INSOLVENCY AND BANKRUPTCY CODE, 2016
Section 46: Relevant Period for Avoidable Transactions
Section 46 specifies the look-back periods for examining undervalued transactions under Section 45 of the Insolvency and Bankruptcy Code, 2016 (IBC). It also empowers the Adjudicating Authority to seek independent expert assistance when assessing transaction values.
Legal guide | Reviewed 21 October 2026
Section 46: Statutory provision
46. (1) In an application for avoiding a transaction at undervalue, the liquidator or the resolution professional, as the case may be, shall demonstrate that-
(i) such transaction was made with any person within the period of one year preceding the insolvency commencement date; or
(ii) such transaction was made with a related party within the period of two years preceding the insolvency commencement date.
(2) The Adjudicating Authority may require an independent expert to assess evidence relating to the value of the transactions mentioned in this section.
These two subsections establish the relevant periods and the court's power to obtain expert assessment. The transaction must also meet the requirements for an undervalued transaction under Section 45; timing alone does not make it avoidable.
Look-back periods under Section 46(1)
| Recipient or counterparty | Relevant period | Statutory reference |
|---|---|---|
| Any person (including an unrelated person) | One year preceding the insolvency commencement date | Section 46(1)(i) |
| Related party | Two years preceding the insolvency commencement date | Section 46(1)(ii) |
The two-year period applies where the counterparty is a related party within the meaning of the Code. A transaction involving a related party may fall within either period, but the longer period is particularly relevant to transactions more than one year before commencement.
Important distinction: Section 46 addresses undervalued transactions under Section 45. Section 43 separately deals with preferential transactions, while Sections 49 and 50 address other forms of suspect transactions with different statutory requirements.
Meaning of important legal terms
Undervalued transaction (Section 45)
Under Section 45(2), a transaction may be undervalued where the corporate debtor makes a gift or transfers assets for consideration significantly less than the value provided by the corporate debtor, subject to the ordinary-course-of-business qualification in that section.
Related party (Section 5(24))
Section 5(24) sets out the statutory categories of related parties in relation to a corporate debtor, including specified directors, key managerial personnel, relatives, connected entities and persons meeting other listed relationship or control tests. The precise statutory category must be established from the facts; commercial familiarity alone is not sufficient.
Insolvency commencement date (Section 5(12))
The date on which the Adjudicating Authority admits an application to initiate the corporate insolvency resolution process under Sections 7, 9 or 10, as applicable. This is the reference date for calculating the periods under Section 46.
Adjudicating Authority (Section 5(1))
For corporate insolvency and liquidation matters under Part II of the Code, the Adjudicating Authority is the National Company Law Tribunal (NCLT), constituted under Section 408 of the Companies Act, 2013.
Evidence and independent expert valuation
In an application concerning an undervalued transaction, the resolution professional or liquidator should be able to identify the transaction, its date, the counterparty, the consideration, and the basis on which the transaction is alleged to be undervalued. Supporting materials may include agreements, bank records, asset registers, invoices, valuation reports and corporate records.
Under Section 46(2), the NCLT may require an independent expert to assess evidence relating to transaction value. The appointment is discretionary, not automatic. A valuation opinion assists the tribunal but does not replace the statutory test or the tribunal's determination.
Where the requirements are satisfied, Section 48 provides for orders intended to reverse the effect of an undervalued transaction. Section 47 addresses applications by creditors, members or partners in specified circumstances.
Practical illustration
Assume the insolvency commencement date is 1 July 2026. An asset transferred to an unrelated purchaser on 1 December 2025 falls within the one-year period for Section 46(1)(i). A transfer to a person established to be a related party on 1 October 2024 falls within the two-year period under Section 46(1)(ii). In either case, the applicant must still demonstrate that the transaction qualifies as undervalued under Section 45.
The dates above are illustrative only; actual calculations depend on the legally established insolvency commencement date and transaction date.
This article is general legal information and not a substitute for advice on the facts of a particular insolvency proceeding.