Sections 50 & 51 IBC: Addressing Extortionate Credit Transactions in Corporate Insolvency Liquidation Process

Sections 50 and 51 of the Insolvency and Bankruptcy Code (IBC) address extortionate credit transactions during the liquidation process for corporate insolvency. Section 50 allows a liquidator or resolution professional to apply to the Adjudicating Authority to avoid transactions involving exorbitant payments made by the corporate debtor within two years before the insolvency commencement date. The IBBI specifies conditions under which transactions are deemed extortionate, such as requiring exorbitant payments or being unconscionable. Section 51 empowers the Adjudicating Authority to restore the pre-transaction position, set aside debts, modify terms, or require repayment or relinquishment of security interests associated with such transactions.

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