By Deboleena Dutta and Aashi Nema
Introduction
The decision of the Hon’ble Supreme Court in the case of Gloster Limited v. Gloster Cables Limited[1], is a significant exposition on the limits of the adjudicatory powers of the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code, 2016. Although the immediate controversy concerned proprietary rights over the trademark “GLOSTER”, the real issue before the Court was far more fundamental: whether insolvency forums can assume jurisdiction to determine complex questions of title to intellectual property merely because one of the parties is undergoing corporate insolvency resolution.
The present case provided the Supreme Court an opportunity to delineate the boundary between matters that truly “arise out of or relate to” insolvency proceedings and those which remain independent causes of action requiring adjudication by civil courts or specialized forums. In doing so, the Court not only set aside the findings of the NCLT but also disapproved the approach of the NCLAT (National Company Law Appellate Tribunal), holding that both forums had travelled beyond their jurisdiction in declaring ownership of the trademark. The judgment thus highlights a crucial principle: the IBC is not a substitute for civil adjudication, and insolvency tribunals cannot be converted into courts of general jurisdiction.
Background of the case
The dispute traces its roots to a longstanding commercial relationship between Fort Gloster Industries Limited (FGIL), the Corporate Debtor, and Gloster Cables Limited (GCL). Both companies operated under the umbrella of the “GLOSTER” brand. Over time, FGIL and GCL executed a series of agreements including a Technical Collaboration Agreement, a Trademark Agreement, and ultimately a Deed of Assignment dated September 20, 2017, pursuant to which GCL claimed that FGIL had assigned the trademark “GLOSTER” to it. FGIL’s own balance sheets, however, had consistently reflected the trademark as an asset of the company.
When FGIL became financially insolvent, it was admitted into the Corporate Insolvency Resolution Process (CIRP) under the IBC. A Resolution Professional (RP) was appointed to manage its affairs and collate its assets. Gloster Limited emerged as the Successful Resolution Applicant (SRA) and it also sought to include the “GLOSTER” trademark as part of the assets being taken over.
GCL intervened by filing an application under Section 60(5) of the IBC before the NCLT, Kolkata, contending that the trademark had already been validly assigned to it prior to the CIRP and therefore did not form part of FGIL’s insolvency estate.
The NCLT held against GCL: it found the assignment invalid and declared the trademark to be an asset of the Corporate Debtor, effectively vesting it in the SRA under the resolution plan. GCL appealed to the NCLAT, which reversed the finding on merits and held the assignment valid, recognising GCL as the rightful owner, but upheld NCLT’s jurisdiction to have decided the issue at all.
Aggrieved by these competing observations, both parties approached the Supreme Court. The Successful Resolution Applicant/Corporate Debtor, i.e. Gloster Limited challenged the NCLAT’s finding that ownership vested in Gloster Cables Limited, whereas GCL challenged the assumption of jurisdiction and the earlier adverse findings of the NCLT.
Arguments Advanced by the Parties
The Successful Resolution Applicant contended that once a resolution plan is approved, all assets of the corporate debtor, including intellectual property, automatically vest in the successful applicant. It was argued that the NCLT is empowered under the IBC to determine what constitutes the assets of the corporate debtor and that such determination is incidental to its core insolvency jurisdiction. According to the SRA, deciding whether the trademark formed part of the debtor’s estate was necessary for effective implementation of the resolution plan.
On the other hand, Gloster Cables Limited argued that trademark ownership is a substantive civil and proprietary issue governed by the Trade Marks Act and general principles of property law. It was submitted that the NCLT is not a civil court of plenary jurisdiction and cannot adjudicate complex questions of title. The IBC, it was contended, is concerned with insolvency resolution and not with adjudicating disputed intellectual property rights. GCL maintained that the NCLT’s findings on ownership exceeded its statutory mandate and amounted to an impermissible exercise of jurisdiction. GCL further emphasized that any declaration of ownership must be made by competent civil or IP fora and not by the insolvency tribunal.
Court’s Observation
The Supreme Court undertook a careful examination of the statutory framework of the Insolvency and Bankruptcy Code, 2016, and clarified the contours of the jurisdiction vested in the National Company Law Tribunal. It emphasized that the jurisdiction under Section 60(5)(c) is not plenary and cannot be expanded to include disputes that fall outside the domain of IBC.
A significant aspect of the Court’s reasoning was its distinction between rights arising within the insolvency framework and those that exist independently under other legal regimes. The Court made it clear that where the corporate debtor seeks to assert rights that fall outside the purview of the IBC, particularly those rooted in public law or governed by separate statutory frameworks, such rights cannot be enforced through the NCLT by resorting to Section 60(5). The insolvency process cannot be used as a mechanism to bypass established legal forums or to consolidate jurisdiction over matters that are otherwise required to be adjudicated elsewhere.
