Adjudicating Authority Cannot Declare Trademark Ownership in Insolvency Proceedings | IBC Jurisdiction Limits : Supreme Court

The Supreme Court has definitively circumscribed the jurisdiction of the National Company Law Tribunal in insolvency proceedings, holding that it cannot adjudicate disputes over trademark ownership when the approved resolution plan acknowledges competing claims and no formal application under Sections 43 or 45 of the IBC has been filed. This judgment reinforces the sanctity of the approved resolution plan and the limits of the Adjudicating Authority’s residuary jurisdiction under Section 60(5)(c).

Background & Facts

The Dispute

The dispute centers on the ownership of the trademark "Gloster" (Registration No. 690772), which was historically used by Fort Gloster Industries Limited (FGIL), the Corporate Debtor, under a licensing arrangement with Gloster Cables Limited (GCL). GCL claimed ownership through a series of agreements, including a 2004 license, a 2006 hypothecation, a 2008 supplemental agreement contingent on the vacation of a BIFR restraint order, and a 2017 Deed of Assignment. FGIL entered Corporate Insolvency Resolution Process (CIRP) on 9 August 2018.

Procedural History

• 2001: FGIL declared a sick company by BIFR; restraint order issued prohibiting asset disposal.
• 2004: GCL and FGIL executed a Trademark License Agreement.
• 2006: GCL extended a Rs. 10 crore loan to FGIL, creating a first charge on the trademark.
• 2008: Supplemental Trademark Agreement executed, making assignment effective only upon vacation of BIFR order.
• 2016: SICA repealed; BIFR proceedings abated.
• 2017: Deed of Assignment dated 20 September 2017 executed, claiming assignment effective from 1 December 2016.
• 2018: CIRP commenced on 9 August 2018; GCL registered as trademark owner on 17 September 2018.
• 2019: GCL filed application under Section 60(5) of IBC seeking exclusion of trademark from resolution plan.
• 27 September 2019: NCLT held trademark was FGIL’s asset, rejecting GCL’s claim.
• 25 January 2024: NCLAT set aside NCLT’s order, holding trademark belonged to GCL.
• 2026: Supreme Court heard appeals from both parties.

Relief Sought

GCL sought exclusion of the trademark from the resolution plan, asserting ownership. The Successful Resolution Applicant (SRA), Gloster Limited, sought affirmation that the trademark was FGIL’s asset and thus vested in it post-CIRP. The NCLT’s declaration in favor of the SRA and the NCLAT’s reversal created conflicting outcomes.

The Legal Issue

The central question was whether the Adjudicating Authority under Section 60(5)(c) of the Insolvency and Bankruptcy Code has jurisdiction to declare ownership of a trademark when the approved resolution plan explicitly recognizes rival claims and no application under Sections 43 or 45 has been filed to avoid the transaction.

Arguments Presented

For the Appellant (SRA)

The SRA contended that the NCLT’s finding was legally sound because:

• The Deed of Assignment dated 20 September 2017 was executed during the moratorium period under Section 14(1)(b), rendering it void.
• The transaction was undervalued (Rs. 10 lakhs for a trademark hypothecated against Rs. 10 crores) and fell within the two-year look-back period under Section 43(2)(a) and Section 45(2)(b).
• The NCLT had inherent power to examine fraudulent or preferential transactions even without a formal application by the Resolution Professional.
• GCL’s conduct - paying royalties until March 2018 - contradicted its claim of ownership as of 2016.

For the Respondent (GCL)

GCL argued that:

• The trademark was never FGIL’s asset; ownership transferred via the 2008 Supplemental Agreement upon abatement of BIFR proceedings in 2016.
• Registration under the Trade Marks Act, 1999 is merely evidentiary; title vests on assignment, not registration.
• The NCLT lacked jurisdiction under Section 60(5)(c) to adjudicate title disputes unrelated to insolvency resolution.
• The NCLT’s reliance on Sections 43 and 45 was procedurally flawed, as no application was filed by the Resolution Professional and GCL was not given notice of such allegations.
• The approved resolution plan itself acknowledged rival claims, precluding the NCLT from unilaterally declaring ownership.

