Management of operations of corporate debtor as going concern [Section 20] - Insolvency Resolution And Liquidation For Corporate Persons - IBC

Management of operations of corporate debtor as going concern Preserve the value of Corporate Debtor as Going Concern [ Section 20(1) ] T h e interim resolution professional shall make every endeavour to protect and preserve the value of the property of the corporate debtor and manage the operations of the corporate debtor as a going concern. Authority of IRP [ Section 20(2) ] F o r the purposes of section 20(1), the interim resolution professional shall have the authority- (a) t o appoint accountants, legal or other professionals as may be necessary; (b ) to enter into contracts on behalf of the corporate debtor or to amend or modify the contracts or transactions which were entered into before the commencement of corporate insolvency resolution process; (c) to raise interim finance provided that no security interest shall be created over any encumbered property of the corporate debtor without the prior consent of the creditors whose debt is secured over such encumbered property: Pro v i d e d that no prior consent of the creditor shall be required where the value of such property is not less than the amount equivalent to twice the amount of the debt. The expression interim finance is defined in section 5(15) of the IBC as any financial debt raised by an IRP or RP during the CIRP period and such other debt as may be notified. The IBC allows an interim resolution professional (IRP)/ Resolution professional (RP) to raise interim finance in order to protect and preserve the value of the property of the Corporate Debtor and manage its operations as a going concern. Interim finance is a very useful device for the effective reorganization of a Corporate Debtor (CD). (d ) to issue instructions to personnel of the corporate debtor as may be necessary for keeping the corporate debtor as a going concern; and ( e ) to take all such actions as are necessary to keep the corporate debtor as a going concern Relevant Case Laws Tuf Metallurgical Pvt. Ltd. Vs. Impex Metal Ferro Alloys Ltd. Ors. - NCLAT Dated 03.02.2021 Section 20(2)(e) gives power to the interim resolution professional ( IRP) (subsequently RP) to take all actions as are necessary to keep the Corporate Debtor (CD) as a going concern. In such a process of managing the business operations of the Corporate Debtor (CD), if advance payments for supply of goods is received, it cannot be treated as raising an interim finance. It is an advance for payment of goods which the Corporate Debtor as a going concern may be manufacturing. Such amount received as an advance payment for the supply of goods during the CIRP would have to be treated as Corporate interim resolution professional (CIRP) cost.