Indian lenders are stepping up efforts to claw back money siphoned out of stressed companies in the run-up to insolvency proceedings, with questionable pre-bankruptcy transactions now reaching levels nearly equal to total recoveries made under the Insolvency and Bankruptcy Code (IBC) over the last decade.
According to a Mint report citing data from the Insolvency and Bankruptcy Board of India (IBBI), banks are seeking to reverse Rs 3.97 trillion worth of preferential, fraudulent, undervalued or extortionate (PUFE) transactions carried out by promoters and related parties shortly before companies entered the IBC.
This mountain of avoidance claims now rivals the Rs 3.99 trillion lenders have actually recovered through successful resolution plans and settlements since the Code came into force in 2016, the Mint report said.
The September quarter alone saw 128 fresh applications seeking reversal of transactions worth about Rs 7,200 crore, while claims of over Rs 20,700 crore have been filed since September 2024.
Despite the aggressive pursuit, recoveries remain relatively muted. Till March 2025, creditors managed to recover Rs 7,931 crore from 368 cases, against 1,396 filings before tribunals. Total filings climbed to 1,570 by the end of September.
Under the IBC framework, resolution professionals must scrutinise a corporate debtor’s recent financial history during the statutory look-back period and flag any preferential or fraudulent transactions to the National Company Law Tribunal (NCLT).
These PUFE transactions often involve asset stripping, fund diversion, giving undue preference to specific creditors, or entering expensive financing arrangements just before insolvency.
Experts told Mint that undoing such deals is complex because the assets in question often vanish or lose value by the time insolvency is admitted.
NCLT’s limited bandwidth further slows disposal of these applications, often stretching them across multiple years.
While company-wise PUFE data is not published, major cases illustrate the scale of such disputes.
The Supreme Court earlier this year clarified how recoveries from such transactions should be distributed between creditors and the winning bidder.
The government is now working with IBBI to tighten scrutiny of pre-insolvency dealings, the report said, adding that authorities are also examining ways to identify avoidance transactions more effectively and increase transparency.
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