IBC Section 105: Repayment plan

Section 105 of Insolvency and Bankruptcy Code, 2016: Repayment plan

Official Bare Act Text

Override / Mandate Mens Rea (Intent) Actus Reus (Conduct) Punishment Limitation Monetary

(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.

Legal Commentary & Landmark Judgments: Section 105

Section 105 regulates the formulation and contents of the Repayment Plan prepared by the debtor in consultation with the Resolution Professional, structuring the debt restructuring proposal.

Debtor's Repayment Proposal: The debtor shall prepare, in consultation with the resolution professional, a repayment plan containing a proposal to the creditors for restructuring of his debts.
Mandatory Elements (Section 105(2)): Must specify: (a) Proposed payment terms; (b) Source of funds; (c) Operational supervision by the RP; (d) Fees of the RP; (e) Treatment of secured creditors.
Justification & Feasibility: Must provide a clear financial justification showing why the proposal is feasible and more beneficial than immediate bankruptcy.
Co-Debtor Provisions: May authorize the restructuring of joint obligations subject to creditor agreement.

Key Landmark Precedents:

Dilip B. Jiwrajka v. Union of India (2024) 5 SCC 436: The Supreme Court held that Section 105 embodies the consensual restructuring core of individual insolvency, enabling honest debtors to negotiate structured settlements without the stigma of bankruptcy.
Lalit Kumar Jain v. Union of India (2021) 9 SCC 321: Affirmed that repayment plans under Section 105 provide a commercial mechanism to settle guarantee exposures amicably.

Courtroom Practice & Strategic Litigation Guidance:

When drafting a repayment plan under Section 105, structure it with realistic cash-flow projections: propose upfront payments from liquid assets, phased installments over 2-3 years, and offer reasonable haircuts that yield higher recovery than bankruptcy liquidation.