IBC Section 110: Rights of secured creditors in relation to repayment plan

Section 110 of Insolvency and Bankruptcy Code, 2016: Rights of secured creditors in relation to repayment plan

Official Bare Act Text

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

(1) Secured creditors shall be entitled to participate and vote in the meetings of the creditors.

(2) A secured creditor participating in the meetings of the creditors and voting in relation to the repayment plan shall forfeit his right to enforce the security during the period of the repayment plan in accordance with the terms of the repayment plan.

(3) Where a secured creditor does not forfeit his right to enforce security, he shall submit an affidavit to the resolution professional at the meeting of the creditors stating-

(a) that the right to vote exercised by the secured creditor is only in respect of the unsecured part of the debt; and

(b) the estimated value of the unsecured part of the debt.

(4) In case a secured creditor participates in the voting on the repayment plan by submitting an affidavit under sub-section (3), the secured and unsecured parts of the debt shall be treated as separate debts.

(5) The concurrence of the secured creditor shall be obtained if he does not participate in the voting on repayment plan but provision of the repayment plan affects his right to enforce security.

Explanation.-For the purposes of this section, "period of the repayment plan" means the period from the date of the order passed under section 114 till the date on which the notice is given by the resolution professional under section 117 or report submitted by the resolution professional under section 118, as the case may be.

Legal Commentary & Landmark Judgments: Section 110

Section 110 regulates the rights of secured creditors in relation to the repayment plan, providing that a secured creditor is entitled to participate and vote only if he forfeits or realizes his security interest.

Forfeiture of Security to Vote: A secured creditor shall be entitled to vote in respect of the whole of the debt only if he agrees to forfeit his right to enforce his security interest.
Voting on Unsecured Balance: If a secured creditor does not forfeit his security, he may vote only in respect of the unsecured balance of the debt after deducting the estimated value of the security.
Consent Required to Restructure Security: No repayment plan shall affect the security interest of a secured creditor without his express written concurrence.

Key Landmark Precedents:

Dilip B. Jiwrajka v. Union of India (2024) 5 SCC 436: The Supreme Court affirmed that Section 110 protects the inviolable property rights of secured creditors, barring repayment plans from altering mortgages without consent.
Paschimanchal Vidyut Vitran Nigam Ltd. v. Raman Ispat Pvt. Ltd. (2023) 10 SCC 60: Reaffirmed the special statutory status of secured creditors under the Code.

Courtroom Practice & Strategic Litigation Guidance:

A repayment plan cannot unilaterally reduce a bank's mortgage or release hypothecated assets. Secured creditors must give express written consent under Section 110 before their security can be modified or released.