Supreme Court Curtails NCLT’s Reach, Bars Adjudication Of Trademark Title Disputes Unconnected With CIRP

Supreme Court Curtails NCLT’s Reach, Bars Adjudication Of Trademark Title Disputes Unconnected With CIRP

Introduction

The Supreme Court has clarified the limits of the National Company Law Tribunal’s jurisdiction under Section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016 (IBC), holding that the NCLT cannot adjudicate disputes relating to ownership of intellectual property, including trademarks, unless such disputes have a direct and proximate nexus with the insolvency resolution process. The Court emphasised that insolvency fora cannot assume the role of civil courts or IP tribunals in matters falling outside the scope of insolvency proceedings.

Factual Background

The dispute 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) approached the NCLT under Section 60(5) of the IBC, claiming that the trademark “Gloster” was not an asset of the corporate debtor, as it had already been assigned to GCL through a series of agreements culminating in a deed of assignment executed in 2017.

GCL sought directions for exclusion of the trademark from the assets of FGIL, contending that the trademark could not vest in the successful resolution applicant.

Procedural Background

The NCLT, Kolkata Bench, dismissed GCL’s application but incidentally recorded a finding that the trademark “Gloster” was an asset of the corporate debtor and, consequently, vested in the successful resolution applicant. This finding was challenged before the National Company Law Appellate Tribunal (NCLAT).

The NCLAT partly allowed the appeal, holding that while the NCLT did have jurisdiction under Section 60(5)(c) of the IBC, it erred in conclusively declaring title to the trademark. Both parties thereafter filed cross appeals before the Supreme Court.

Issues

1. Whether the NCLT has jurisdiction under Section 60(5)(c) of the IBC to adjudicate disputed questions of title relating to trademarks.

2. Whether determination of trademark ownership, in the facts of the case, had a direct and proximate nexus with the CIRP of the corporate debtor.

3. Whether the NCLT could grant relief inconsistent with an approved resolution plan.

Contentions of the Parties

GCL contended that the trademark “Gloster” had been validly assigned to it prior to the commencement of CIRP and, therefore, could not be treated as an asset of the corporate debtor. It argued that the NCLT exceeded its jurisdiction by recording findings on trademark ownership.

On the other hand, the successful resolution applicant argued that the NCLT was empowered under Section 60(5)(c) to adjudicate all disputes connected with the insolvency process and that the trademark formed part of the assets dealt with under the resolution plan.

Reasoning and Analysis

The Supreme Court undertook a detailed examination of the scope of Section 60(5)(c) of the IBC and reiterated that the provision confers jurisdiction only over disputes that arise solely from or are directly related to insolvency proceedings. Relying on its earlier decision in Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta, the Court cautioned that insolvency fora must not encroach upon the jurisdiction of other courts and tribunals in matters unrelated to insolvency.

The Court observed that the issue of trademark ownership was not intrinsically connected to the CIRP and did not arise from the insolvency of the corporate debtor. It held that the NCLT committed a clear error in declaring title to the trademark, as such determination fell outside the statutory remit of Section 60(5)(c).

The Court further noted that the approved resolution plan had already acknowledged GCL’s claim. Any direction conferring additional or altered rights over the trademark would amount to modification of the resolution plan, which is impermissible once the plan is approved by the Committee of Creditors and the Adjudicating Authority.

It was emphasised that if the successful resolution applicant harboured doubts regarding its title to the trademark, it was required to pursue appropriate remedies before the competent forum and not through insolvency proceedings.

Decision

The Supreme Court set aside the findings of the NCLAT and held that the NCLT lacked jurisdiction to adjudicate the trademark ownership dispute in the present case. It ruled that determination of title to the trademark “Gloster” did not have the necessary nexus with the insolvency resolution process and, therefore, could not be decided under Section 60(5)(c) of the IBC. The appeals were disposed of accordingly.

In this case the appellant was represented by Mr. Shyam Divan, Sr. Adv. Mr. Diwakar Maheshwari, Ms. Pratiksha Mishra, AOR Mr. Rongon Choudhary, Mr. Karan Bhootra, Mr. Ranjit Kumar, Sr.Adv. Mr. Chander M Lall, Sr. Adv. Mr. Alok Dhir, Ms. Maneesha Dhir, Ms. Varsha Banerjee, Ms. Ayushi Misra, Ms. Nancy Roy, Ms. Prakriti Varshney, Ms. Annanya Mehan, Mr. Akash Dikshit, Mr. Adwait Sharma, Advocates and Mr. Karan Batura, AOR