IBC Section 115: Effect of order of Adjudicating Authority on repayment plan

Section 115 of Insolvency and Bankruptcy Code, 2016: Effect of order of Adjudicating Authority on repayment plan

Official Bare Act Text

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

(1) Where the Adjudicating Authority has approved the repayment plan under section 114, such repayment plan shall-

(a) take effect as if proposed by the debtor in the meeting; and

(b) be binding on creditors mentioned in the repayment plan and the debtor.

(2) Where the Adjudicating Authority rejects the repayment plan under section 114, the debtor and the creditors shall be entitled to file an application for bankruptcy under Chapter IV.

(3) A copy of the order passed by the Adjudicating Authority under sub-section (2) shall be provided to the Board, for the purpose of recording an entry in the register referred to in section 196.

Legal Commentary & Landmark Judgments: Section 115

Section 115 defines the binding statutory effect of the order approving the repayment plan passed under Section 114, binding the debtor and all creditors mentioned in the plan.

Universal Binding Effect: The order approving the repayment plan shall take effect as if enacted in the Code, and shall be binding on the creditors mentioned in the plan and on the debtor.
Cessation of Moratorium: The moratorium declared under Section 101 ceases to have effect from the date of the order approving the plan.
Supervision by Resolution Professional: The resolution professional shall supervise the implementation of the repayment plan in accordance with its terms.
Notice to Board & Registrars: Copy of the order shall be forwarded to the IBBI and relevant registries for public record.

Key Landmark Precedents:

Dilip B. Jiwrajka v. Union of India (2024) 5 SCC 436: The Supreme Court affirmed that Section 115 establishes the doctrine of finality; once approved, the plan binds all participating and dissenting creditors, extinguishing all inconsistent pre-existing claims.
Ghanashyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. (2021) 9 SCC 657: The Supreme Court held that statutory approval creates a clean slate; creditors cannot initiate parallel recovery proceedings outside the approved plan terms.

Courtroom Practice & Strategic Litigation Guidance:

If a dissenting bank attempts to continue execution of a prior DRT recovery certificate or file fresh insolvency proceedings during the implementation of an approved Section 115 plan, produce the Section 114/115 order. All prior debts are merged into the repayment plan.