The Supreme Court of India has held that the National Company Law Tribunal (NCLT), while exercising jurisdiction under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (IBC), cannot adjudicate or declare title over a trademark when such an issue does not arise directly from, or is not intrinsically connected with, the insolvency resolution process. The Court ruled that granting ownership rights over the trademark “Gloster” to the Successful Resolution Applicant would amount to an impermissible modification of an approved resolution plan.
The dispute arose during the corporate insolvency resolution process (CIRP) of Fort Gloster Industries Limited (FGIL), whose resolution plan submitted by Gloster Limited was approved by the Committee of Creditors. During the pendency of approval, Gloster Cables Limited (GCL) filed an application under Section 60(5) of the IBC before the NCLT, asserting that the trademark “Gloster” was not an asset of the corporate debtor and seeking its exclusion from the resolution plan. The NCLT, while approving the resolution plan, held that the trademark formed part of FGIL’s assets, thereby effectively vesting it in the resolution applicant. This finding was later set aside by the NCLAT, leading to cross appeals before the Supreme Court.
The Division Bench comprising Justice J.B. Pardiwala and Justice K.V. Viswanathan examined the scope of Section 60(5)(c) of the IBC and reiterated that the provision, though wide, is not intended to confer jurisdiction on the NCLT to decide complex and independent civil disputes such as trademark ownership. The Bench noted that the approved resolution plan itself acknowledged rival claims over the trademark and merely recorded the resolution applicant’s “belief” that the assignment in favour of GCL was invalid. In such circumstances, the Adjudicating Authority could not, under the guise of approving the plan, conclusively decide title in favour of one party.
The Court further held that any declaration of ownership beyond what is expressly provided in the resolution plan would amount to altering or modifying the plan, which is barred once the plan attains finality under Section 31 of the IBC. The Bench also disapproved the NCLT’s attempt to invoke provisions relating to preferential or undervalued transactions in the absence of a proper application and pleadings, observing that such an exercise violated principles of natural justice.
Accordingly, the Supreme Court upheld the NCLAT’s conclusion that the NCLT lacked jurisdiction to declare ownership of the trademark “Gloster” in the CIRP proceedings, clarified that the issue of title must be decided by a competent forum independently, and disposed of both the appeal and cross-appeal with no order as to costs.
Appearance:
For the Petitioner(s): Mr. Shyam Divan, Senior Advocate; Mr. Diwakar Maheshwari, Advocate; Ms. Pratiksha Mishra, AOR; Mr. Rongon Choudhary, Advocate; Mr. Karan Bhootra, Advocate; Mr. Ranjit Kumar, Senior Advocate; Mr. Chander M. Lall, Senior Advocate; Mr. Alok Dhir, Advocate; Ms. Maneesha Dhir, Advocate; Ms. Varsha Banerjee, Advocate; Ms. Ayushi Misra, Advocate; Ms. Nancy Roy, Advocate; Ms. Prakriti Varshney, Advocate; Ms. Annanya Mehan, Advocate; Mr. Akash Dikshit, Advocate; Mr. Adwait Sharma, Advocate; and Mr. Karan Batura, AOR.
For the Respondent(s): Mr. Ranjit Kumar, Senior Advocate; Mr. Chander M. Lall, Senior Advocate; Mr. Alok Dhir, Advocate; Ms. Maneesha Dhir, Advocate; Ms. Varsha Banerjee, Advocate; Ms. Ayushi Misra, Advocate; Ms. Nancy Roy, Advocate; Ms. Prakriti Varshney, Advocate; Ms. Annanya Mehan, Advocate; Mr. Akash Dikshit, Advocate; Mr. Adwait Sharma, Advocate; Mr. Karan Batura, AOR; Mr. Anand Varma, AOR; Mr. Ayush Gupta, Advocate; Dr. Mrs. Vipin Gupta, AOR; Mr. Krishna Kumar, Advocate; and Ms. Nandani Gupta, Advocate.
