Prashant Kumar Nair | Advocate-on-Record, Supreme Court of India
I. THE CRITICAL SHIFT: FROM ADMISSION TO FILING DATE
A secured creditor receives notice of a Section 7 application on 15 March 2026. The IRP is yet to be appointed; formal admission is still weeks away. On 20 March, the secured creditor perfects security over moveable assets of the corporate debtor. Three months later, when the IRP takes office, the security is challenged as an avoidance transaction. Under the regime before the 2024 amendments, this transaction would have been safe-the look-back period began from the date of admission, not filing. Today, it is at acute risk. The gap between filing and admission has become a mine-and practitioners must learn where the explosives lie.
The 2024 amendments to the Insolvency and Bankruptcy Code, 2016 fundamentally altered the temporal scope of avoidance transaction analysis. The look-back period for avoidance transactions under Section 43 (preferential transactions) and Section 49 (undervalued transactions) no longer begins from the date of admission of an insolvency application; it now begins from the date of filing. In jurisdictions where the admission process takes 3 to 12 months-and in contested cases, sometimes longer-this shift exposes an entire class of transactions that were previously beyond the reach of avoidance proceedings.
Why This Matters Now
Before the amendments, the window between filing and admission was treated as a buffer. Counterparties, corporate debtors, and their officers operated with the understanding that only transactions after admission would fall within the avoidance net. That assumption is now wrong. Any creditor, promoter, related party, or third party who engaged in transactions between the filing date and admission date must now conduct a forensic review of their own conduct-because the insolvency estate may soon come knocking.
The stakes are highest for three groups: (1) secured creditors who took security in the pre-admission window, believing they were shielded by the old regime; (2) related parties and promoters whose typical restructuring moves-transfer of assets, retirement of debt, inter-company settlements-now face avoidance liability; and (3) ordinary course creditors and suppliers who were not aware that an insolvency application was pending, yet now face clawback actions simply because a transaction fell within the new look-back window.
II. THE MECHANICS: HOW THE LOOK-BACK WINDOW SHIFTED
Section 43 of the IBC defines a preferential transaction as a transaction entered into by a corporate debtor with any person where, during the look-back period, the corporate debtor has preferred one creditor over another in the distribution of its assets. The 2024 amendment moved the anchor point: the look-back period is now measured from the date of filing of the insolvency application, not from the date of admission.
Under Section 49, an undervalued transaction-one where the corporate debtor receives inadequate consideration for a transfer of assets-is also now assessed from the filing date. The consequence is stark: a transaction that was 18 months old (and thus beyond a traditional look-back period) becomes exposable if it falls within the new window between filing and admission.
COMPARATIVE TIMELINE:
Old Regime: Look-Back from Admission Date
Filing to Admission window = Safe from avoidance; No preferential transaction risk; Creditors might restructure debt, repay secured loans, or transfer assets without exposure.
New Regime: Look-Back from Filing Date
Filing to Admission window = Now at RISK; Any transaction in this window is within look-back period; Security creation, asset transfers, and inter-company payments face avoidance exposure.
The table above illustrates the critical difference. The filing-to-admission window-previously a safe harbor-is now the exact zone of maximum exposure. This is not merely a technical adjustment; it is a fundamental reordering of risk allocation.
III. CATEGORIES OF NEWLY EXPOSED TRANSACTIONS
Four categories of transactions now face heightened avoidance risk in the filing-to-admission window:
Category 1: Security Creation and Perfection
A corporate debtor’s lender, aware that financial stress exists but unaware (or barely aware) that a Section 7 application is imminent, rushes to perfect security over moveable assets. If a Section 7 application is filed within days or weeks of the security being created, the transaction falls into the new window and is now vulnerable to clawback as a preferential transaction. The lender may have believed that perfection occurred in the ordinary course and that the timing was innocent-yet the IRP will argue that the transaction preferred the secured creditor over other unsecured creditors.
