{"id":6316,"date":"2020-05-18T23:49:48","date_gmt":"2020-05-18T18:19:48","guid":{"rendered":"https:\/\/carajput.com\/blog\/?p=6316"},"modified":"2022-01-18T16:39:40","modified_gmt":"2022-01-18T11:09:40","slug":"overviews-of-principles-of-avoidable-preferential-transactions-ibc-2016","status":"publish","type":"post","link":"https:\/\/carajput.com\/blog\/overviews-of-principles-of-avoidable-preferential-transactions-ibc-2016\/","title":{"rendered":"Principles of Avoidable Preferential Transactions"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_58 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Page Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69d426f293322\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #000000;color:#000000\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #000000;color:#000000\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69d426f293322\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/carajput.com\/blog\/overviews-of-principles-of-avoidable-preferential-transactions-ibc-2016\/#Elements_of_Avoidable_Preferential_Specified_Transactions_under_IBC_2016\" title=\"Elements of Avoidable Preferential Specified Transactions under IBC 2016\">Elements of Avoidable Preferential Specified Transactions under IBC 2016<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/carajput.com\/blog\/overviews-of-principles-of-avoidable-preferential-transactions-ibc-2016\/#Section_43_Preferential_Transaction\" title=\"Section 43: Preferential Transaction\u00a0\u00a0 \">Section 43: Preferential Transaction\u00a0\u00a0 <\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/carajput.com\/blog\/overviews-of-principles-of-avoidable-preferential-transactions-ibc-2016\/#Not_considered_as_preferential_transactions\" title=\"Not considered as preferential transactions \">Not considered as preferential transactions <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/carajput.com\/blog\/overviews-of-principles-of-avoidable-preferential-transactions-ibc-2016\/#Section_44_Orders_in_case_of_Preferential_Transactions\" title=\"Section 44: Orders in case of Preferential Transactions\">Section 44: Orders in case of Preferential Transactions<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/carajput.com\/blog\/overviews-of-principles-of-avoidable-preferential-transactions-ibc-2016\/#The_Adjudicating_Authority_may_on_an_application_made_by_the_resolution_professional_or_liquidator_by_an_order\" title=\"The Adjudicating Authority may on an application made by the resolution professional or liquidator, by an order\">The Adjudicating Authority may on an application made by the resolution professional or liquidator, by an order<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/carajput.com\/blog\/overviews-of-principles-of-avoidable-preferential-transactions-ibc-2016\/#Provided_that_an_order_under_this_section_shall_not%E2%80%94\" title=\"Provided that an order under this section shall not\u2014\">Provided that an order under this section shall not\u2014<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/carajput.com\/blog\/overviews-of-principles-of-avoidable-preferential-transactions-ibc-2016\/#Section_45_Undervalued_Transactions\" title=\"Section 45: Undervalued Transactions\">Section 45: Undervalued Transactions<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/carajput.com\/blog\/overviews-of-principles-of-avoidable-preferential-transactions-ibc-2016\/#A_transaction_shall_be_considered_undervalued_where_the_corporate_debtor%E2%80%94\" title=\"A transaction shall be considered undervalued where the corporate debtor\u2014\">A transaction shall be considered undervalued where the corporate debtor\u2014<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/carajput.com\/blog\/overviews-of-principles-of-avoidable-preferential-transactions-ibc-2016\/#Section_46_Relevant_period_for_avoidable_transactions\" title=\"Section 46: Relevant period for avoidable transactions\">Section 46: Relevant period for avoidable transactions<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/carajput.com\/blog\/overviews-of-principles-of-avoidable-preferential-transactions-ibc-2016\/#Section_47_Application_by_creditor_in_case_of_undervalued_transactions\" title=\"Section 47: Application by creditor in case of undervalued transactions\">Section 47: Application by creditor in case of undervalued transactions<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/carajput.com\/blog\/overviews-of-principles-of-avoidable-preferential-transactions-ibc-2016\/#It_shall_pass_an_order%E2%80%94\" title=\"It shall pass an order\u2014\">It shall pass an order\u2014<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/carajput.com\/blog\/overviews-of-principles-of-avoidable-preferential-transactions-ibc-2016\/#Section_48_Order_in_case_of_undervalued_transactions\" title=\"Section 