Supreme Court Overturns NCLT's Trademark Declaration in Insolvency Case Apex Court Clarifies Jurisdiction Limits of NCLT in Trademark Disputes During Insolvency Proceedings
In a significant ruling, the Supreme Court of India has set aside the National Company Law Tribunal's (NCLT) declaration regarding the trademark ownership of "Gloster" in the case between Gloster Limited and Gloster Cables Limited. The Supreme Court emphasized the limitations of the NCLT's jurisdiction under the Insolvency and Bankruptcy Code (IBC), particularly regarding disputes unrelated to insolvency resolution.
The dispute arose when Gloster Cables Limited challenged the NCLT's decision, which favored Gloster Limited, declaring the "Gloster" trademark as an asset of the corporate debtor, Fort Gloster Industries Limited (FGIL), now under the control of Gloster Limited as the Successful Resolution Applicant (SRA). The NCLT's decision was based on the understanding that the assignment of the trademark to Gloster Cables Limited was invalid, as it allegedly contravened sections of the IBC dealing with preferential and undervalued transactions.
However, the Supreme Court, led by Justices J.B. Pardiwala and K.V. Viswanathan, ruled that the NCLT overstepped its jurisdiction. The Court highlighted that the issue of trademark ownership did not arise "in relation to the insolvency resolution or liquidation proceedings" as required under Section 60(5)(c) of the IBC. The Apex Court noted that the resolution plan approved by the Committee of Creditors (CoC) did not definitively settle the trademark ownership but recognized potential disputes, which should be adjudicated by appropriate courts or authorities.
The Supreme Court further criticized the NCLT for its reliance on Sections 43 and 45 of the IBC to declare the assignment of the trademark void without a formal application by the Resolution Professional or adequate evidence and notice to the parties involved. The Court underscored the importance of adhering to procedural fairness and ensuring that the sanctity of the resolution plan is preserved.
This ruling reaffirms the need for careful delineation of the NCLT's jurisdiction, particularly in matters extending beyond the immediate scope of insolvency proceedings. It also underscores the necessity for resolution plans to clearly outline asset ownership to avoid such legal ambiguities.
Bottom Line:
Insolvency and Bankruptcy Code (IBC) - Scope of Section 60(5)(c) - Adjudicating Authority (NCLT) cannot declare title to a trademark in favor of a party while adjudicating an application under Section 60(5) if the issue of title is not directly "in relation to insolvency proceedings" or is contrary to the resolution plan approved by the Committee of Creditors (CoC).
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 - Sections 60(5)(c), 43, 45, 46; Trade Marks Act, 1999 - Assignment of trademark.
Gloster Limited v. Gloster Cables Limited, (SC) : Law Finder Doc Id # 2842384