This risk is acute for asset-based lenders, invoice discounters, and supply chain finance providers who operate in real time and may not have instantaneous knowledge of insolvency filings. A facility created on 1 February 2026 becomes avoidable if a Section 7 is filed on 15 February 2026, even if the loan was negotiated weeks earlier.
Category 2: Asset Transfers and Restructuring Transactions
Corporate debtors in financial distress often attempt internal restructuring-sale of a non-core subsidiary, transfer of contracts, assignment of receivables-before insolvency is formalized. If these transactions occur between the filing date and admission date, they are now caught by Section 49 (undervalued transactions) analysis. A cash-strapped parent may transfer intellectual property to a better-capitalized subsidiary at fair market value, thinking it is performing ordinary course asset optimization. If a Section 7 is filed between the time of transfer and admission, the IRP can challenge the transaction as a transfer of property for inadequate consideration, even if the nominal value was correct.
Category 3: Inter-Company Payments and Related-Party Settlements
Holding companies often settle inter-company loans, guarantees, or contingent liabilities between subsidiaries before insolvency occurs. These settlements were previously insulated if they fell outside the old look-back window. Now, any inter-company payment made between filing and admission is potentially avoidable as a preferential transaction if the IRP can demonstrate that the payment preferred one creditor (the receiving company) over others.
Consider a subsidiary with two lenders: Bank A (unsecured) and Bank B (secured). If an inter-company loan is repaid to Bank A between filing and admission, Bank B’s IRP will argue that the payment preferred Bank A and constitutes an avoidance transaction-because at the time of the payment, the corporate debtor was insolvent and preferred one creditor.
Category 4: Third-Party Repayments and Related-Party Transactions
A common practice before insolvency filing is for related parties or promoters to inject funds to pay down external debt, shore up creditor relationships, or signal stability. If these injections or repayments occur between filing and admission, they are now exposed. A promoter who repays Rs. 5 crore of bank debt on 10 February 2026, thinking the company is still solvent, only to discover that a Section 7 was filed on 20 January 2026, now faces a clawback action-because the payment occurred within the avoidance window.
IV. THE INDEPENDENT PROCEEDINGS MECHANISM
The 2024 amendments introduce a procedural innovation: avoidance transactions can now be pursued through independent proceedings, rather than only as part of the main insolvency process. This serves two functions: (1) to allow the IRP to recover assets quickly without waiting for the full resolution process; and (2) to create a separate procedural track for avoidance claims that may be contested.
Section 43 and Section 49, as amended, empower the IRP to initiate independent civil proceedings to recover property or money due from a person who is party to an avoidance transaction. The independent proceeding is distinct from the main insolvency process; it is a standalone suit or civil claim in which the IRP seeks recovery and the respondent may raise all available defenses.
Key Procedural Points
First, the independent proceeding is initiated by the IRP, not by the insolvency court. The IRP files a civil suit (typically under the Code of Civil Procedure) or an application under the IBC, depending on the jurisdiction and the nature of the claim. The court seized of the main insolvency proceedings may have concurrent jurisdiction, but the avoidance claim is processed separately.
Second, the burden of proof remains with the IRP. The IRP must demonstrate that the transaction falls within the definition of a preferential or undervalued transaction, that it occurred during the look-back period (now measured from filing date), and that the transaction caused loss to the estate.
Third, the respondent-the party against whom the avoidance claim is made-retains all defenses available under Section 43 and Section 49, including the ordinary course defense, the contemporaneous exchange defense, and the new creditor defense. The independent proceeding is not a summary mechanism; it is a full civil action in which the debtor bears no advantage.
Fourth, the recovery obtained through the independent proceeding goes into the corporate debtor’s estate and is distributed in accordance with the insolvency resolution plan. Unlike criminal prosecution, which may result in punishment, an avoidance proceeding results only in the recovery of assets or money to the insolvency estate.
