Section 111: Approval of Repayment Plan by Creditors
Section 111 of the Insolvency and Bankruptcy Code, 2016 sets the voting threshold by which creditors approve a repayment plan, or a modification to that plan, at a meeting of 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.
Meaning and effect of Section 111
Section 111 forms part of the statutory process for consideration of a repayment plan under Part III of the Code. It does not require approval merely by counting the number of creditors. The statutory test is based on the value of the creditors voting at the meeting, and the required majority must be more than three-fourths of that value.
The provision applies both to the original repayment plan placed before creditors and to any modification of that repayment plan. A proposal that does not obtain the voting majority prescribed by Section 111 is not approved by the creditors under this provision.
What is a repayment plan?
Under Section 105 of the IBC, the debtor prepares a repayment plan in consultation with the resolution professional. The plan contains a proposal to creditors for restructuring the debtor's debts or affairs. It may authorise or require the resolution professional to carry on the debtor's business or trade, realise assets, or administer or dispose of funds, subject to the Code and applicable regulations.
The resolution professional examines the repayment plan and submits it with a report to the Adjudicating Authority under Section 106. The statutory process then provides for a meeting of creditors and consideration of the repayment plan.
Voting requirement under Section 111
| Requirement | Section 111 rule |
|---|---|
| Proposal voted upon | Repayment plan or any modification to the repayment plan |
| Required majority | More than three-fourths in value |
| Whose value is counted | Creditors present in person or by proxy and voting on the resolution |
| Forum | Meeting of creditors |
Relationship with secured creditors
Section 110 deals with the rights of secured creditors in relation to a repayment plan. A secured creditor may participate and vote in meetings of creditors, subject to the statutory consequences concerning enforcement of security. Where the secured creditor does not forfeit the right to enforce security, the Code regulates the extent and manner in which the creditor may vote and requires the prescribed affidavit. These rules should be read with Section 111 when calculating and exercising voting rights on a repayment plan.
What happens after the vote?
Under Section 112, the resolution professional prepares a report of the meeting of creditors on the repayment plan. The report records whether the plan was approved or rejected and, where approved, the modifications, if any. Under Section 113, notice of the decisions taken at the meeting is given in accordance with the Code.
Section 114 governs the order of the Adjudicating Authority on the repayment plan. The later provisions deal with the effect, implementation, supervision, completion, premature end and discharge connected with an approved repayment plan.
Applicability of Part III
Official legal resources
For the authoritative and current legal position, refer to the official text and legal framework published by the Government of India and the Insolvency and Bankruptcy Board of India. Amendments, commencement notifications and regulations should be checked together with the principal Code.
This page is an explanatory legal resource. Statutory text, notifications, regulations and binding judicial decisions prevail in case of any difference.