Transaction Audit Services

Under the Insolvency and Bankruptcy Code, 2016, the resolution professional or liquidator is required to review the corporate debtor's historical transactions to determine whether any of them qualify as preferential, undervalued, extortionate credit, or fraudulent transactions, collectively referred to as PUFE transactions, within the look-back periods prescribed by the Code. Where such transactions are identified, the professional must apply to the National Company Law Tribunal to have them reversed, recovered, or otherwise dealt with, so that value improperly extracted from the corporate debtor prior to insolvency can be brought back for the benefit of creditors. This forensic review is a statutory obligation, not an optional exercise, and forms a critical part of the resolution professional's due diligence.

Why This Matters

Failure to identify and act on PUFE transactions can result in a permanent loss of recoverable value for creditors, and may expose the resolution professional or liquidator to scrutiny for not discharging this statutory duty. At the same time, transactions must be assessed carefully against the specific tests laid down under the Code, since mischaracterising an ordinary business transaction as a PUFE transaction can lead to unnecessary disputes with counterparties and related parties, making a rigorous and well-evidenced audit essential on both counts.

How We Help

Look-back Period Transaction Review

We conduct a structured review of the corporate debtor's transactions within the relevant look-back periods, examining related-party dealings, asset transfers, and payments that may indicate preferential or undervalued transactions.

Testing Against Statutory Criteria

We assess each flagged transaction against the specific tests for preferential, undervalued, extortionate credit, and fraudulent transactions set out in the Code, distinguishing genuine commercial dealings from those requiring further action.

Evidence Compilation and Reporting

We compile the documentary and financial evidence needed to support a transaction audit report, structured to meet the standard of proof expected when the resolution professional or liquidator applies to the tribunal for relief.

Support in Tribunal Proceedings

Where an application is filed before the tribunal in respect of identified transactions, we assist in preparing supporting analysis and responding to queries raised by the tribunal or affected parties during the proceedings.

Who Needs This

• Resolution professionals discharging their statutory duty to review past transactions
• Liquidators assessing recoverable value before or during liquidation
• Committee of Creditors members seeking assurance on asset preservation
• Creditors concerned about value extracted from the debtor prior to insolvency

Our Approach

We combine forensic accounting techniques with a close reading of the statutory tests under the Code, so that findings are both factually robust and legally well-founded. Our transaction audits are conducted methodically and documented thoroughly, giving resolution professionals and liquidators a defensible basis for the applications they bring before the tribunal.

Get in Touch

To discuss how we can support you with transaction audit services, write to us at info@agarwalurs.com.