48: Order in case of undervalued transactions\">Section 48: Order in case of undervalued transactions<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/carajput.com\/blog\/overviews-of-principles-of-avoidable-preferential-transactions-ibc-2016\/#Section_49_Transactions_defrauding_creditors\" title=\"Section 49: Transactions defrauding creditors\">Section 49: Transactions defrauding creditors<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/carajput.com\/blog\/overviews-of-principles-of-avoidable-preferential-transactions-ibc-2016\/#Section_50_Extortionate_credit_transactions\" title=\"Section 50: Extortionate credit transactions\">Section 50: Extortionate credit transactions<\/a><ul class='ez-toc-list-level-4'><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/carajput.com\/blog\/overviews-of-principles-of-avoidable-preferential-transactions-ibc-2016\/#Section_51_Orders_of_Adjudicating_Authority_in_respect_of_extortionate_credit_transactions\" title=\"Section 51: Orders of Adjudicating Authority in respect of extortionate credit transactions\">Section 51: Orders of Adjudicating Authority in respect of extortionate credit transactions<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/carajput.com\/blog\/overviews-of-principles-of-avoidable-preferential-transactions-ibc-2016\/#Guidance_on_the_GST_Registration_Facility_available_for_IRP_under_the_IBC\" title=\"Guidance on the GST Registration Facility available for IRP under the IBC\">Guidance on the GST Registration Facility available for IRP under the IBC<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/carajput.com\/blog\/overviews-of-principles-of-avoidable-preferential-transactions-ibc-2016\/#IBC_ordinance_2020_after_the_impact_covid-19_covid_period_defaults_cannot_be_triggered_by_CIRP\" title=\"IBC ordinance 2020 after the impact covid-19 covid period defaults cannot be triggered by CIRP\">IBC ordinance 2020 after the impact covid-19 covid period defaults cannot be triggered by CIRP<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/carajput.com\/blog\/overviews-of-principles-of-avoidable-preferential-transactions-ibc-2016\/#IBC_Forms_Insolvency_and_Bankruptcy_Code_2016_Forms_Demand_Notices_Returns\" title=\"IBC Forms Insolvency and Bankruptcy Code 2016 Forms Demand Notices Returns\">IBC Forms Insolvency and Bankruptcy Code 2016 Forms Demand Notices Returns<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h1><\/h1>\n<figure id=\"attachment_6318\" aria-describedby=\"caption-attachment-6318\" style=\"width: 816px\" class=\"wp-caption alignnone\"><a href=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2020\/05\/Elements-of-Avoidable-Preferential-Specified-Transactions-under-IBC-2016.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-6318\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2020\/05\/Elements-of-Avoidable-Preferential-Specified-Transactions-under-IBC-2016.jpg\" alt=\"www.carajput.com;IBC\" width=\"816\" height=\"892\" srcset=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2020\/05\/Elements-of-Avoidable-Preferential-Specified-Transactions-under-IBC-2016.jpg 816w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2020\/05\/Elements-of-Avoidable-Preferential-Specified-Transactions-under-IBC-2016-274x300.jpg 274w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2020\/05\/Elements-of-Avoidable-Preferential-Specified-Transactions-under-IBC-2016-768x840.jpg 768w\" sizes=\"(max-width: 816px) 100vw, 816px\" \/><\/a><figcaption id=\"caption-attachment-6318\" class=\"wp-caption-text\">www.carajput.com; IBC<\/figcaption><\/figure>\n<h2><span class=\"ez-toc-section\" id=\"Elements_of_Avoidable_Preferential_Specified_Transactions_under_IBC_2016\"><\/span><span style=\"color: #000080;\">Elements of Avoidable Preferential Specified Transactions under IBC 2016<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>As per the 2016 <a href=\"https:\/\/carajput.com\/blog\/category\/insolvency\/\">Insolvency<\/a> and Bankruptcy Code, Section 43 to 51 deals with avoidable transactions. These transactions are also kept referring to as vulnerable transactions.<\/p>\n<p>In case of code, there are three types of avoidable transactions. These are preferential transactions, undervalued transactions, and extortionate credit transactions that the corporate debtor must avoid during the relevant period.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Section_43_Preferential_Transaction\"><\/span><span style=\"color: #000080;\"><strong>Section 43: Preferential Transaction<\/strong><strong>\u00a0\u00a0 <\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>To the advantage of the borrower, a sale of the assets or property of the corporate debtor shall be made on account of the previous financial obligation or other liabilities.