To protect lenders’ interests, the Code provides for avoidance of preferential (Sections 43 and 44), undervalued (Section 45 to 48), extortionate (Sections 50 and 51) and fraudulent (Section 49 and 66) transactions. The main objective behind these provisions is to make available the assets of the corporate debtor for their resolution, making it run as a going concern, and liquidation. It also ensures that a particular creditor is not placed in a beneficial position vis-à -vis the other creditors.
The parameters and enquiries pertaining to each of these transactions are different and require different sets of inquiries to be conducted by the Resolution Professional and the Adjudicating Authority. For instance, the question of intention is not relevant for a transaction to be categorised as preferential under Section 43, so long as the ingredients given therein are fulfilled. On the other hand, while inquiring into undervalued transaction, the Adjudicating Authority may consider the intent to examine if the undervalued transaction was to defraud the creditors.
Source: Barandbench
