Category: Insolvency and Bankruptcy

The Indian market has witnessed a surge in the number of distressed companies being dragged into insolvency. This is on account of past debts or other liabilities owed by the distressed company to its creditors, sureties and/or guarantors (Creditors). The Insolvency and Bankruptcy Code, 2016 (Code) provides the statutory regime for dealing with such insolvent businesses. While dealing with the entire process of insolvency, it also regulates certain types of transactions which could undermine the value of the assets available to Creditors. These transactions are known as ‘avoidable transactions’ i.e., preferential transactions, undervalued transactions, transactions defrauding creditors and extortionate credit transactions. In this article, we will be dealing specifically with ‘Preferential Transactions’.

The Insolvency and Bankruptcy Code, 2016 (Code) was legislated with the intent to resolve the banking crisis that had engulfed the Indian economy. While the Code provides banks and other financial creditors a theoretically faster mechanism to resolve their bad debts, the infrastructural and procedural aspects surrounding the resolution process are leading to delays.