Vesuvius India Ltd. vs. Fenace Auto Ltd.

The existence of I&B Code has systemized the process of insolvency but in this process, there is no statement as to differentiation among the different creditors while repaying the debt. The recent tiff witnessed has been between the two companies “Vesuvius India Ltd.” and “Fenace Auto Ltd.”


A company petition was filed in the National Company Law Tribunal (NCLT), New Delhi against Fenace Auto Ltd. u/s 9 of the Insolvency and Bankruptcy Code, 2016 read with Rule 6 of the IBC Rules, 2016 for the initiation of insolvency proceedings by Vesuvius India in the capacity of it being an Operational Creditor to the Company. The Applicant was represented by Khurana and Khurana Advocates and IP Attorneys. The Application was approved by the court which was followed by the initiation of the proceedings

M/s. Badve Engineering Ltd., the appointed Resolution Applicant came up with the Insolvency Resolution Plan which was approved by the Committee of Creditors as well the NCLT, New Delhi via order dated 17th October 2018


The Insolvency resolution plan finalized by the resolution applicant and approved by the concerned authorities (The concerned authorities being the committee of creditors and NCLT) had the ratio of payment which was unfair towards the Operational Creditors. There has been no provision as to the preference of Other Creditors over the Operational Creditors with respect to repayment of the loan in case of insolvency and thus, an appeal was filed at the NCLAT on behalf of Vesuvius represented by Khurana & Khurana Advocates and IP Attorneys

The counsel for the appellant contended that the “resolution plan” is discriminatory as all the “operational creditors” having similarly situated not treated equally goes against the principle stated in Binani Judgment where the court held that the I&B Code aims to balance the interests of all stakeholders and does not maximize value for financial creditors and therefore, the dues of operational creditors must get at least similar treatment as compared to the due of the financial creditors. The court further held that “The I&B Code or the Regulations framed by the Insolvency and Bankruptcy Board of India (‘IBBI’) do not prescribe differential treatment between the similarly situated operational creditors or financial creditors on any ground.”


In the due course of such hearings going on before the NCLAT, the resolution applicant furnished an undertaking to the effect that all operational creditors would be paid in a similar percentage of the claim amount as allowed in the favor of the financial creditors. The payments were made to the operational and financial creditors on 12th March. 2019 and the appeals by the operational creditors henceforth were disposed of.

It is pertinent to note that the order was in the favor of the applicant but the matter is pending before the Adjudicating authority.

Author: Vidushi Trehan, LL.M from Symbiosis Law School, Pune , Intern at Khurana & Khurana, Advocates and IP Attorneys. In case of any queries please contact/write back to us at




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