Preferential transactions and relevant time
Section 43 of the Insolvency and Bankruptcy Code, 2016 deals with preferential transactions and relevant time. Where the liquidator or the resolution professional, as the case may be, is of the opinion that the corporate debtor has at a relevant time given a preference in such transactions and in such manner as laid down in sub-section (2) to any persons as referred to in sub-section (4), he shall apply to t The Act was enacted on 28 May 2016.
(1) Where the liquidator or the resolution professional, as the case may be, is of the opinion that the corporate debtor has at a relevant time given a preference in such transactions and in such manner as laid down in sub-section (2) to any persons as referred to in sub-section (4), he shall apply to the Adjudicating Authority for avoidance of preferential transactions and for, one or more of the orders referred to in section 44.
(2) A corporate debtor shall be deemed to have given a preference, if—
(a) there is a transfer of property or an interest thereof of the corporate debtor for the benefit of a creditor or a surety or a guarantor for or on account of an antecedent financial debt or operational debt or other liabilities owed by the corporate debtor; and
(b) the transfer under clause (a) has the effect of putting such creditor or a surety or a guarantor in a beneficial position than it would have been in the event of a distribution of assets being made in accordance with section 53.
(3) For the purposes of sub-section (2), a preference shall not include the following transfers—
(a) transfer made in the ordinary course of the business or financial affairs of the corporate debtor or the transferee;
(b) any transfer creating a security interest in property acquired by the corporate debtor to the extent that—
(i) such security interest secures new value and was given at the time of or after the signing of a security agreement that contains a description of such property as security interest and was used by corporate debtor to acquire such property; and
(ii) such transfer was registered with an information utility on or before thirty days after the corporate debtor receives possession of such property:
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.
Explanation.—For the purpose of sub-section (3) of this section, "new value" means money or its worth in goods, services, or new credit, or release by the transferee of property previously transferred to such transferee in a transaction that is neither void nor voidable by the liquidator or the resolution professional under this Code, including proceeds of such property, but does not include a financial debt or operational debt substituted for existing financial debt or operational debt.
(4) A preference shall be deemed to be given at a relevant time, if—
(a) it is given to a related party (other than by reason only of being an employee), during the period of two years preceding the insolvency commencement date; or
(b) a preference is given to a person other than a related party during the period of one year preceding the insolvency commencement date.
Section 43, The Insolvency and Bankruptcy Code, 2016 (Act 31 of 2016).
Cross-references
Extracted from the operative text of the enactments themselves. Every destination below exists in our corpus.
This section refers to
Referred to by 4
- Bilateral Netting of Qualified Financial Contracts Act s. 8 Limitations on powers of administration practitioner
- s. 44 Orders in case of preferential transactions
- s. 54-O Initiation of corporate insolvency resolution process
- s. 54P Application of provisions of Chapters II, III, VI and VII to this Chapter
Related judgements & precedents
These are some judgments that construed this section, and hold precedence value. They hold authority on how to read, interpret and use this section.
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Anuj Jain Interim Resolution Professional for Jaypee Infratech Limited vs Axis Bank Limited
Court's Decision & Legal Precedent
Mortgage transactions executed by a subsidiary to secure loans of its holding company constitute preferential transactions under Section 43 of the Insolvency and Bankruptcy Code 2016 when: (1) the transactions transfer the subsidiary's property for benefit of the holding company (a related party and creditor of the subsidiary) for antecedent debts owed by the subsidiary to the holding company; (2) the transactions put the holding company in a beneficial position compared to other creditors in liquidation distribution; (3) the transactions fall within the two-year look-back period for related party transactions; and (4) the transactions are not made in the ordinary course of business or financial affairs of the subsidiary, which requires reading the word 'or' in Section 43(3)(a) as 'and' to ensure both the subsidiary's and transferee's ordinary course of business are considered. Furthermore, lenders of a holding company cannot be categorized as financial creditors of a subsidiary merely by holding mortgages on the subsidiary's assets because financial debt requires disbursal against consideration for time value of money to the corporate debtor, and mortgage debt does not satisfy this essential requirement. The distinction between secured creditor and financial creditor must be maintained, with financial creditors being those with direct engagement in the corporate debtor's functioning from inception, involvement in assessing viability, and role in restructuring.
On this section: Core provision defining preferential transactions; requires transfer of property for benefit of creditor/surety/guarantor for antecedent debt; must be at relevant time; subject to exclusions in sub-section (3)
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Rajesh Gupta vs Nbcc (india) LTD
Court's Decision & Legal Precedent
The Adjudicating Authority's jurisdiction in approving a resolution plan is limited to verifying compliance with the mandatory requirements specified in Section 30(2) of the Insolvency and Bankruptcy Code, 2016. The Authority cannot modify the commercial terms of a resolution plan approved by the Committee of Creditors by the requisite majority (66% or more of voting share). If the Authority finds that the resolution plan does not meet the specified parameters (keeping corporate debtor as going concern, maximizing asset value, protecting stakeholder interests), it must remit the plan back to the Committee of Creditors for reconsideration rather than modifying it itself. The commercial wisdom of the Committee of Creditors is non-justiciable and cannot be interfered with by the Adjudicating Authority or Appellate Authority on equitable or quantitative grounds. Dissenting financial creditors must receive payment in monetary terms (cash) equivalent to their liquidation value, not in kind through equity or land transfers. The INR 750 crores deposited by the holding company JAL pursuant to Supreme Court orders in the Chitra Sharma case remains the property of JAL and cannot be treated as an asset of the corporate debtor JIL for purposes of the resolution plan. Homebuyers as a class are bound by the decision of their authorized representative in the Committee of Creditors under Section 25A(3A), and individual homebuyers cannot maintain separate challenges to the resolution plan. The Insolvency and Bankruptcy Code prevails over the Real Estate (Regulation and Development) Act, 2016 in case of conflict, though both statutes must be interpreted harmoniously. Concession Agreements with statutory authorities are not statutory contracts and their material terms cannot be modified without the consent of the other contracting party. Security interests not avoided under Section 43 of the Code cannot be unilaterally extinguished through a resolution plan.
