Section 44: Orders in Case of Preferential Transactions under IBC 2016
Section 44 of the Insolvency and Bankruptcy Code, 2016 specifies the orders that the Adjudicating Authority may make when the resolution professional or liquidator applies under Section 43(1) for avoidance of a preferential transaction.
Meaning and purpose of Section 44
A preferential transaction is examined under Section 43. If the statutory requirements are established, Section 44 empowers the Adjudicating Authority to make restorative and consequential orders. For corporate persons, the Adjudicating Authority is the National Company Law Tribunal having jurisdiction under the Code.
The remedies are directed principally at reversing the effect of the preference, restoring property or value to the corporate debtor, dealing with security interests and adjusting resulting debts or claims.
Orders that may be passed under Section 44(1)
- Vesting transferred property: require property transferred in connection with the giving of the preference to be vested in the corporate debtor.
- Vesting substituted property or proceeds: require property to be vested in the corporate debtor where it represents the application of the proceeds of sale of property transferred, or of money transferred.
- Release or discharge of security: release or discharge, wholly or partly, a security interest created by the corporate debtor.
- Payment of benefits received: require a person to pay, in respect of benefits received from the corporate debtor, such sums to the liquidator or resolution professional as the Adjudicating Authority directs.
- Revival of guarantor liability: direct a guarantor whose financial debt or operational debt owed to a person was released or discharged, wholly or partly, by the preference to be subject to such new or revived financial debt or operational debt to that person as the Adjudicating Authority considers appropriate.
- Security or charge: direct the provision of security or a charge on property for discharge of a financial debt or operational debt under the order, with the same priority as the security or charge released or discharged wholly or partly by the preference.
- Proof of resulting debt: determine the extent to which a person whose property is vested in the corporate debtor, or upon whom financial debt or operational debt is imposed by the order, may prove in liquidation or the corporate insolvency resolution process for debts arising from, or released or discharged by, the preference.
Good-faith and value protections
The proviso to Section 44 limits the orders that may be made. An order under the section shall not:
Interest acquired in good faith and for value: affect an interest in property acquired from a person other than the corporate debtor, or an interest derived from such an interest, where it was acquired in good faith and for value.
Benefit received in good faith and for value: require a person who received a benefit from the preferential transaction in good faith and for value to pay a sum to the liquidator or resolution professional.
Explanation I: Presumption concerning good faith
Explanation I addresses a person who acquired an interest in property from a person other than the corporate debtor, or who received a benefit from the preference or from another person to whom the corporate debtor gave the preference.
Where that person had sufficient information of the initiation or commencement of the corporate insolvency resolution process, or is a related party, the statute provides a presumption that the interest was acquired or the benefit was received otherwise than in good faith, unless the contrary is shown.
Explanation II: Sufficient information
Explanation II provides that a person is deemed to have sufficient information or opportunity to obtain such information where a public announcement concerning the corporate insolvency resolution process has been made under Section 13 of the Code.
Relationship between Sections 43 and 44
Section 43 sets out when a corporate debtor is deemed to have given a preference, the statutory exclusions and the relevant-time framework. Section 44 provides the orders that may follow an application under Section 43(1). The two provisions therefore operate together: Section 43 addresses identification and avoidance, while Section 44 supplies the principal remedial powers.
Other avoidance transaction provisions
The Code also contains separate provisions dealing with other transaction categories, including Section 45 - avoidance of undervalued transactions, Section 46 - relevant period for avoidable transactions, Section 47 - application by creditor in cases of undervalued transactions, Section 49 - transactions defrauding creditors and Section 50 - extortionate credit transactions.
Official legal resources
For current legislation and regulatory material, refer to the IBBI Acts page and the IBBI Legal Framework database. The IBBI database includes the Insolvency and Bankruptcy Code (Amendment) Act, 2026 and updated CIRP and Liquidation Process Regulations issued in 2026.
Legal note: This article is a general explanation of Section 44. The applicable statutory text, commencement notifications, regulations and judicial decisions should be checked for the facts and date of a particular proceeding.