Section 164 in The Insolvency and Bankruptcy Code, 2016

Title: Undervalued transactions.

Description: (1) The bankruptcy trustee may apply to the Adjudicating Authority for an order under this section in respect of an undervalued transaction between a bankrupt and any person. (2) The undervalued transaction referred to in sub-section (1) should have— (a) been entered into during the period of two years ending on the filing of the application for bankruptcy; and (b) caused bankruptcy process to be triggered. (3) A transaction between a bankrupt and his associate entered into during the period of two years preceding the date of making of the application for bankruptcy shall be deemed to be an undervalued transaction under this section. (4) On the application of the bankruptcy trustee under sub-section (1), the Adjudicating Authority may— (a) pass an order declaring an undervalued transaction void; (b) pass an order requiring any property transferred as a part of an undervalued transaction to be vested with the bankruptcy trustee as a part of the estate of the bankrupt; and (c) pass any other order it thinks fit for restoring the position to what it would have been if the bankrupt had not entered into the undervalued transaction. (5) The order under clause (a) of sub-section (4) shall not be passed if it is proved by the bankrupt that the transaction was undertaken in the ordinary course of business of the bankrupt: Provided that the provisions of this sub-section shall not be applicable to undervalued transaction entered into between a bankrupt and his associate under sub-section (3) of this section. (6) For the purposes of this section, a bankrupt enters into an undervalued transaction with any person if— (a) he makes a gift to that person; (b) no consideration has been received by that person from the bankrupt; (c) it is in consideration of marriage; or (d) it is for a consideration, the value of which in money or money's worth is significantly less than the value in money or money's worth of the consideration provided by the bankrupt.

Title: Preference transactions.

Description: (1) The bankruptcy trustee may apply to the Adjudicating Authority for an order under this section if a bankrupt has given a preference to any person. (2) The transaction giving preference to an associate of the bankrupt under sub-section (1) should have been entered into by the bankrupt with the associate during the period of two years ending on the date of the application for bankruptcy. (3) Any transaction giving preference not covered under sub-section (2) should have been entered into by the bankrupt during the period of six months ending on the date of the application for bankruptcy. (4) The transaction giving preference under sub-section (2) or under sub-section (3) should have caused the bankruptcy process to be triggered. (5) On the application of the bankruptcy trustee under sub-section (1), the Adjudicating Authority may— (a) pass an order declaring a transaction giving preference void; (b) pass an order requiring any property transferred in respect of a transaction giving preference to be vested with the bankruptcy trustee as a part of the estate of the bankrupt; and (c) pass any other order it thinks fit for restoring the position to what it would have been if the bankrupt had not entered into the transaction giving preference. (6) The Adjudicating Authority shall not pass an order under sub-section (5) unless the bankrupt was influenced in his decision of giving preference to a person by a desire to produce in relation to that person an effect under clause (b) of sub-section (8). (7) For the purpose of sub-section (6), if the person is an associate of the bankrupt, (otherwise than by reason only of being his employee), at the time when the preference was given, it shall be presumed that the bankrupt was influenced in his decision under that sub-section. (8) For the purposes of this section, a bankrupt shall be deemed to have entered into a transaction giving preference to any person if— (a) the person is the creditor or surety or guarantor for any debt of the bankrupt; and (b) the bankrupt does anything or suffers anything to be done which has the effect of putting that person into a position which, in the event of the debtor becoming a bankrupt, will be better than the position he would have been in, if that thing had not been done.

Title: Effect of order.

Description: (1) Subject to the provision of sub-section (2), an order passed by the Adjudicating Authority under section 164 or section 165 shall not,— (a) give rise to a right against a person interested in the property which was acquired in an undervalued transaction or a transaction giving preference, whether or not he is the person with whom the bankrupt entered into such transaction; and (b) require any person to pay a sum to the bankruptcy trustee in respect of the benefit received from the undervalued transaction or a transaction giving preference, whether or not he is the person with whom the bankrupt entered into such transaction. (2) The provision of sub-section (1) shall apply only if the interest was acquired or the benefit was received— (a) in good faith; (b) for value; (c) without notice that the bankrupt entered into the transaction at an undervalue or for giving preference; (d) without notice that the bankrupt has filed an application for bankruptcy or a bankruptcy order has been passed; and (e) by any person who at the time of acquiring the interest or receiving the benefit was not an associate of the bankrupt. (3) Any sum required to be paid to the bankruptcy trustee under sub-section (1) shall be included in the estate of the bankrupt.

Title: Extortionate credit transactions.

Description: (1) Subject to sub-section (6), on an application by the bankruptcy trustee, the Adjudicating Authority may make an order under this section in respect of extortionate credit transactions to which the bankrupt is or has been a party. (2) The transactions under sub-section (1) should have been entered into by the bankrupt during the period of two years ending on the bankruptcy commencement date. (3) An order of the Adjudicating Authority may— (a) set aside the whole or part of any debt created by the transaction; (b) vary the terms of the transaction or vary the terms on which any security for the purposes of the transaction is held; (c) require any person who has been paid by the bankrupt under any transaction, to pay a sum to the bankruptcy trustee; (d) require any person to surrender to the bankruptcy trustee any property of the bankrupt held as security for the purposes of the transaction. (4) Any sum paid or any property surrendered to the bankruptcy trustee shall be included in the estate of the bankrupt. (5) For the purposes of this section, an extortionate credit transaction is a transaction for or involving the provision of credit to the bankrupt by any person— (a) on terms requiring the bankrupt to make exorbitant payments in respect of the credit provided; or (b) which is unconscionable under the principles of law relating to contracts. (6) Any debt extended by a person regulated for the provision of financial services in compliance with the law in force in relation to such debt, shall not be considered as an extortionate credit transaction under this section.

Title: Obligations under contracts.

Description: (1) This section shall apply where a contract has been entered into by the bankrupt with a person before the bankruptcy commencement date. (2) Any party to a contract, other than the bankrupt under sub-section (1), may apply to the Adjudicating Authority for— (a) an order discharging the obligations of the applicant or the bankrupt under the contract; and (b) payment of damages by the party or the bankrupt, for non-performance of the contract or otherwise. (3) Any damages payable by the bankrupt by virtue of an order under clause (b) of sub-section (2) shall be provable as bankruptcy debt. (4) When a bankrupt is a party to the contract under this section jointly with another person, that person may sue or be sued in respect of the contract without joinder of the bankrupt.

PART 3 INSOLVENCY RESOLUTION AND BANKRUPTCY FOR INDIVIDUALS AND PARTNERSHIP FIRMS CHAPTER 5 ADMINISTRATION AND DISTRIBUTION OF THE ESTATE OF BANKRUPT