S. 60(5)(c) IBC | NCLT Cannot Decide Trademark Ownership Dispute Which Isn't Related To Insolvency Proceedings: Supreme Court

The Supreme Court has held that the National Company Law Tribunal (NCLT), while exercising jurisdiction under Section 60(5) of the Insolvency and Bankruptcy Code (IBC), cannot adjudicate disputed questions of title to intellectual property if such determination goes beyond the scope of the approved resolution plan.The Court held that NCLT cannot decide title disputes over assets, including intellectual property rights such as trademarks unless the dispute has a direct and proximate nexus with the insolvency resolution process. “This Court examined the scope of Section 60(5). This Court held that under 60(5)(c) the Adjudicating Authority had jurisdiction to adjudicate disputes, which arise solely from or which relate to the insolvency of the Corporate Debtors. Administrating a note of caution, this Court observed that in doing so the authorities under IBC should ensure that they do not usurp the legitimate jurisdiction of other Courts, Tribunals and fora when the dispute is one which does not arise solely from or relate to the insolvency of the Corporate Debtor.”, observed a bench of Justices JB Pardiwala and KV Viswanathan, referring to precedent in Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta and others. The bench set aside the NCLAT's decision that held that the NCLT had jurisdiction to adjudicate the title disputes to the trademark, despite the issue lacked any direct and proximate nexus with the Corporate Insolvency Resolution Process (CIRP). BackgroundThe controversy arose during the corporate insolvency resolution process (CIRP) of Fort Gloster Industries Limited (FGIL). Gloster Limited emerged as the successful resolution applicant. During the pendency of approval of the resolution plan, Gloster Cables Limited (GCL) moved the NCLT under Section 60(5) of the IBC seeking directions that the trademark “Gloster” be excluded from the assets of the corporate debtor, contending that it had already been assigned to GCL through a series of agreements culminating in a deed of assignment in 2017.The NCLT, Kolkata Bench, while dismissing GCL's application, incidentally recorded a finding that the trademark “Gloster” was an asset of the corporate debtor and consequently vested in the successful resolution applicant. This was challenged before the National Company Law Appellate Tribunal (NCLAT).The NCLAT partly allowed GCL's appeal, holding that the NCLT did have jurisdiction under Section 60(5)(c) of the IBC but erred in declaring that the trademark belonged to the corporate debtor. Both parties then approached the Supreme Court in cross appeals.Supreme Court's RulingSetting aside the NCLAT's findings, the judgment authored by Justice Viswanathan observed that NCLT committed an error in adjudicating the title dispute over the trademark as the same was not extrinsically linked to the CIRP. “we have no doubt in our mind that in exercise of power under Section 60(5)(c) of IBC and while adjudicating the application of GCL on the facts of the present case, the Adjudicating Authority could not have declared title in the trademark “Gloster” in favour of the appellant SRA. The issue of the title of the Trademark was not “in relation to the insolvency proceedings”, on the facts of the present case.”, the court observed. In support, the Court relied on the case of Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta and others, (2021) 7 SCC 209, where it was held that “the Adjudicating Authority cannot exercise its jurisdiction over matters dehors the insolvency proceedings since such matters fall outside the realm of IBC.” Resolution Plan Once Approved By COC Becomes Binding, NCLT Can't Dispute Plan Here, the resolution plan submitted had acknowledged the GCL's claim. In that context, the Court observed :“the ultimate order of the NCLT recognizing the title in the trademark “Gloster” with the SRA does not reconcile with the resolution plan as approved by the COC and later by the Adjudicating Authority.”, The Court added that “…any grant of further rights over and above what is recognized in the plan would amount to modification or alteration of the approved plan. It should be remembered that the plan as it exists is the one duly approved by the COC and while adjudicating an application of GCL, no directions could be made by the NCLT conferring better rights.” “In a case like the present where the SRA has perceived clouds hovering over its title, it is for the SRA to resort to remedies and protect its rights. On the facts of the present case, while adjudicating an application under Section 60(5) of GCL, NCLT could not have passed the direction it ultimately passed.”, the court held. Cause Title: GLOSTER CABLES LTD. THROUGH ITS : AUTHORISED REPRESENTATIVE MR. SHYAM SUNDER KALYA VS. FORT GLOSTER INDUSTRIES LTD. (WITH CONNECTED MATTER)Citation : 2026 LiveLaw (SC) 80Click here to download judgmentAppearance: For Appellant(s) Mr. Shyam Divan, Sr. Adv. Mr. Diwakar Maheshwari, Adv. Ms. Pratiksha Mishra, AOR Mr. Rongon Choudhary,...

S. 60(5)(c) IBC | NCLT Cannot Decide Trademark Ownership Dispute Which Isn't Related To Insolvency Proceedings: Supreme Court

Yash Mittal

Tags