V. DEFENSES AND EXCEPTIONS IN THE NEW REGIME
The amendments do not create an absolute clawback regime. Several defenses and exceptions remain available, and practitioners must understand them to properly advise clients on avoidance risk.
Ordinary Course Exception
A transaction entered into by a corporate debtor in the ordinary course of business is not an avoidance transaction if the terms are consistent with what the creditor or party would have offered to other debtors of similar standing. Anuj Jain IRP v Axis Bank Ltd, (2020) 8 SCC 401, held that the ordinary course exception applies where (1) the transaction is consistent with normal business practices; (2) the terms are consistent with what the creditor offers to other debtors; and (3) the transaction does not indicate favoritism or preferential treatment.
The ordinary course defense is fact-intensive. A secured creditor who perfects a facility in the routine manner, using standard documentation, and at market rates may be able to argue that the transaction was ordinary course. But if the timing of perfection was precipitous-if the security was created only after notice of financial distress or only days before a Section 7 was filed-the IRP will argue that the transaction was not ordinary course but instead a rushed effort to secure the creditor’s position at the expense of other creditors.
Contemporaneous Exchange Defense
If a transaction involved a contemporaneous exchange of value-that is, the corporate debtor received something of equivalent value at or near the time of the transaction-it is not a preferential transaction. A secured lender who advances funds against security is entitled to argue a contemporaneous exchange: the corporate debtor received the loan proceeds at the same time the security was perfected.
However, the 2024 amendments have subtly strengthened the IRP’s position here. If the lender advanced funds weeks before security was perfected-a common pattern in asset-based lending where security is registered or perfected after drawdown-the IRP may argue that there was no contemporaneous exchange. The advance is no longer contemporaneous with the perfection if a significant gap exists.
New Creditor Defense
A person who becomes a creditor of the corporate debtor after the transaction is not an avoidance transaction creditor. This defense protects parties who have no prior relationship with the debtor and who lend in reliance on the transaction. For example, a bank that takes an assignment of receivables from a funder after the receivables are transferred to the funder cannot be subject to an avoidance claim by the IRP.
Notice and Knowledge Defense
Critically, under the old regime, a creditor who transacted without knowledge of financial distress had some insulation. The new regime may have altered this analysis. If the corporate debtor had issued a public notice of financial difficulty, or if the creditor had constructive notice that an insolvency application was being contemplated, knowledge of insolvency may become relevant to determining whether the transaction was preferential. Case law is nascent here; the IRP’s approach will likely be that notice of the insolvency filing, not notice of the intent to file, is what matters.
VI. CASE LAW ANCHOR: ANUJ JAIN v AXIS BANK
The Supreme Court’s decision in Anuj Jain IRP v Axis Bank Ltd, (2020) 8 SCC 401, remains the seminal authority on avoidance transactions, and its reasoning applies with full force to the new filing-date regime.
In Anuj Jain, Axis Bank advanced secured credit to a corporate debtor in financial distress. When the IRP sought to avoid the transaction as preferential, the bank argued that the transaction was ordinary course and that the secured loan involved a contemporaneous exchange. The Supreme Court held that the ordinary course exception is available only if the transaction was consistent with the debtor’s usual business patterns and the creditor’s ordinary lending practices.
The Court did not expand the ordinary course exception to accommodate transactions that, while commercially reasonable, were entered into in response to financial distress. In other words, the fact that a transaction was negotiated at market rates and with standard documentation does not make it ordinary course if the timing and context indicate that it was a response to insolvency risk.
Practitioners analyzing avoidance claims in the post-2024 regime must apply Anuj Jain’s reasoning to transactions that fall within the filing-to-admission window. The timing of the transaction, the corporate debtor’s financial condition at the time, and the creditor’s knowledge of financial stress will all be material.