<\/p>\n<p>Such a move has the effect of placing the borrower in a place of profit rather than the allocation of the properties referred to in section 53<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Not_considered_as_preferential_transactions\"><\/span><span style=\"color: #000080;\"><strong>Not considered as preferential transactions <\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ol>\n<li>Transfer made in the ordinary course of business of the corporate debtor or the transferee<\/li>\n<li>Any transfer creating a security interest in the property acquired by the corporate debtor to the extent that,<\/li>\n<li>Such security interest secures \u201cnew value\u201d and was given at the time of or after the signing of a security agreement that contains a description of such property as a security interest and was used by corporate debtor to acquire such property<\/li>\n<li>Transfer was registered with an information utility on or before thirty days after the corporate debtor receives possession of such property<\/li>\n<li>Provided that any transfer made in pursuance of the order of a court shall not, preclude such transfer to be deemed as giving of preference by the corporate debtor<\/li>\n<\/ol>\n<p><strong><span style=\"color: #000080;\">New Value:<\/span> <\/strong>means\u00a0money or its worth in goods, services, or new credit, or release by the transferee of property\u00a0previously transferred to such transferee in a transaction that is neither void nor voidable by\u00a0the liquidator or the resolution professional under this Code, including proceeds of such\u00a0property, but does not include a financial debt or operational debt substituted for existing\u00a0financial debt or operational debt.<\/p>\n<p><span style=\"color: #000080;\"><strong>Relevant Time: <\/strong><\/span>it is given to a related party (other than by reason only of being an employee),\u00a0during the period of two years preceding the insolvency commencement date; or<\/p>\n<p>A preference is given to a person other than a related party during the period\u00a0of one year preceding the insolvency commencement date.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Section_44_Orders_in_case_of_Preferential_Transactions\"><\/span><span style=\"color: #000080;\"><strong>Section 44: Orders in case of Preferential Transactions<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<h3><span class=\"ez-toc-section\" id=\"The_Adjudicating_Authority_may_on_an_application_made_by_the_resolution_professional_or_liquidator_by_an_order\"><\/span><span style=\"color: #000080;\"><strong>The Adjudicating Authority may on an application made by the resolution professional or liquidator, by an order<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ol>\n<li>Require any property transferred in connection with the giving of the preference to be vested in the corporate debtor<\/li>\n<li>\u00a0Any 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;<\/li>\n<li>release or discharge (in whole or in part) of any security interest created by the corporate debtor;<\/li>\n<li>require any person to pay such sums in respect of benefits received by him from the corporate debtor, such sums to the liquidator or the resolution professional, as the Adjudicating Authority may direct;<\/li>\n<li>\u00a0Any 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;<\/li>\n<li>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<\/li>\n<li>The 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:<\/li>\n<\/ol>\n<h3><span class=\"ez-toc-section\" id=\"Provided_that_an_order_under_this_section_shall_not%E2%80%94\"><\/span><strong>Provided that an order under this section shall not\u2014<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ol>\n<li>affect any interest in property which was acquired from a person other than\u00a0the corporate debtor or any interest derived from such interest and was acquired in\u00a0good faith and for value;<\/li>\n<li>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.<\/li>\n<\/ol>\n<h3><span class=\"ez-toc-section\" id=\"Section_45_Undervalued_Transactions\"><\/span><span style=\"color: #000080;\"><strong>Section 45: Undervalued Transactions<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>If, as the case may be, the liquidator or the resolution professional finds, after reviewing the transactions of the corporate debtor, that such transactions have been made within the applicable time under section 46.<\/p>\n<p>which have been undervalued, he shall make an appeal to the adjudicating authority to declare certain transactions null and void and to reverse the effect of such transactions in compliance with that clause.