Whether the advance paid to Corporate Debtor for the supply of goods during CIRP, on failure to supply part goods, during CIRP can be treated as CIRP costs – Tuf Metallurgical Pvt. Ltd. Vs. Impex Metal& Ferro Alloys Ltd. – NCLAT New Delhi
A perusal of Section 20 of IBC makes it clear that after the CIRP is initiated, the IRP/RP is required to manage the Corporate Debtor’s operations as a going concern. Section 20(2) (e) gives power to the IRP (Subsequently RP) to take all actions as are necessary to keep the Corporate Debtor as a going concern. In such a process of managing the business operations of the Corporate Debtor, 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. The goods are either to be supplied, or the amount should be returned. If the goods are not supplied, the purchaser cannot be made to run for his money. If this approach as in the present matter is not changed, it will become difficult to keep the Corporate Debtors as a going concern. Such amount received as an advance payment for the supply of goods during the CIRP would have to be treated as CIRP costs.