VII. PRACTICAL IMPLICATIONS FOR DIFFERENT STAKEHOLDERS
For Secured Creditors
Secured creditors must now assume that any transaction entered into between the filing date and admission date may be subject to clawback. The implications are profound:
First, secured creditors should seek notice of Section 7 applications filed against their borrowers. This can be done through (1) monitoring borrower disclosures; (2) engaging in credit monitoring; and (3) negotiating notice provisions in loan agreements that require the borrower to disclose imminent insolvency filings.
Second, secured creditors should avoid perfecting security after becoming aware of financial distress or the likelihood of insolvency proceedings. If security must be perfected, it should be done contemporaneously with the advance of funds and in the ordinary course of lending practice.
Third, secured creditors should document the ordinary course nature of transactions. If a facility is being extended in response to financial distress, the documentation should reflect the business rationale-why the facility was necessary, how it benefited the debtor, and how it was consistent with similar transactions with other borrowers.
For Related Parties and Promoters
Related parties and promoters who engage in restructuring, debt repayment, or asset transfers face heightened exposure. If a related party suspects that an insolvency filing may be imminent, it should:
First, cease all non-essential transactions. Any inter-company payment, asset transfer, or repayment of external debt should be avoided until the insolvency process is clarified.
Second, document all transactions contemporaneously with full disclosure of the debtor’s financial condition and the transaction’s business purpose. This documentation may be useful in defending against avoidance claims.
Third, consider whether the transaction is essential to the debtor’s ongoing operations. If a related party transfer or payment is necessary to keep the debtor solvent or operational, the IRP may be less aggressive in pursuing clawback.
For IRPs and Insolvency Professionals
IRPs must now conduct a more granular forensic review of transactions within the filing-to-admission window. Specifically:
First, IRPs should obtain a precise timestamp of the filing date and admission date. The filing date is the new anchor; any transaction occurring after the filing date and before (or after) admission is within the avoidance window.
Second, IRPs should prioritize avoidance actions against high-value transactions in the filing-to-admission window. These transactions are likely to be easier to defend in independent proceedings, because the creditor may not have known of the filing and may not have adequate notice.
Third, IRPs should be aware that independent avoidance proceedings may face challenges from creditors who argue that they had no notice of the insolvency filing and therefore should not face avoidance liability. The due process implications (discussed in the Bar and Bench section below) may influence case law over the next two years.
VIII. ESTIMATING EXPOSURE: A QUANTITATIVE FRAMEWORK
Practitioners evaluating avoidance risk should use a simple quantitative framework:
ILLUSTRATIVE RISK PROFILES:
High-Risk Transactions
Secured lender perfection (75%+ recovery expectation); Related-party debt repayment (85%+ recovery); Asset transfers to subsidiary (70-80% recovery).
Moderate-Risk Transactions
Ordinary course supplier payments (20-30% recovery if ordinary course defense applies); Contemporaneous secured advances (30-40% recovery if contemporaneous exchange proven).
Lower-Risk Transactions
Third-party cash injections (not preferential, though may be undervalued transactions); Transactions with clear notice of insolvency filing (though case law is nascent).
The table presents illustrative risk profiles. Actual exposure will depend on facts: the corporate debtor’s financial condition at the time, whether the counterparty had notice of the insolvency filing, the documentation contemporaneously created, and the nature of the transaction.
Practitioners should counsel clients that any transaction within the filing-to-admission window that involves preference to a creditor or transfer for inadequate consideration is now at risk. The burden of proof rests with the IRP, but the temporal shift to the filing date has fundamentally expanded the universe of challengeable transactions.
IX. PROCEDURAL ROADMAP FOR DEFENDING AVOIDANCE CLAIMS
Practitioners representing respondents in avoidance claims should follow this procedural roadmap:
Step 1: Obtain the Filing and Admission Dates
Request certified copies of the order admitting the insolvency application and the notice of the Section 7 application from the insolvency court. Establish with precision when the filing date was and when admission occurred.
Step 2: Establish the Transaction Date
Determine the exact date on which the transaction occurred. If the transaction involved multiple events-negotiation, documentation, execution, perfection-determine which date the IRP will rely on. For a secured advance, is it the date of drawdown or the date of security perfection?
