PUFE transactions is a practitioner's acronym for the four categories of avoidable transactions under the Insolvency and Bankruptcy Code, 2016: Preferential (P), Undervalued (U), Fraudulent (F), and Extortionate (E) transactions, governed by Sections 43-51 and Section 66 of the IBC. Under Indian law, the resolution professional or liquidator is duty-bound to investigate and challenge PUFE transactions to recover assets that were improperly dissipated before the insolvency commencement date.
Legal definition
The term "PUFE" is not defined in the IBC itself — it is a widely used shorthand in Indian insolvency practice that captures the four categories of avoidance transactions:
| Category | Section | Test | Lookback Period |
|---|---|---|---|
| Preferential | Section 43 | Transfer giving a creditor a more beneficial position than under Section 53 distribution | 1 year (2 years for related parties) |
| Undervalued | Sections 45-46 | Transaction for significantly less consideration than value given, or a gift | 1 year (2 years for related parties) |
| Fraudulent | Section 66 | Business carried on with intent to defraud creditors; or wrongful trading where directors knew insolvency was unavoidable | No lookback limitation |
| Extortionate | Sections 50-51 | Credit transaction on exorbitant or unconscionable terms | 2 years |
The resolution professional's duty to investigate PUFE transactions arises from Section 25(2)(j), which requires the RP to file applications for avoidance of transactions in accordance with Chapter III of Part II of the Code. During liquidation, this duty passes to the liquidator under Section 35(1)(n).
How courts have interpreted this term
Anuj Jain (IRP for Jaypee Infratech Ltd.) v. Axis Bank Ltd. (2020) 8 SCC 401
The Supreme Court's comprehensive judgment analysed the interplay between different categories of PUFE transactions. The Court held that the resolution professional should examine all transactions during the relevant lookback periods and apply the appropriate statutory test to each. A single transaction may simultaneously qualify as preferential, undervalued, and fraudulent — these are not mutually exclusive categories. The Court set aside mortgages created by Jaypee Infratech in favour of its parent company's lenders as preferential transactions, demonstrating the practical operation of avoidance provisions in large insolvencies.
Sunil Kumar Jain v. Sundaresh Bhatt (NCLAT, 2021)
The NCLAT held that the resolution professional has a fiduciary duty to investigate PUFE transactions and that failure to file avoidance applications where there is a prima facie case constitutes a breach of duty. The CoC can also direct the RP to investigate specific transactions and file applications before the NCLT.
Srikanth Dwarakanath v. IDBI Bank (NCLAT, 2019)
The NCLAT clarified the application of the extended lookback period for related parties across all categories of PUFE transactions. The Tribunal held that the determination of related-party status under Section 5(24) must be made at the time of the impugned transaction, and the extended period applies automatically once the relationship is established.
Why this matters
PUFE analysis is one of the most technically demanding aspects of Indian insolvency practice. For every CIRP, the resolution professional must conduct a forensic examination of the corporate debtor's transactions during the lookback periods, identify transactions that fall within any of the four PUFE categories, and file applications before the NCLT to avoid them. In large insolvencies involving group structures and complex inter-company transactions, this analysis can involve hundreds of transactions and multiple categories.
For practitioners, understanding the hierarchy of PUFE categories is essential. Fraudulent transactions (Section 66) carry the broadest reach (no lookback limitation) but the highest evidentiary burden (intent to defraud). Preferential transactions (Section 43) are the most commonly challenged because the test is objective (effect, not intent). Undervalued transactions (Sections 45-46) require valuation evidence. Extortionate credit transactions (Sections 50-51) are the least litigated category due to the difficulty of establishing "exorbitant" terms.
The recovery of amounts through PUFE applications directly augments the corporate debtor's estate, benefiting all creditors. In the Jaypee Infratech case, the avoidance of mortgages worth approximately Rs. 8,600 crore fundamentally altered the resolution landscape, demonstrating the transformative potential of effective PUFE analysis.
Related terms
Sub-types:
- Preferential Transaction
- Undervalued Transaction
- Fraudulent Transaction
- Extortionate Credit Transaction
Synonym:
Key officer:
Frequently asked questions
What does PUFE stand for?
PUFE stands for Preferential, Undervalued, Fraudulent, and Extortionate — the four categories of avoidable transactions under the Insolvency and Bankruptcy Code, 2016 (Sections 43-51 and Section 66). It is a practitioner's shorthand, not a statutory term.
Who is responsible for filing PUFE applications?
During CIRP, the resolution professional files PUFE applications under Section 25(2)(j). During liquidation, the liquidator files them under Section 35(1)(n). The CoC may also direct the RP to investigate specific transactions.
Can a single transaction be challenged under multiple PUFE categories?
Yes. The Supreme Court in Anuj Jain (2020) confirmed that the four PUFE categories are not mutually exclusive. A single transaction can simultaneously be challenged as preferential, undervalued, and fraudulent. The resolution professional should plead all applicable grounds in the avoidance application.
This entry is part of the Veritect Indian Legal Glossary, a comprehensive reference of Indian legal terminology grounded in statutory text and judicial interpretation.
Last updated: 2026-03-27. Veritect provides this content for informational purposes and does not constitute legal advice.