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"A_transaction_shall_be_considered_undervalued_where_the_corporate_debtor%E2%80%94\"><\/span><span style=\"color: #000080;\">A transaction shall be considered undervalued where the corporate debtor<\/span>\u2014<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ol>\n<li>makes a gift to a person; or<\/li>\n<li>enters into a transaction with a person which involves the transfer of one or\u00a0more assets by the corporate debtor for a consideration the value of which is significantly\u00a0less than the value of the consideration provided by the corporate debtor,<\/li>\n<li>and such transaction has not taken place in the ordinary course of business of the corporate\u00a0debtor.<\/li>\n<\/ol>\n<h3><span class=\"ez-toc-section\" id=\"Section_46_Relevant_period_for_avoidable_transactions\"><\/span><span style=\"color: #000080;\"><strong>Section 46: Relevant period for avoidable transactions<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>In an application for avoiding a transaction at undervalue, the liquidator or the\u00a0resolution professional, as the case may be, shall demonstrate that\u2014<\/p>\n<ol>\n<li>such transaction was made with any person within the period of one year\u00a0preceding the insolvency commencement date; or<\/li>\n<li>A transaction was made with a related party within the period of two years preceding the insolvency commencement date.<\/li>\n<\/ol>\n<h3><span class=\"ez-toc-section\" id=\"Section_47_Application_by_creditor_in_case_of_undervalued_transactions\"><\/span><span style=\"color: #000080;\"><strong>Section 47: Application by creditor in case of undervalued transactions<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Where an undervalued transaction has taken place and the liquidator or resolution professional, as the case may be, has not informed the adjudicator, the borrower, the employee or the spouse of the corporate debtor, as the case may be, the appeal to the adjudicator to render those transactions null and void in compliance with this Clause.<\/p>\n<p>Where the Adjudicating Authority, after examination of the application made under\u00a0sub-section (1), is satisfied that\u2014<\/p>\n<ol>\n<li>undervalued transactions had occurred; and<\/li>\n<li>the 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,<\/li>\n<\/ol>\n<h3><span class=\"ez-toc-section\" id=\"It_shall_pass_an_order%E2%80%94\"><\/span><strong>It shall pass an order\u2014<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ol>\n<li>restoring the position as it existed before such transactions and reversing\u00a0the effects thereof in the manner as laid down in section 45 and section 48;<\/li>\n<li>requiring the Board to initiate disciplinary proceedings against the liquidator\u00a0or the resolution professional as the case may be.<\/li>\n<\/ol>\n<h3><span class=\"ez-toc-section\" id=\"Section_48_Order_in_case_of_undervalued_transactions\"><\/span><span style=\"color: #000080;\"><strong>Section 48: Order in case of undervalued transactions<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The order of the Adjudicating Authority under sub-section (1) of section 45 may\u00a0provide for the following:<\/p>\n<ol>\n<li>Any property transferred as part of the transaction, to be vested in the corporate debtor;<\/li>\n<li>release or discharge (in whole or in part) any security interest granted by the\u00a0corporate debtor;<\/li>\n<li>A 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<\/li>\n<li>The payment\u00a0 required of such consideration for the transaction as may be determined by an independent expert.<\/li>\n<\/ol>\n<h3><span class=\"ez-toc-section\" id=\"Section_49_Transactions_defrauding_creditors\"><\/span><span style=\"color: #000080;\"><strong>Section 49: Transactions defrauding creditors<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Where the corporate debtor has entered into an undervalued transaction and the Adjudicating Authority is satisfied that such\u00a0transaction was deliberately entered into by such corporate debtor\u2014<\/p>\n<ol>\n<li>for keeping assets of the corporate debtor beyond the reach of any person\u00a0who is entitled to make a claim against the corporate debtor; or<\/li>\n<li>in order to adversely affect the interests of such a person in relation to the\u00a0claim,<\/li>\n<li>the Adjudicating Authority shall make an order\u2014<\/li>\n<li>restoring the position as it existed before such transaction as if the\u00a0transaction had not been entered into; and<\/li>\n<li>protecting the interests of persons who are victims of such transactions:<\/li>\n<\/ol>\n<p><strong>Provided that an order under this section\u2014<\/strong><\/p>\n<ol>\n<li>shall not affect any interest in property which was acquired from a person\u00a0other than the corporate debtor and was acquired in good faith, for value and without\u00a0notice of the relevant circumstances, or affect any interest deriving from such an\u00a0interest, and<\/li>\n<li>He 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.