Exploring Avoidance Transactions Within Corporate Insolvency Proceedings Under The IBC, 2016

Ayush B. Gurav, Maharashtra National Law University (MNLU), Mumbai

ABSTRACT

Avoidance Transactions, also referred to as Vulnerable Transactions, represent a specific subset of restricted transactions that Debtors are prohibited from engaging in under the provisions of insolvency laws. The Insolvency and Bankruptcy Code of 2016, which serves as a comprehensive framework for insolvency and bankruptcy law in India, identifies four primary types of avoidance transactions: preferential, undervalued, fraudulent, and extortionate transactions, collectively known as "PUFE Transactions". While previous legislations addressing insolvency law have addressed one or more of these PUFE transactions, they have done so with variations in approach.

To delve into the evolution of these transactions within Indian insolvency jurisprudence and their significance in the current Insolvency and Bankruptcy Code of 2016, this article will provide a concise overview of each avoidance transaction type, along with insights into the roles played by key stakeholders in this domain. Furthermore, it will underscore the necessity for a comprehensive system to address the shortcomings and loopholes in the existing mechanism, proposing potential changes for more effective implementation aligned with the objectives of the IBC, 2016.

Keywords: Insolvency, Avoidable transaction, CIRP, IBC, Preferential Transactions.