IBC Section 48: Orders in cases of undervalued transactions

Section 48 of Insolvency and Bankruptcy Code, 2016: Orders in cases of undervalued transactions

Official Bare Act Text

Override / Mandate Mens Rea (Intent) Actus Reus (Conduct) Punishment Limitation Monetary

The order of the Adjudicating Authority under sub-section (1) of section 45 may provide for the following:-

(a) require any property transferred as part of the transaction, to be vested in the corporate debtor;

(b) release or discharge (in whole or in part) any security interest granted by the corporate debtor;

(c) require any person to pay such sums, in respect of benefits received by such person, to the liquidator or the resolution professional as the case may be, as the Adjudicating Authority may direct; or

(d) require the payment of such consideration for the transaction as may be determined by an independent expert.

1. The words and figures "of section 43" omitted by Act 26 of 2018, s. 28 (w.e.f. 6-6-2018).

Legal Commentary & Landmark Judgments: Section 48

Section 48 specifies the remedial and restorative orders the Adjudicating Authority may pass upon finding that a transaction of the corporate debtor was an undervalued transaction under Section 45.

Restoration of Asset Value: The NCLT may pass an order requiring the property transferred to be vested in the corporate debtor.
Release of Incidental Encumbrances: Release or discharge (in whole or in part) of any security interest or charge created over the transferred property.
Disgorgement of Benefits: Direct any person who received benefits from the undervalued transaction to pay such sums to the liquidator or resolution professional as the court thinks fit.
Protection for Bona Fide Third Parties: Section 48(2) protects third-party purchasers who acquired the property in good faith and for valuable consideration without notice.

Key Landmark Precedents:

Anuj Jain v. Axis Bank Ltd. (2020) 8 SCC 401: The Supreme Court exercised powers analogous to Section 48 to order the re-vesting of valuable commercial properties in the corporate debtor to swell the assets available for resolution.
ArcelorMittal India Pvt. Ltd. v. Satish Kumar Gupta (2019) 2 SCC 1: Affirmed that Section 48 orders are restorative, designed to undo economic extraction and place the corporate debtor in the status quo ante.

Courtroom Practice & Strategic Litigation Guidance:

In your Section 45/48 application, request precise directions under Section 48(1): pray for cancellation of the registered sale deed, recovery of the undervaluation deficit amount from the beneficiary, and attachment of the transferee's bank accounts.