The Insolvency and Bankruptcy Code, 2016
Part-II Insolvency Resolution and Liquidation for Corporate Persons
Chapter-II Corporate Insolvency Resolution Process
Section 20: Management of operations of corporate debtor as going concern.
*20. (1) The 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 concernJ1.
(2) For the purposes of sub-section (1), the interim resolution professional shall have the authority—
(a) to 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:
Provided 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.
(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.
Reference
*Effective from 01.12.2016.
Judicial Pronouncements:
J1. Sections 5(26), 14(2), 20(1), 20(2)(d) and (e) of the Code read with Regulations 37 and 38 of the 2016 Regulations all speak of the corporate debtor running as a going concern during the insolvency resolution process. [Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta and Ors. (2019) ibclaw.in 07 SC]. Even if it is found that the Corporate Debtor was not a going concern during the CIRP despite best efforts by the resolution professional, it cannot be presumed that still the Corporate Debtor was a going concern during the CIRP period. [Sunil Kumar Jain and Ors. v. Sundaresh Bhatt and Ors. (2022) ibclaw.in 23 SC, p12]
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