IBC Section 114: Order of Adjudicating Authority on repayment plan

Section 114 of Insolvency and Bankruptcy Code, 2016: Order of Adjudicating Authority on repayment plan

Official Bare Act Text

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

(1) The Adjudicating Authority shall by an order approve or reject the repayment plan on the basis of the report of the meeting of the creditors submitted by the resolution professional under section 112:

Provided that where a meeting of creditors is not summoned, the Adjudicating Authority shall pass an order on the basis of the report prepared by the resolution professional under section 106.

(2) The order of the Adjudicating Authority approving the repayment plan may also provide for directions for implementing the repayment plan.

(3) Where the Adjudicating Authority is of the opinion that the repayment plan requires modification, it may direct the resolution professional to re-convene a meeting of the creditors for reconsidering the repayment plan.

Legal Commentary & Landmark Judgments: Section 114

Section 114 empowers the Adjudicating Authority to pass a formal judicial order approving or rejecting the repayment plan on the basis of the report of the meeting of creditors.

Judicial Order of Approval or Rejection: The Adjudicating Authority shall by order approve or reject the repayment plan on the basis of the report of the meeting of creditors submitted by the RP under Section 112.
Order of Approval Standard: If the plan was approved by 75% of creditors and conforms to statutory requirements, the NCLT/DRT approves the plan, giving it full legal force.
Consequences of Rejection: Where the plan is rejected by creditors or the court, the debtor and creditors are entitled to file an application for bankruptcy under Chapter IV.
Directions for Implementation: The court may issue directions for the implementation, supervision, and monitoring of the approved plan.

Key Landmark Precedents:

Dilip B. Jiwrajka v. Union of India (2024) 5 SCC 436: The Supreme Court held that the order under Section 114 is a full judicial decree; approval vests the plan with statutory enforceability, while rejection unlocks the bankruptcy gateway under Section 121.
Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta (2020) 8 SCC 531: Reaffirmed that the judicial authority cannot modify commercial terms approved by the requisite majority of creditors.

Courtroom Practice & Strategic Litigation Guidance:

Once the NCLT passes an approval order under Section 114, the repayment plan becomes a binding statutory contract. Dissenting creditors cannot pursue separate recovery, and the debtor must deposit installments strictly according to the approved schedule.