On this section: Preferential transactions; transactions within 2 years before insolvency commencement date where debtor gave preference to related party
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Raman Prakash Mangla vs Anuj Jain
Court's Decision & Legal Precedent
The Adjudicating Authority has limited jurisdiction in approving a resolution plan, circumscribed by Sections 30(2) and 31 of the Insolvency and Bankruptcy Code, 2016. The Authority cannot interfere with the commercial aspects of the decision taken by the Committee of Creditors. If the Adjudicating Authority finds shortcomings in the resolution plan vis-à-vis the specified parameters of keeping the corporate debtor as a going concern, maximizing the value of its assets, and taking care of interests of all stakeholders, it must send the plan back to the Committee of Creditors for reconsideration, not modify the plan itself. Payment to dissenting financial creditors must be in monetary terms, not in kind or through transfer of equity or land. Once homebuyers as a class vote in favor of a resolution plan through their authorized representative, individual homebuyers cannot challenge the plan as dissenting creditors or aggrieved persons. The INR 750 crores deposited by the holding company pursuant to Supreme Court orders in Chitra Sharma is the property of the holding company, not the corporate debtor, and cannot be appropriated by the corporate debtor or the resolution applicant.
On this section: Preferential transactions
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Chandra Prakash Jain RP vs Mr. Rajendra Sharma & Ors.
Court's Decision & Legal Precedent
A consolidated interlocutory application in insolvency proceedings may be bifurcated into separate applications addressing distinct sections of the Insolvency and Bankruptcy Code when such bifurcation promotes procedural efficiency and does not prejudice the rights of any party. The tribunal has the discretion to segregate applications to streamline complex insolvency proceedings involving multiple respondents and diverse legal issues.
On this section: One of the sections addressed in the bifurcated IA 23/2022, relating to specific aspects of insolvency proceedings
The holding above is the ratio decidendi as extracted from the judgment by eCourts India, reproduced unaltered — it is a rendering of the court's reasoning, not a substitute for its words. Read the order itself before relying on it.
Made under this section, and citing it
2 instruments name this provision in its title or its text without being made under it.
Questions about Section 43
What have the courts held on Section 43 of the Insolvency and Bankruptcy Code?
Anuj Jain Interim Resolution Professional for Jaypee Infratech Limited vs Axis Bank Limited (26 Feb 2020) is the leading judgment on this section among those set out below: Core provision defining preferential transactions; requires transfer of property for benefit of creditor/surety/guarantor for antecedent debt; must be at relevant time; subject to exclusions in sub-section (3). Another 3 judgments on this section are set out below, 3 of them from the Supreme Court. They run from 2020 to 2022.
How do I find court cases under Section 43 of the Insolvency and Bankruptcy Code?
In judgments and charge sheets this section is written several ways, and each form finds a different set of orders. These search the full text of every order eCourtsIndia holds, best matches first: Insolvency and Bankruptcy Code 43, section 43 Insolvency and Bankruptcy Code, section 43 of the Insolvency and Bankruptcy Code. Each opens the full list of orders on eCourtsIndia, where it can be narrowed by court, year and outcome. 4 reported judgments on this section are set out on this page, beginning with Anuj Jain Interim Resolution Professional for Jaypee Infratech Limited vs Axis Bank Limited (26 Feb 2020).
What should I read with Section 43 of the Insolvency and Bankruptcy Code, and has it changed?
Its own text turns on section 44 (Orders in case of preferential transactions), section 53 (Distribution of assets), so none of them can safely be read on its own. 4 other provisions in this corpus refer back to it. 2 instruments name it without being made under it, most recently Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) (Amendment) Regulations, 2022 (2022), then IBBI (Liquidation Process) (Fourth Amendment) Regulations, 2020 (2020).
When was Section 43 of the Insolvency and Bankruptcy Code enacted?
Section 43 of the Insolvency and Bankruptcy Code, cited as Insolvency and Bankruptcy Code 43, was enacted on 28 May 2016 as Act 31 of 2016. It is in force as at the date shown on this page.
Other sections of this Act
- 240. Power to make regulations2349 words
- 5. Definitions2326 words
- 3. Definitions1381 words
- 29A. Person not eligible to be resolution applicant1152 words
- 239. Power to make rules963 words
- 196. Powers and functions of Board942 words
Source and method. Compiled from the enactments of Parliament and of the State legislatures as published on India Code, and republished together with commentary and other original matter under section 52(1)(q)(ii) of the Copyright Act, 1957. Structured, cross-referenced and maintained by eCourtsIndia. Text as in force on 15 Oct 2026. This page is not a substitute for legal advice.