SC rules insolvency tribunals cannot decide contested trademark ownership; parties must pursue IP rights in civil or commercial courts
)
Allowing GCL’s appeal on the core issue, the apex court held that the NCLT exceeded its jurisdiction in declaring title to the trademark in favour of the SRA | (Photo:PTI)
Listen to This Article
The Supreme Court has set aside a ruling that had effectively vested ownership of the “Gloster” trademark in a successful resolution applicant, holding that insolvency tribunals cannot decide contested questions of title that do not arise solely from a corporate insolvency process.
A Bench led by Justice KV Viswanathan ruled on cross-appeals arising from the corporate insolvency resolution process (CIRP) of Fort Gloster Industries (FGIL), where Gloster Limited, the successful resolution applicant (SRA), and Gloster Cables Limited (GCL) were locked in a long-running dispute over the ownership of the “Gloster” trademark.
The controversy stemmed from a series of agreements between FGIL and GCL dating back to the 1990s, including a technical collaboration, licensing arrangements, a loan secured by a charge over the trademark, and a conditional assignment executed in 2008 that was later confirmed through a deed of assignment in 2017.
During the CIRP, GCL approached the National Company Law Tribunal (NCLT) seeking a direction that any approved resolution plan should exclude rights over the trademark, asserting that it was not an asset of the corporate debtor.
While the NCLT dismissed GCL’s plea and held that the trademark belonged to FGIL, thereby passing to the SRA, the National Company Law Appellate Tribunal (NCLAT) overturned that finding, though it upheld the NCLT’s jurisdiction to examine the issue. Both sides then approached the Supreme Court.
Allowing GCL’s appeal on the core issue, the apex court held that the NCLT exceeded its jurisdiction in declaring title to the trademark in favour of the SRA.
The Bench emphasised that Section 60(5) of the Insolvency and Bankruptcy Code (IBC) confers wide, but not unlimited, residuary powers, which extend only to questions arising out of or directly relating to insolvency resolution.
Determining ownership of intellectual property amid competing contractual claims, the court said, falls outside that narrow remit when it is not integral to the insolvency itself.
The court noted that even the approved resolution plan acknowledged rival claims over the trademark and merely recorded the SRA’s “belief” that the assignment in favour of GCL was unlawful. In such circumstances, the tribunal could not, through the “fortuitous” filing of an application by GCL, convert insolvency proceedings into a forum for conclusively adjudicating property rights.
Importantly, the Bench underscored that if the resolution professional believed the assignment to be preferential, undervalued or fraudulent, the appropriate course was to invoke the avoidance provisions of the IBC through a dedicated application, something that was never done.
By restoring the NCLAT’s conclusion that title could not be declared in insolvency proceedings, the Supreme Court clarified that parties must pursue their substantive trademark rights before the appropriate civil or commercial fora.
aniltikotekar4sme.com 