The Court's Analysis

The Supreme Court undertook a rigorous analysis of Section 60(5)(c), which grants the NCLT jurisdiction over "any question of law or facts arising out of or in relation to the insolvency resolution or liquidation proceedings." The Court emphasized that this residuary jurisdiction is not unlimited and must be tethered to the insolvency process.

The Court relied on Embassy Property Developments v. State of Karnataka, Gujarat Urja Vikas Nigam v. Amit Gupta, and Tata Consultancy Services v. SK Wheels to establish that jurisdiction under Section 60(5)(c) requires a direct nexus between the dispute and the insolvency proceedings. A dispute over trademark ownership, where the resolution plan acknowledges competing claims and no avoidance application has been filed, lacks this nexus.

"The plan, as approved, is a binding document which would govern the relationship between the stakeholders and on which terms the new management takes over the Corporate Debtor."

The Court found that the approved resolution plan explicitly recognized the existence of rival claims. The SRA’s own plan stated it "believes" the assignment was mala fide and "understands" the trademark belongs to FGIL - language that reflects uncertainty, not assertion of ownership. The NCLT’s declaration of ownership in favor of the SRA effectively modified the approved plan, which is impermissible under SREI Multiple Asset Investment Trust v. Deccan Chronicle.

The Court further held that the NCLT erred in invoking Sections 43 and 45 sua sponte. These provisions require a formal application by the Resolution Professional, a creditor, or a member, with specific averments and notice to the affected party. The absence of such an application rendered the NCLT’s findings a violation of natural justice.

"The enquiry was primarily on the approval of the plan and on the application of GCL. The NCLT could not, by a sidewind, neutralize a transaction under Sections 43 and 45 without the procedural safeguards mandated by the Code."

The Court clarified that while the NCLT cannot decide trademark ownership, other courts retain jurisdiction to adjudicate the matter on its merits, uninfluenced by these observations.

The Verdict

The Supreme Court allowed both appeals. The NCLT’s declaration that the trademark "Gloster" was FGIL’s asset was set aside. The NCLAT’s finding that GCL was the owner was also set aside. The Court held that neither tribunal had jurisdiction to determine trademark ownership under the facts of the case. The dispute must be resolved in a civil court.

What This Means For Similar Cases

Resolution Plan Finality Is Absolute

• Practitioners must treat the approved resolution plan as the definitive charter of rights; no tribunal can unilaterally expand or alter rights beyond its terms.
• Any attempt by the NCLT to declare ownership, even if "in the interest of justice," constitutes an impermissible modification under SREI Multiple Asset.
• If a resolution applicant suspects fraudulent transfers, it must file an avoidance application under Sections 43, 45, or 47 before plan approval.

Jurisdictional Boundaries Under Section 60(5)(c) Are Strict

• The NCLT cannot act as a general civil court for property disputes. The nexus to insolvency must be direct and demonstrable.
• Disputes over intellectual property ownership, especially where registration or assignment is contested, fall outside its purview unless directly tied to asset preservation during CIRP.
• Parties must litigate title disputes in civil courts or appropriate IP tribunals, not through insolvency applications.

Procedural Compliance in Avoidance Applications Is Non-Negotiable

• Sections 43, 45, and 47 require formal applications with specific pleadings and notice to the affected party.
• The Resolution Professional cannot rely on the NCLT to conduct a sua sponte forensic audit or invoke avoidance provisions without a petition.
• Failure to file an avoidance application precludes the NCLT from later invalidating transactions, even if they appear undervalued or preferential.
• Practitioners must ensure all avoidance applications are filed within the statutory timelines and with full disclosure of facts and documents.