Section 105 Repayment Plan under the Insolvency and Bankruptcy Code, 2016
Section 105 of the Insolvency and Bankruptcy Code, 2016 governs preparation of a repayment plan in the insolvency resolution process for individuals and partnership firms. The debtor prepares the plan in consultation with the resolution professional and proposes how the debtor's debts or affairs may be restructured for consideration by creditors.
Text of Section 105 - Repayment plan
(1) The debtor shall prepare, in consultation with the resolution professional, a repayment plan containing a proposal to the creditors for restructuring of his debts or affairs.
(2) The repayment plan may authorise or require the resolution professional to-
(a) carry on the debtor's business or trade on his behalf or in his name; or
(b) realise the assets of the debtor; or
(c) administer or dispose of any funds of the debtor.
(3) The repayment plan shall include the following, namely:-
(a) justification for preparation of such repayment plan and reasons on the basis of which the creditors may agree upon the plan;
(b) provision for payment of fee to the resolution professional;
(c) such other matters as may be specified.
Meaning of repayment plan under the IBC
Section 79 defines a repayment plan, for Part III of the Code, as a plan prepared by the debtor in consultation with the resolution professional under Section 105 containing a proposal for restructuring the debtor's debts or affairs. Section 105 provides the substantive framework for preparing that proposal.
Who prepares the repayment plan?
The primary statutory responsibility lies with the debtor, but the plan must be prepared in consultation with the resolution professional. The resolution professional subsequently reports on the plan to the Adjudicating Authority under Section 106.
What may a repayment plan provide?
Restructuring of debts or affairs
The plan must contain a proposal to creditors for restructuring the debtor's debts or affairs. Its purpose is therefore broader than a bare schedule of payments: it may set out a structured arrangement intended to address the debtor's financial obligations and affairs within the statutory process.
Carrying on the debtor's business or trade
Under Section 105(2)(a), the plan may authorise or require the resolution professional to carry on the debtor's business or trade on the debtor's behalf or in the debtor's name.
Realisation of assets
Section 105(2)(b) permits the repayment plan to authorise or require the resolution professional to realise the debtor's assets. The manner in which assets are dealt with must remain consistent with the Code, the applicable regulations, the terms of the plan and other applicable law.
Administration or disposal of funds
Section 105(2)(c) permits the plan to authorise or require the resolution professional to administer or dispose of funds of the debtor. This can provide a mechanism for implementing financial arrangements contemplated by an approved plan.
Mandatory contents of a repayment plan
Section 105(3) expressly requires the plan to include a justification for its preparation and reasons why creditors may agree to it, provision for payment of the resolution professional's fee, and any other matters specified under the applicable regulatory framework.
Personal guarantors to corporate debtors
For insolvency resolution processes of personal guarantors to corporate debtors, the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Regulations, 2019 supplement the Code. The regulations contain requirements relating to preparation and implementation of repayment plans and should be read with Sections 105 to 119. The regulatory framework has also been amended to address the procedure where a repayment plan is not submitted within the statutory process.
What happens after preparation of the plan?
Under Section 106, the resolution professional submits the repayment plan together with a report to the Adjudicating Authority within the period prescribed by that section. The report addresses matters including legal compliance, the prospect of approval and implementation, and whether a meeting of creditors is required. The succeeding provisions govern the creditors' meeting, voting, approval and the Adjudicating Authority's consideration of the repayment plan.
Key points at a glance
- The debtor prepares the repayment plan in consultation with the resolution professional.
- The plan proposes restructuring of the debtor's debts or affairs.
- It may authorise or require the resolution professional to carry on the debtor's business or trade.
- It may provide for realisation of assets and administration or disposal of the debtor's funds.
- The plan must explain why it is prepared and why creditors may agree to it.
- It must provide for payment of the resolution professional's fee.
- Applicable regulations may specify additional matters that the repayment plan must address.
- Section 106 governs the resolution professional's report on the repayment plan and its submission to the Adjudicating Authority.
Related provisions
Section 105 should be read with Section 79 on definitions under Part III, Section 104 on preparation of the list of creditors, Section 106 on the resolution professional's report, Sections 107 to 112 on the creditors' meeting and voting process, and Sections 114 and 115 concerning consideration and effect of the repayment plan.
This page provides statutory reference material and general legal information. The current Code, applicable rules, regulations, notifications and binding judicial decisions should be checked for a particular proceeding.