subsection (3): Order of the Adjudicating Authority

On the basis of the resolution professional's report, the Adjudicating Authority must pass an order recording that the repayment plan has not been completely implemented.

Subsection (4): Right to apply for bankruptcy

The debtor or a creditor whose claim under the repayment plan has not been fully satisfied is entitled to apply for a bankruptcy order under Chapter IV. This is a right to apply, not an automatic bankruptcy order.

Subsection (5): Communication of report and order

The Adjudicating Authority must forward to the persons bound by the repayment plan under Section 115 copies of (a) the resolution professional's report under subsection (2) and (b) the order under subsection (3).

Subsection (6): Information to the Board

The provision requires forwarding of a copy of the order referred to in subsection (4) to the Insolvency and Bankruptcy Board of India for entries in the register under Section 196. Subsection (4) itself describes entitlement to apply; readers should consult the authoritative statutory text and applicable procedure when interpreting this cross-reference.

What happens after premature termination?

Premature termination is linked to failure to implement the plan fully within its agreed period. The resolution professional documents performance and unpaid claims; the Adjudicating Authority then records the non-implementation through an order. An eligible debtor or unpaid creditor may pursue the bankruptcy application procedure, but the statutory conditions, jurisdiction and time limits must still be met.

For example, if a repayment plan requires instalments to several creditors by a fixed deadline and one creditor's claim remains partly unpaid when that deadline expires, the plan may be deemed prematurely ended under Section 118(1). The report must account for amounts actually received and paid, reasons for the shortfall and outstanding creditors.

Section 105 - Repayment plan: the debtor prepares a restructuring proposal in consultation with the resolution professional.
Section 114 - Approval or rejection: the Adjudicating Authority decides on the repayment plan and may give implementation directions.
Section 115 - Effect of approval: an approved plan binds the debtor and creditors mentioned in it; rejection may permit a bankruptcy application.
Section 116 - Supervision: the resolution professional supervises implementation and may seek directions.
Section 117 - Completion: on full implementation, the resolution professional provides notice and a receipts-and-payments report within the statutory period.
Section 119 - Discharge order: governs the discharge following complete implementation, subject to its terms.
Section 121 - Bankruptcy application: specifies when an application may be made following relevant orders, including an order under Section 118(3), and provides a three-month filing period.
Section 196 - Board powers and functions: includes functions relating to information and records maintained by the Board.

Frequently asked questions

Does one unpaid creditor mean the repayment plan can end prematurely?

If the plan has not been fully implemented for all persons bound by it within its specified period, Section 118(1) applies. The precise position depends on the plan's terms and performance.

Does the end of a repayment plan automatically make the debtor bankrupt?

No. Section 118 provides for a report and an order confirming non-implementation. A bankruptcy application is a separate step under Chapter IV.

Who prepares the report about the failed repayment plan?

The resolution professional must report payments, reasons for premature termination and creditors with outstanding claims under Section 118(2).

What is the time limit for a bankruptcy application?

Section 121(2) generally requires the application within three months of the relevant order, including an order under Section 118(3). Applicability of Part III provisions and relevant notifications must be checked for the particular debtor.

Official legislation and further reading

Legal information only. The operation of Part III depends on applicable commencement notifications and the category of debtor; consult the latest notified provisions, rules and binding judicial decisions before taking action.