Section 44 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.
Section 43 tells the resolution professional or liquidator when to apply to avoid a preference. Section 44 says what the Adjudicating Authority can do about it: seven kinds of order, two protections for good-faith receivers of property or benefit, and a presumption against related parties and persons with sufficient information. This article reads it as per the IBBI consolidated text of the Code amended up to 12 August 2021. The Insolvency and Bankruptcy Code (Amendment) Act, 2026 does not amend section 44.
On an application by the resolution professional or liquidator under section 43(1), the Adjudicating Authority may by order vest property back in the corporate debtor, require payment of benefits received, release security interest, revive guarantor liabilities, direct fresh security and fix how affected persons are to be proved. An order shall not affect an interest acquired from a third party in good faith and for value, or require a person who took a benefit in good faith and for value to pay. Related parties and persons with sufficient information are presumed not to have acted in good faith.
The setting: section 43 and the live post
Section 43 defines when a preference is given and the relevant time. It is covered in the site's post on section 43, which this article does not repeat. Section 43(1) says the liquidator or resolution professional who believes a preference was given "shall apply to the Adjudicating Authority for avoidance of preferential transactions and for, one or more of the orders referred to in section 44." Section 44 is therefore the remedy section for a section 43 application. Section 43(4) was changed by section 26 of the 2026 Act, which alters the words describing the relevant period in clauses (a) and (b); the change is dealt with in the post and in the Act itself. Lenders and buyers who need to know whether a transfer they received could be attacked can ask for financial and legal due diligence on the transactions and the dates.
Sub-section (1): the seven orders
Section 44(1): "The Adjudicating Authority, may, on an application made by the resolution professional or liquidator under sub-section (1) of section 43, by an order" do one or more of the following.
| Clause | Order |
|---|---|
| (a) | require any property transferred in connection with the giving of the preference to be vested in the corporate debtor |
| (b) | require any property to be so vested if it represents the application either of the proceeds of sale of property so transferred or of money so transferred |
| (c) | release or discharge (in whole or in part) of any security interest created by the corporate debtor |
| (d) | require any person to pay such sums in respect of benefits received by him from the corporate debtor, to the liquidator or the resolution professional, as the Adjudicating Authority may direct |
| (e) | direct any guarantor, whose financial debts or operational debts owed to any person were released or discharged (in whole or in part) by the giving of the preference, to be under such new or revived financial debts or operational debts to that person as the Adjudicating Authority deems appropriate |
| (f) | direct for providing security or charge on any property for the discharge of any financial debt or operational debt under the order, and such security or charge to have the same priority as a security or charge released or discharged wholly or in part by the giving of the preference |
| (g) | direct the extent to which any person whose property is so vested in the corporate debtor, or on whom financial debts or operational debts are imposed by the order, are to be proved in the liquidation or the corporate insolvency resolution process for debts which arose from, or were released or discharged by, the giving of the preference |
The word "may" gives the Adjudicating Authority a choice among the orders and "one or more" can be combined. Clause (e) ties to the guarantor: where a preference released a guarantor's liability, the guarantor can be put back under a new or revived debt. "Security interest" is defined in section 3(31); see the section 3 article.
Example. Soni Electricals Private Limited, shortly before its insolvency, repaid a bank loan early, which also released Mr Soni, a promoter who was the guarantor of that loan. The liquidator applies under section 43(1). If the Adjudicating Authority finds a preference, it may order the bank to pay back sums (d), release or revive the position of the guarantor (e), and direct how the bank is to be proved in the liquidation (g).
The proviso: good faith and value
"An order under this section shall not -- (a) affect any interest in property which was acquired from a person other than the corporate debtor or any interest derived from such interest and was acquired in good faith and for value; (b) 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 the resolution professional." So a purchaser from a third party who paid value in good faith keeps what he acquired, and a recipient of a benefit in good faith and for value is not asked to pay back.
Explanations I and II: the presumption
Explanation-I says that where a person who has acquired an interest in property from another person other than the corporate debtor, or who has received a benefit from the preference or such another person to whom the corporate debtor gave the preference, (i) "had sufficient information of the initiation or commencement of insolvency resolution process of the corporate debtor", or (ii) "is a related party", "it shall be presumed that the interest was acquired, or the benefit was received otherwise than in good faith unless the contrary is shown."
Explanation-II: "A person shall be deemed to have sufficient information or opportunity to avail such information if a public announcement regarding the corporate insolvency resolution process has been made under section 13." The public announcement is covered in the section 13 article. "Related party" is defined in section 5(24); see the related party article.
The presumption is rebuttable ("unless the contrary is shown"). It is raised only against those with sufficient information, or who are related parties.
Related sections and later texts
Section 44 sits with section 43 (the preference), section 45 and following (undervalued transactions; see the live post on section 45) and section 47 (creditor application), which the 2026 Act substitutes so that a creditor, member or partner can apply on preferential, undervalued, extortionate credit and wrongful trading cases; see the article on sections 46 to 48. The Amendment Act, 2026 (No. 6 of 2026) comes into force on the date or dates the Central Government notifies; the notification is not in the texts consulted, so check whether those changes have been notified. Amendments and notifications made after 12 August 2021, other than the Amendment Act, 2026, are not in the texts consulted and should be checked.
Need help with a preference?
Liquidators and resolution professionals need a clean record of the transfer, the date and the recipient before an application. Recipients need to show good faith and value. Our financial and legal due diligence team can review the transactions and the dates against sections 43 and 44.
Key takeaways
- Section 44 lists seven orders the Adjudicating Authority may pass on an application under section 43(1).
- Orders cannot affect interests acquired from third parties in good faith and for value, or require payment from a good-faith recipient who gave value.
- Persons with sufficient information, or related parties, are presumed not to have acted in good faith unless the contrary is shown.
- A public announcement under section 13 deems sufficient information.
- Section 44 is not amended by the 2026 Act.
Read next
- Sections 46 to 48: relevant period, creditor application and orders on undervalued transactions
- Section 49: transactions defrauding creditors
- Sections 38 to 42: claims in liquidation
- Avoidance transactions under sections 43 to 51
Disclaimer: Based on the IBBI consolidated text of the Insolvency and Bankruptcy Code, 2016 amended up to 12 August 2021 and on the Insolvency and Bankruptcy Code (Amendment) Act, 2026 (No. 6 of 2026), which comes into force on the date or dates notified by the Central Government, as consulted on 2 October 2026. It explains the words of the statute only; commencement notifications, other amendments made after 12 August 2021, notified thresholds, the rules and IBBI regulations, and the way tribunals and courts apply these sections should be checked. This article is general information, not legal advice; check the official text before acting.