PUFE Transactions explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Identifying preferential, undervalued, fraudulent and extortionate transactions is the factual foundation on which every avoidance application rests. Series 17 sets out what that examination covers — and the deadline it has to fit inside.
What the examination is for
The investigation seeks to determine whether the available material indicates that transactions fall within the relevant provisions of the IBC, and whether the circumstances require further examination or action. It provides the factual foundation for the Resolution Professional to consider the appropriate statutory course.
The distinction is important and easily blurred. The forensic professional establishes facts; the RP forms the opinion and determination that a transaction is preferential, undervalued, fraudulent or extortionate; the adjudicating authority decides avoidability.
Two periods, not one
The search for PUFE transactions covers the applicable statutory period as well as the relevant gap period.
| Provision | Statutory look-back |
|---|---|
| Section 43 preference | 2 years (related party) / 1 year (others) before commencement |
| Section 45 undervalue | 2 years (related party) / 1 year (others) before commencement |
| Section 50 extortionate credit | 2 years preceding the commencement date |
| Section 66 fraudulent trading | No look-back limitation |
The gap period is the interval between the last audited or reliable financial position and the commencement date — the stretch in which records are thinnest and, for that reason, the stretch in which value most often left the company.
Regulation 35A introduces an important time dimension: the investigation operates within the timelines prescribed for determining whether the available material indicates transactions covered by the relevant provisions.
Those are the 75th day for the opinion, the 115th day for the determination and intimation to the IBBI, and the 135th day for the application. The forensic examination therefore has to balance the requirement for comprehensive investigation with the urgency associated with identifying transactions for which avoidance-related action may be required.
There is no clean answer to that tension. What follows from it is the discipline in the next section — the examination has to be prioritised by risk from the outset, because there is not time to look at everything to the same depth.
The areas that attract attention
PUFE transactions rarely announce themselves. Six categories of entry are where they are found:
- Related-party relationships — which also extend the look-back from one year to two.
- Unusual journal entries — value moved by adjustment rather than by transaction.
- Unusual transactions generally.
- Loan advances — particularly to connected entities without business purpose.
- Write-offs — of debtors or advances, which may amount to a gift under section 45.
- Changes in security — creation or release, and conversion of unsecured to secured without new value.
What makes something a red flag
Two factors determine whether a transaction warrants deeper investigation: the movement of funds and the relationship between the parties involved.
Together they explain why related-party analysis is the single highest-yield procedure. A payment to an unconnected supplier with a matching delivery is explicable on its face; the same amount to a connected entity, followed by an onward transfer, is not — and under section 43 a transaction with an associate carries a presumption the trustee or professional does not have to prove.
How the findings are used
Identified PUFE transactions then travel through four stages:
- The professional records what the material shows, transaction by transaction.
- The RP forms the opinion by day 75 and the determination by day 115, informing the IBBI.
- The application follows by day 135, pleading the look-back, the parties, the RP's determination and the reference to the auditor's report with the corporate debtor's response.
- All transactions found are disclosed with the resolution plans under Regulation 39(2) and in Form H.
Common mistakes
- Searching for PUFE transactions only in the statutory look-back and ignoring the gap period.
- Starting the forensic work late and compressing it against the day-135 filing.
- Treating journal entries as accounting detail rather than as a route for moving value.
- Applying a look-back period to a section 66 case, which has none.