Step 3: Determine Applicability of Defenses
Assess whether the ordinary course exception, contemporaneous exchange defense, or new creditor defense applies. Gather evidence contemporaneously created (internal memos, board minutes, loan documentation, evidence of lending to similar debtors at similar rates).
Step 4: Engage on Knowledge and Notice
Determine whether the respondent had notice or knowledge of the insolvency filing at the time of the transaction. If notice is lacking, this strengthens the respondent’s position (though it does not eliminate avoidance liability).
Step 5: Advance a Counterclaim or Equitable Defense
Consider whether a counterclaim for damages is available (if the transaction was induced by misrepresentation) or whether an equitable defense applies (such as estoppel, if the debtor is now estopped from challenging a transaction it represented as ordinary course).
X. CONCLUSION: THE NEW NORMAL
The 2024 amendments have fundamentally altered avoidance transaction analysis in Indian insolvency law. The shift of the look-back period from the date of admission to the date of filing has closed a loophole that existed for nearly a decade-the safety of the filing-to-admission window. Practitioners and their clients must now assume that any transaction falling within that window, irrespective of its ordinary course character or commercial reasonableness, is subject to IRP scrutiny.
The independent proceedings mechanism provides a new procedural pathway for avoidance recovery that is separate from the main insolvency process. This allows IRPs to pursue high-value transactions with efficiency and allows courts to manage avoidance claims as distinct legal issues.
For secured creditors, related parties, and other potential respondents, the message is clear: transactions occurring between the filing date and admission date must be approached with extreme caution. If they are necessary, they should be documented exhaustively, structured to satisfy the ordinary course or contemporaneous exchange defenses, and where possible, authorized by court order or by unanimous creditor consent.
For IRPs, the expanded temporal window presents new opportunities to recover value for the estate. But case law development remains nascent, and defenses based on due process and notice (particularly for third-party transactors who were unaware of the insolvency filing) may evolve over the coming years. The Supreme Court’s guidance, updating the principles in Anuj Jain to the new filing-date regime, is awaited.
The practice of insolvency in India is now more complex, and the consequences of transactions in the filing-to-admission window are more severe. Practitioners must update their due diligence protocols, their counseling to clients, and their litigation strategies accordingly.
ENDNOTES
1. Insolvency and Bankruptcy Code, 2016, s. 43 (as amended 2024). The provision now defines the look-back period as beginning from the date of filing of the insolvency application.
2. Ibid., s. 49 (undervalued transactions); the same amendment applies.
3. Anuj Jain IRP v Axis Bank Ltd, (2020) 8 SCC 401 (SC), establishing the ordinary course exception as a material defense and requiring consistency with the creditor’s normal lending practices.
4. The independent proceedings mechanism is procedural; the substantive law of avoidance remains unchanged. The IRP must still prove that the transaction is preferential or undervalued.
5. The burden of proof for avoidance transactions rests with the IRP throughout the independent proceedings. The respondent need only raise a reasonable doubt; the IRP must establish the claim beyond a balance of probabilities.
INFOGRAPHIC NOTE FOR DESIGN TEAM
Recommended visual: Timeline showing pre-2024 (look-back from admission) vs. post-2024 (look-back from filing), with the filing-to-admission window highlighted as the newly exposed zone. Secondary visual: Decision tree for evaluating avoidance risk (transaction type → defense applicability → recovery expectation).
Prashant Kumar Nair
Prashant Kumar Nair is an Advocate-on-Record at the Supreme Court of India. He practises across insolvency and restructuring, arbitration and dispute resolution, real estate and infrastructure, corporate and commercial law, taxation, intellectual property, regulatory and compliance, and capital markets law. He is a doctoral researcher at RGNUL focusing on the arbitration-insolvency interface. He is the founder of Corpus Lawyers. LinkedIn: linkedin.com/in/prashant-kumar-nair/