IBC Section 20: Management of operations of corporate debtor as going concern

Section 20 of Insolvency and Bankruptcy Code, 2016: Management of operations of corporate debtor as going concern

Official Bare Act Text

Override / Mandate Mens Rea (Intent) Actus Reus (Conduct) Punishment Limitation Monetary

(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 concern.

(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.

1. Subs. by Act 26 of 2018, s. 14, for "sub-section" (w.e.f. 6-6-2018).

Legal Commentary & Landmark Judgments: Section 20

Section 20 imposes a positive statutory duty on the IRP to manage the operations of the corporate debtor as a going concern, conferring wide commercial powers to raise interim finance and execute contracts.

Going Concern Preservation Duty: The IRP shall make every endeavor to protect and preserve the value of the property of the corporate debtor and manage the operations as a going concern.
Authority to Appoint Professionals: Power to appoint accountants, legal counsel, and other professionals to assist in managing operations.
Authority to Enter Contracts & Settle Bills: Power to enter into contracts, amend existing agreements, and issue instructions for ongoing utilities, wages, and raw materials.
Interim Finance Authorization (Section 20(2)(c)): Power to raise interim finance (subject to CoC approval under Section 28), which enjoys super-priority status in CIRP costs under Section 53.

Key Landmark Precedents:

Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta (2021) 7 SCC 209: The Supreme Court held that the primary duty of the RP under Section 20 is to keep the corporate debtor a going concern; third parties cannot terminate critical power purchase agreements or contracts solely on the ground of insolvency.
Swiss Ribbons Pvt. Ltd. v. Union of India (2019) 4 SCC 17: Affirmed that preserving the corporate debtor as a going concern under Section 20 maintains asset valuation and protects jobs during the resolution window.

Courtroom Practice & Strategic Litigation Guidance:

If an essential utility provider (electricity, water, raw material vendor) threatens to terminate supply due to pre-CIRP unpaid arrears, file an urgent IA citing Section 20 r/w Gujarat Urja Vikas Nigam. Vendors must maintain ongoing supplies provided current CIRP running bills are paid.