Section 114: Order of Adjudicating Authority on Repayment Plan

Section 114 of the Insolvency and Bankruptcy Code, 2016 governs the order of the Adjudicating Authority on a repayment plan. The Authority may approve or reject the plan on the statutory report before it, may include directions for implementation when approving the plan, and may require creditors to reconsider the plan where modification is considered necessary.

Text of Section 114

Meaning and scope of Section 114

Section 114 places the repayment plan before the Adjudicating Authority for a formal order. Where a meeting of creditors has been held, the statutory basis for the decision is the report of that meeting submitted by the resolution professional under Section 112.

If a meeting of creditors has not been summoned, the proviso to Section 114(1) requires the Authority to proceed on the basis of the resolution professional's report prepared under Section 106. Section 106 concerns the resolution professional's report on the repayment plan submitted to the Adjudicating Authority.

Three functions of the Adjudicating Authority under Section 114

1. Approval or rejection of the repayment plan

Under Section 114(1), the Adjudicating Authority must pass an order approving or rejecting the repayment plan. Where creditors have met, that decision is based on the meeting report under Section 112. The provision therefore links the creditors' consideration of the plan with the judicial stage of the insolvency resolution process.

2. Directions for implementation

Section 114(2) expressly permits an order approving the repayment plan to include directions for implementing it. This power supports the transition from approval of the plan to its performance and supervision.

3. Reconsideration where modification is required

Section 114(3) addresses a situation in which the Adjudicating Authority considers that the repayment plan requires modification. Instead of finally dealing with a modified plan itself, the Authority may direct the resolution professional to re-convene a meeting of creditors so that the repayment plan can be reconsidered through the creditors' meeting process.

Relationship with Sections 112 and 106

Section 112 requires the resolution professional to prepare a report of the meeting of creditors on the repayment plan. That report records, among other matters, whether the plan was approved or rejected, modifications if approved, resolutions proposed, decisions taken, creditor participation and voting records.

The proviso to Section 114(1) applies where no meeting of creditors is summoned. In that situation, the order is based on the report prepared by the resolution professional under Section 106 rather than a Section 112 meeting report.

Effect of approval or rejection under Section 115

The immediate statutory consequences of an order under Section 114 are addressed by Section 115. If the repayment plan is approved, it takes effect in the manner prescribed by Section 115 and becomes binding on the debtor and the creditors mentioned in the plan. If the plan is rejected, Section 115 provides for the debtor and creditors to seek bankruptcy under Chapter IV, subject to the applicable provisions of the Code.

Implementation after approval

Section 116 provides for supervision of implementation of the repayment plan by the resolution professional and permits an application to the Adjudicating Authority for directions where necessary in relation to a matter arising under the plan.

Official legal resources

For the current statutory text, amendments, regulations, notifications and orders, refer to the Insolvency and Bankruptcy Board of India legal framework and the India Code portal. The effective date and scope of the relevant provisions, rules and regulations should be verified for the particular insolvency proceeding.

This article is intended as a legal information resource. Application of Part III of the Code depends on the category of debtor or guarantor, applicable commencement notifications, rules and regulations, and the facts of the proceeding.