Section 44 in The Insolvency and Bankruptcy Code, 2016

Title: Orders in case of preferential transactions.

Description: The Adjudicating Authority, may, on an application made by the resolution professional or liquidator under sub-section (1) of section 43, by an order: (a) require any property transferred in connection with the giving of the preference to be vested in the corporate debtor; (b) require any property to be so vested if it represents the application either of the proceeds of sale of property so transferred or of money so transferred; (c) release or discharge (in whole or in part) of any security interest created by the corporate debtor; (d) require any person to pay such sums in respect of benefits received by him Adjudicating Authority may direct; (e) direct any guarantor, whose financial debts or operational debts owed to any person were released or discharged (in whole or in part) by the giving of the preference, to be under such new or revived financial debts or operational debts to that person as the Adjudicating Authority deems appropriate; (f) direct for providing security or charge on any property for the discharge of any financial debt or operational debt under the order, and such security or charge to have the same priority as a security or charge released or discharged wholly or in part by the giving of the preference; and (g) direct for providing the extent to which any person whose property is so vested in the corporate debtor, or on whom financial debts or operational debts are imposed by the order, are to be proved in the liquidation or the corporate insolvency resolution process for financial debts or operational debts which arose from, or were released or discharged wholly or in part by the giving of the preference: Provided that an order under this section shall not— (a) affect any interest in property which was acquired from a person other than the corporate debtor or any interest derived from such interest and was acquired in good faith and for value; (b) require a person, who received a benefit from the preferential transaction in good faith and for value to pay a sum to the liquidator or the resolution professional. Explanation I.— For the purpose of this section, it is clarified that where a person, who has acquired an interest in property from another person other than the corporate debtor, or who has received a benefit from the preference or such another person to whom the corporate debtor gave the preference,— (i) had sufficient information of the initiation or commencement of insolvency resolution process of the corporate debtor; (ii) is a related party,br it shall be presumed that the interest was acquired or the benefit was received otherwise than in good faith unless the contrary is shown. Explanation II.—A person shall be deemed to have sufficient information or opportunity to avail such information if a public announcement regarding the corporate insolvency resolution process has been made under section 13.

Title: Avoidance of undervalued transactions.

Description: (1) If the liquidator or the resolution professional, as the case may be, on an examination of the transactions of the corporate debtor referred to in sub-section (2) 1*** determines that certain transactions were made during the relevant period under section 46, which were undervalued, he shall make an application to the Adjudicating Authority to declare such transactions as void and reverse the effect of such transaction in accordance with this Chapter. (2) A transaction shall be considered undervalued where the corporate debtor— (a) makes a gift to a person; or (b) enters into a transaction with a person which involves the transfer of one or more assets by the corporate debtor for a consideration the value of which is significantly less than the value of the consideration provided by the corporate debtor, and such transaction has not taken place in the ordinary course of business of the corporate debtor. 1. The words and figures “of section 43” omitted by Act 26 of 2018, s. 28 (w.e.f. 6-6-2018).

Title: Relevant period for avoidable transactions

Description: (1) In an application for avoiding a transaction at undervalue, the liquidator or the resolution professional, as the case may be, shall demonstrate that— (i) such transaction was made with any person within the period of one year preceding the insolvency commencement date; or (ii) such transaction was made with a related party within the period of two years preceding the insolvency commencement date. (2) The Adjudicating Authority may require an independent expert to assess evidence relating to the value of the transactions mentioned in this section.

Title: Application by creditor in cases of undervalued transactions.

Description: (1) Where an undervalued transaction has taken place and the liquidator or the resolution professional as the case may be, has not reported it to the Adjudicating Authority, a creditor, member or a partner of a corporate debtor, as the case may be, may make an application to the Adjudicating Authority to declare such transactions void and reverse their effect in accordance with this Chapter. (2) Where the Adjudicating Authority, after examination of the application made under sub-section (1), is satisfied that— (a) undervalued transactions had occurred; and (b) liquidator or the resolution professional, as the case may be, after having sufficient information or opportunity to avail information of such transactions did not report such transaction to the Adjudicating Authority, it shall pass an order— (a) restoring the position as it existed before such transactions and reversing the effects thereof in the manner as laid down in section 45 and section 48; (b) requiring the Board to initiate disciplinary proceedings against the liquidator or the resolution professional as the case may be.

Title: Order in cases of undervalued transactions.

Description: The order of the Adjudicating Authority under sub-section (1) of section 45 may provide for the following:— (a) require any property transferred as part of the transaction, to be vested in the corporate debtor; (b) release or discharge (in whole or in part) any security interest granted by the corporate debtor; (c) require any person to pay such sums, in respect of benefits received by such person, to the liquidator or the resolution professional as the case may be, as the Adjudicating Authority may direct; or (d) require the payment of such consideration for the transaction as may be determined by an independent expert.

PART 2 INSOLVENCY RESOLUTION AND LIQUIDATION FOR CORPORATE REASONS CHAPTER 3 LIQUIDATION PROCESS