8.48 Extortionate Credit Transactions (18 U.S.C. Sec. 892)
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Any transaction requiring exorbitant payment from the corporate debtor shall be termed as extortionate credit transaction and shall be subject to avoidance under Section 50 of the Code.
IBC Section 51-Orders of Adjudicating Authority in respect of extorionate credit transactions. (e) require any security interest that was created as part of the extortionate credit transaction to be relinquished in favour of the liquidator or the resolution professional, as the case may be.
(1) Where the corporate debtor has been a party to an extortionate credit transaction involving the receipt of financial or operational debt during the period within two years preceding the insolvency commencement date, the liquidator or the resolution professional as the case may be, may make an application for
Realization of security interest by secured creditor. (1) A secured creditor who seeks to realize its security interest under section 52 shall intimate the liquidator of the price at which he proposes to realize its secured asset.
An extortionate transaction is defined as the receipt of financial or operational debt within two years after the insolvency beginning date at terms requiring the corporate debtor to make extravagant payments, which may be avoided by an order of the adjudicating authority under Section 50 of the IBC.
54. (1) Where the assets of the corporate debtor have been completely liquidated, the liquidator shall make an application to the Adjudicating Authority for the dissolution of such corporate debtor.
Under the Insolvency Act 1986 a credit transaction is extortionate if, having regard to the risk accepted by the lender, the payments required in return were grossly exorbitant; or if it otherwise grossly contravened the ordinary principles of fair dealing.
Whoever makes any extortionate extension of credit, or conspires to do so, shall be fined under this title or imprisoned not more than 20 years, or both.
