Supreme Court Says NCLT Could Not Have Decided Title Of Gloster Trademark In Fort Gloster Insolvency

The Supreme Court on Thursday held that the National Company Law Tribunal could not have decided the ownership of the trademark “Gloster” while exercising powers under Section 60(5) of the Insolvency and Bankruptcy Code, as the dispute did not arise in relation to the insolvency resolution process.

A bench of Justices J.B. Pardiwala and K.V. Viswanathan upheld the National Company Law Appellate Tribunal,decision setting aside the NCLT Kolkata's finding that the trademark belonged to the corporate debtor.

“In view of the above, we have no doubt in our mind that in exercise of power under Section 60(5)(c) of IBC, the Adjudicating Authority could not have declared title in the trademark 'Gloster' in favour of the appellant SRA,” the court said.

The issue arose during the corporate insolvency resolution process of Fort Gloster Industries Ltd., which was admitted on August 9, 2018. A resolution plan submitted by Gloster Ltd. was approved by the committee of creditors with a 72.31 percent vote share.

While approval of the plan was pending, Gloster Cables Ltd approached the NCLT seeking exclusion of the trademark from the assets of the corporate debtor, claiming ownership.

On September 27, 2019, the NCLT dismissed the application but incidentally recorded that the trademark was an asset of the corporate debtor, vesting it in the successful resolution applicant. The appellate tribunal later set aside this finding.

Before the Supreme Court, the resolution applicant argued that the assignment of the trademark in favour of Gloster Cables was illegal and hit by the avoidance provisions under the Code.

The court noted that the resolution plan itself acknowledged rival claims over the trademark and merely asserted illegality. It also recorded that no avoidance proceedings had been initiated by the resolution professional.

The bench said that since no avoidance proceedings had been initiated, the adjudicating authority could not have declared title to the trademark while exercising powers under Section 60(5) of the Insolvency and Bankruptcy Code.

It noted that once a resolution plan is approved by the committee of creditors, it governs the rights of all stakeholders, and that conferring any additional rights would amount to altering the approved plan.

“Any grant of further rights over and above what is recognized in the plan would amount to modification or alteration of the approved plan,” the court said.

It added that if the successful resolution applicant perceived uncertainty over the title to the trademark, it was for the applicant to take appropriate steps to protect its rights.

Holding that the trademark dispute was not in relation to the insolvency proceedings on the facts of the case, the court affirmed the NCLAT's view and declined to restore the NCLT's finding on ownership.