Section 45 in The Insolvency and Bankruptcy Code, 2016

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.

Title: Transactions defrauding creditors.

Description: Where the corporate debtor has entered into an undervalued transaction as referred to in sub-section (2) of section 45 and the Adjudicating Authority is satisfied that such transaction was deliberately entered into by such corporate debtor— (a) for keeping assets of the corporate debtor beyond the reach of any person who is entitled to make a claim against the corporate debtor; or (b) in order to adversely affect the interests of such a person in relation to the claim, the Adjudicating Authority shall make an order— (i) restoring the position as it existed before such transaction as if the transaction had not been entered into; and (ii) protecting the interests of persons who are victims of such transactions: Provided that an order under this sectionr— (a) shall not affect any interest in property which was acquired from a person other than the corporate debtor and was acquired in good faith, for value and without notice of the relevant circumstances, or affect any interest deriving from such an interest, and (b) shall not require a person who received a benefit from the transaction in good faith, for value and without notice of the relevant circumstances to pay any sum unless he was a party to the transaction.

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