<\/li>\n<\/ol>\n<h3><span class=\"ez-toc-section\" id=\"Section_50_Extortionate_credit_transactions\"><\/span><span style=\"color: #000080;\"><strong>Section 50: Extortionate credit transactions<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Where a corporate debtor has been a party to an extortionate credit facility involving the acquisition of financial or operational liability for a period of two years before the date of commencement of insolvency, the liquidator or the resolution professional may, as the case may be, make an appeal to the Adjudicating Authority to prevent such an agreement if the terms of that transaction are met.<\/p>\n<h4><span class=\"ez-toc-section\" id=\"Section_51_Orders_of_Adjudicating_Authority_in_respect_of_extortionate_credit_transactions\"><\/span><span style=\"color: #000080;\"><strong>Section 51: Orders of Adjudicating Authority in respect of extortionate credit transactions<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p>Where the Adjudicating Authority after examining the application made under\u00a0sub-section (1) of section 50 is satisfied that the terms of a credit transaction required\u00a0exorbitant payments to be made by the corporate debtor, it shall, by an order\u2014<\/p>\n<ol>\n<li>restore the position as it existed prior to such transaction;<\/li>\n<li>set aside the whole or part of the debt created on account of the extortionate\u00a0credit transaction;<\/li>\n<li>modify the terms of the transaction;<\/li>\n<li>require any person who is, or was, a party to the transaction to repay any\u00a0amount received by such person; or<\/li>\n<li>He require any security interest that was created as part of the extortionate credit transaction to be relinquished in favor of the liquidator or the resolution professional, as the case may be.<\/li>\n<\/ol>\n<p>Therefore, the rules for the prohibition of transactions ensure that transactions that have no other business intent and which have been conducted solely to the benefit of certain creditors or to obstruct the insolvency or liquidation process are put aside.<\/p>\n<p>The laws aim to remedy the condition when a certain transfer of assets is made merely to hold the property away from the pool of assets to be shared by creditors.<\/p>\n<p>However, the principles of deterrence must be strictly followed to ensure that legal activities conducted in the usual course of business are not overturned.<\/p>\n<p><strong>Popular blog:-<\/strong><\/p>\n<ul>\n<li>\n<h4><span class=\"ez-toc-section\" id=\"Guidance_on_the_GST_Registration_Facility_available_for_IRP_under_the_IBC\"><\/span><a href=\"https:\/\/www.caindelhiindia.com\/blog\/application-of-gst-on-contribution-by-rwa-members\/\">Guidance on the GST Registration Facility available for IRP under the IBC<\/a><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/li>\n<li>\n<h4><span class=\"ez-toc-section\" id=\"IBC_ordinance_2020_after_the_impact_covid-19_covid_period_defaults_cannot_be_triggered_by_CIRP\"><\/span><a href=\"https:\/\/carajput.com\/blog\/ibc-ordinance-2020-after-the-impact-covid-19-covid-period-defaults-cannot-be-triggered-by-cirp\/\">IBC ordinance 2020 after the impact covid-19 covid period defaults cannot be triggered by CIRP<\/a><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/li>\n<li>\n<h4><span class=\"ez-toc-section\" id=\"IBC_Forms_Insolvency_and_Bankruptcy_Code_2016_Forms_Demand_Notices_Returns\"><\/span><a href=\"https:\/\/carajput.com\/blog\/ibc-forms-insolvency-and-bankruptcy-code-2016-forms-demand-notices-returns\/\">IBC Forms Insolvency and Bankruptcy Code 2016 Forms Demand Notices Returns<\/a><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Elements of Avoidable Preferential Specified Transactions under IBC 2016 As per the 2016 Insolvency and Bankruptcy Code, Section 43 to 51 deals with avoidable transactions. These transactions are also kept referring to as vulnerable transactions. In case of code, there are three types of avoidable transactions. These are preferential transactions, undervalued transactions, and extortionate credit &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8788],"tags":[8885,8890,8887,8886,8880,8879],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/6316"}],"collection":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/comments?post=6316"}],"version-history":[{"count":4,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/6316\/revisions"}],"predecessor-version":[{"id":21263,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/6316\/revisions\/21263"}],"wp:attachment":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/media?parent=6316"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/categories?post=6316"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/tags?post=6316"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}