The Court further observed that the issue of ownership of the trademark “Gloster” did not arise out of or in relation to the insolvency resolution process in a manner that would justify the exercise of jurisdiction by the NCLT. The resolution plan merely recorded the sequence of transactions between the parties and reflected the position of the successful resolution applicant that the transfer of the trademark was questionable. However, no substantive proceedings were undertaken within the framework of the IBC to invalidate the transaction in accordance with the mechanisms provided under the Code. The assertion of title, without recourse to such statutory remedies, could not transform a disputed proprietary claim into an insolvency issue.
A further and equally important aspect of the Court’s reasoning concerned the sanctity of the resolution plan. The Court held that once a resolution plan is approved, it becomes the binding charter governing all stakeholders, and its terms cannot be altered or expanded through subsequent adjudicatory orders. The finding of the NCLT that the trademark formed part of the assets of the corporate debtor effectively granted rights to the successful resolution applicant that were not contemplated under the approved plan. Such an exercise was impermissible, as it amounted to a modification of the plan outside the statutory process.
The Court also expressed concern regarding the manner in which the NCLT proceeded to adjudicate the issue. It noted that the application filed by Gloster Cables Limited was considered alongside the application for approval of the resolution plan, and the focus of the proceedings remained on the approval of the plan. In this backdrop, the determination of a complex question of trademark ownership was undertaken without the depth of adjudication that such a dispute warranted. The Court observed that the application was effectively decided in a hurried manner, resulting in findings that went beyond the scope of the proceedings and adversely affected the rights of the applicant itself.
Court’s Order
In view of the above, the Supreme Court held that the National Company Law Tribunal stepped beyond its jurisdiction by declaring title of the mark “Gloster” in favour of the successful resolution applicant while exercising powers under Section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016. The Hon’ble Bench clarified that the question of ownership of the trademark did not bear the requisite nexus to the insolvency resolution process and therefore could not have been adjudicated within those proceedings.
The Court further held that the resolution plan, as approved by the Committee of Creditors and the Adjudicating Authority, did not conclusively determine the ownership of the trademark and merely recorded the competing positions of the parties. Any determination conferring proprietary rights beyond what was recognized in the plan would amount to an impermissible alteration of the plan.
Accordingly, the declaration made by the NCLT treating the trademark as an asset of the corporate debtor and vesting it in the successful resolution applicant was held to be legally unsustainable. The Court clarified that disputes concerning title to the trademark must be adjudicated before a forum competent to decide such issues in accordance with the applicable law. The appeals were disposed of with this clarification, leaving the question of ownership open for determination in appropriate proceedings.
Author’s Note
This judgment is a welcome reaffirmation of jurisdictional discipline. Insolvency tribunals, designed for speedy resolution of corporate distress, do not exercise the power of public law jurisdiction. NCLT deciding ownership of trademarks or other intellectual property would undermine both insolvency efficiency and the specialized nature of IP adjudication.
The decision also carries practical implications for every stakeholder in the insolvency ecosystem:
For Resolution Professionals: The duty of the Resolution Professional does not end with listing tangible assets in the Information Memorandum. The RP must proactively identify and disclose all intellectual property assets of the corporate debtor, including trademarks proprietorship, pending trademark applications, and any existing licensing or assignment agreements, in its reports to the Committee of Creditors. Failure to flag contested IP rights at the outset creates precisely the kind of ambiguity that led to protracted litigation in this case.
For Resolution Applicants: Due diligence becomes paramount. A resolution plan cannot assume ownership of intellectual property merely because it appears in the debtor’s asset schedule. Before submitting a resolution plan, the applicant must independently evaluate the IP background of the corporate debtor, including the history of trademark filings, assignments, licensing agreements, and any proprietary disputes. Where title is contested, this must be expressly and carefully addressed in the resolution plan itself, so that a prior owner or claimant cannot later dispute proprietorship after the plan is approved and implemented.
The resolution plan must make specific and clear provision for all intellectual property assets, especially where competing claims exist. A plan that glosses over disputed IP rights creates a vacuum that neither the NCLT nor any subsequent proceeding can easily fill. The more clearly the resolution plan deals with trademark rights, the less room there is for a prior owner to resurface and contest ownership after the corporate debtor has been handed over to the SRA.
For Corporate Debtors: When the resolution plan is approved and the corporate debtor is handed over to the SRA, the SRA subsequently finds that an asset it believed it was receiving is subject to a competing claim, it cannot easily go back to the NCLT and seek a fresh determination, because as the Supreme Court has now clarified, the NCLT simply does not have jurisdiction to decide title disputes. This reinforces the need for front-end diligence rather than back-end litigation.
Ultimately, the Supreme Court strikes a balance: while insolvency proceedings may deal with assets, but they cannot conclusively determine trademark ownership when such ownership is genuinely contested. In doing so, the Court protects both the procedural efficiency of the IBC and the substantive integrity of intellectual property law. Because, the insolvency process is a rescue mechanism, not a shortcut to resolving property disputes that rightfully belong before civil or specialized courts.
[1] CIVIL APPEAL NO. 2996 OF 2024