By S&S Co. Advocates & Solicitors · Published 28 September 2026 · Informational content, not legal advice: see our disclaimer
Overview
A guide for a resolution professional, liquidator, or a party that received payment or a transfer from a company that has since gone into CIRP, explaining the PUFE categories the IBC allows a tribunal to unwind, the look-back periods, and what a recipient of an avoided transaction risks.
What You Need to Know
- The IBC allows an Adjudicating Authority to avoid four categories of pre-insolvency transactions, collectively known as PUFE transactions: preferential (Sections 43-44), undervalued (Sections 45-48), extortionate credit (Sections 50-51), and fraudulent or wrongful trading (Sections 49 and 66)
- A preferential transaction under Section 43 involves a transfer of the corporate debtor's property for the benefit of a creditor, surety or guarantor on account of an antecedent debt, which places that recipient in a materially better position than it would have received in a Section 53 liquidation distribution
- The look-back period for preferential transactions is two years before the insolvency commencement date for transactions with a related party, and one year for transactions with an unrelated party: transactions outside these windows generally cannot be avoided as preferential
- An undervalued transaction under Section 45 involves a gift, or a transfer for consideration significantly below the asset's true market value, made by the corporate debtor without a legitimate commercial rationale
- Section 66 empowers the Adjudicating Authority to direct any person knowingly party to fraudulent or wrongful trading, carrying on the corporate debtor's business with intent to defraud creditors, or without a reasonable prospect of avoiding insolvency, to contribute to the corporate debtor's assets
- A resolution professional or liquidator identifying a potential avoidance transaction must make the required application to the Adjudicating Authority within the statutory timeline, since courts have held that a resolution plan cannot ordinarily extinguish avoidance applications that were not disposed of before the plan's approval
Frequently Asked Questions
What are the four PUFE categories a resolution professional can seek to avoid?
Preferential transactions (Sections 43-44), undervalued transactions (Sections 45-48), extortionate credit transactions (Sections 50-51), and fraudulent or wrongful trading (Sections 49 and 66).
How far back can a preferential transaction be avoided?
Two years before the insolvency commencement date for transactions with a related party, and one year for transactions with an unrelated party: transactions outside these windows generally can't be avoided as preferential.
Can a resolution plan wipe out a pending avoidance application?
Courts have held that a resolution plan cannot ordinarily extinguish an avoidance application that was not disposed of before the plan's approval, though this remains a developing, judicially contested area.
References & Further Reading
This guide references the following statutes, rules and sources, cross-checked at the time of writing.
- Four PUFE categories and their governing sections (43-44 preferential, 45-48 undervalued, 50-51 extortionate, 49/66 fraudulent/wrongful trading): well-settled statutory framework, confirmed via Bar and Bench, IBC Laws and multiple practitioner guides at research time
- Two-year (related party) / one-year (unrelated party) look-back periods for preferential transactions under Section 46: well-settled, confirmed at research time
- Treatment of avoidance applications surviving a resolution plan's approval where not yet disposed of: an evolving, judicially contested area per SCC Online Blog's 'doctrinal gaps' commentary at research time: present as a developing area of law rather than a settled, uniform rule, and verify the current judicial position (including any 2025 IBC amendment referenced by sources) at drafting time
- See also our IBC & Insolvency Notable Judgments and Legal Updates: IBC & Insolvency archive.