Insolvency and Bankruptcy Code, 2016 — Section 60(5)(c) — Scope and limits
Jurisdiction under Section 60(5)(c) extends only to questions of law or fact arising out of or in relation to insolvency resolution proceedings — Adjudicating Authority cannot assume jurisdiction over disputes de hors insolvency, especially where the issue is independent of CIRP — Nexus with insolvency must exist — Section 60(5) cannot be used to bypass appropriate civil or statutory fora.
(Paras 24–26, 29–31, 37–38)
IBC — Section 60(5) — Declaration of title — Impermissibility
Adjudicating Authority has no jurisdiction to adjudicate or declare title to intellectual property where such issue does not arise directly from insolvency resolution — Title dispute over trademark involving rival claimants is beyond the scope of summary insolvency jurisdiction — Such adjudication requires determination by competent civil or statutory forum.
(Paras 37–41, 50–51)
Resolution Plan — Sanctity and finality — Modification prohibited
Once a resolution plan is approved by the Committee of Creditors and the Adjudicating Authority under Section 31, the plan becomes binding and final — No authority under the IBC may modify, supplement, or enlarge rights beyond what is provided in the approved plan — Any declaration granting additional proprietary rights amounts to impermissible alteration of the resolution plan.
(Paras 19–23, 35–38)
Resolution Applicant — Rights confined strictly to approved plan
Successful Resolution Applicant cannot obtain rights superior to or beyond those recognized in the resolution plan — Where the plan itself acknowledges rival claims and records only belief or understanding regarding ownership, adjudicating authority cannot confer absolute title post-approval.
(Paras 12–13, 21–23, 38)
Trademark — Ownership dispute — Outside insolvency jurisdiction
Determination of ownership of trademark involving disputed assignments, contingent agreements, licensing arrangements and statutory rights under Trade Marks Act, 1999 cannot be undertaken under IBC proceedings — Such disputes are highly contentious, fact-intensive and unsuitable for insolvency adjudication.
(Paras 39–41, 50–51)
Section 43 & 45 IBC — Preferential and undervalued transactions — Procedure
Findings under Sections 43 and 45 cannot be recorded in absence of a properly instituted avoidance application — Rigorous pleading, forensic scrutiny and notice to affected parties are mandatory — Adjudicating Authority cannot suo motu invalidate transactions while approving resolution plan.
(Paras 42–49)
Principles of natural justice — Violation
Recording findings of preferential or undervalued transaction without pleadings, application or notice to affected party amounts to gross violation of principles of natural justice — Such findings are perverse and unsustainable.
(Paras 45–49)
IBC — Role of Resolution Professional
Avoidance of preferential or undervalued transactions must ordinarily be initiated by Resolution Professional — In absence of application under Sections 43, 45 or 47, adjudicating authority cannot conduct collateral enquiry.
(Paras 14–16, 42–44)
Precedents followed
Applied and reaffirmed:
• Embassy Property Developments Pvt. Ltd. v. State of Karnataka
• Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta
• Tata Consultancy Services Ltd. v. SK Wheels Pvt. Ltd.
• SREI Multiple Asset Investment Trust v. Deccan Chronicle Marketeers
• Ebix Singapore Pvt. Ltd. v. Educomp Solutions Ltd.
• Kalyani Transco v. Bhushan Power & Steel Ltd.
(Paras 26–36)
ANALYSIS OF THE JUDGMENT
1. Core controversy
The dispute concerned ownership of the trademark “Gloster”, claimed by:
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Fort Gloster Industries Ltd. (FGIL) – Corporate Debtor, and
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Gloster Cables Ltd. (GCL) – asserting ownership by assignment.
During CIRP, the Successful Resolution Applicant (Gloster Limited) claimed entitlement to the trademark on the premise that it was an asset of the Corporate Debtor.
The NCLT declared the trademark to be an asset of the Corporate Debtor.
The NCLAT reversed that finding but upheld jurisdiction.
Both findings were challenged before the Supreme Court.
2. Resolution plan itself recognised rival claims
The approved resolution plan:
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Set out the entire history of licensing, charge, supplemental agreement and assignment;
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Recorded only the “belief” and “understanding” of the Resolution Applicant;
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Explicitly acknowledged competing claims over ownership.
There was no definitive declaration of title in the plan.
(Paras 11–13)
3. Central question before Supreme Court
Whether, while adjudicating an application under Section 60(5) of the IBC, the Adjudicating Authority could declare that the trademark “Gloster” was an asset of the Corporate Debtor and consequently vest title in the Successful Resolution Applicant.
(Para 10)
4. Interpretation of Section 60(5)(c)
The Court undertook a detailed review of precedent and held:
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Section 60(5)(c) is wide but not unlimited.
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The dispute must arise out of or relate to insolvency resolution itself.
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Matters independent of insolvency fall outside its scope.
The Court reaffirmed:
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Embassy Property — no adjudication of public law rights.
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Gujarat Urja — nexus with insolvency essential.
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TCS v. SK Wheels — disputes dehors insolvency excluded.
(Paras 24–31)
5. Title dispute not arising from insolvency
The Court held:
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Trademark ownership dispute existed independently and prior to CIRP.
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It did not arise because of insolvency.
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CIRP merely brought parties before NCLT.
Hence, there was no jurisdictional foundation under Section 60(5)(c).
(Paras 37–41)
6. Impermissible modification of resolution plan
Relying heavily on:
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SREI Multiple Asset Investment Trust v. Deccan Chronicle, and
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Ebix Singapore,
the Court held:
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Resolution plan is sacrosanct once approved.
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NCLT cannot confer additional proprietary rights not granted by plan.
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Declaration of trademark ownership amounted to modification of approved plan, which is impermissible.
(Paras 35–38)
7. Errors by NCLT on Sections 43 & 45
The Court strongly disapproved:
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NCLT invoking preferential and undervalued transaction provisions without:
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application,
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pleadings,
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forensic audit,
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notice to affected party.
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Such findings were held:
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beyond jurisdiction,
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violative of natural justice,
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legally perverse.
(Paras 42–49)
8. NCLAT also exceeded jurisdiction
The Supreme Court also set aside NCLAT’s observation that:
title vested in GCL under supplemental agreement,
holding that NCLAT too lacked jurisdiction to pronounce upon ownership.
(Para 51)
9. Final determination
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Declaration by NCLT that trademark was asset of Corporate Debtor — set aside.
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Observations of NCLAT recognising title in GCL — set aside.
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Ownership dispute left open for determination by competent forum.
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Resolution plan stands unaltered.
(Paras 50–52)
RATIO DECIDENDI
The National Company Law Tribunal, while exercising jurisdiction under Section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016, cannot adjudicate or declare title to a trademark where such dispute does not arise out of or relate directly to the insolvency resolution process; nor can it modify or enlarge rights beyond those provided in the approved resolution plan, as any such declaration would amount to an impermissible alteration of the plan and exceed the statutory limits of insolvency jurisdiction.
AUTHORITATIVE VALUE
This judgment conclusively establishes that:
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IBC is not a forum for deciding property title disputes.
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Trademark ownership cannot be determined in CIRP.
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Resolution plan is inviolable once approved.
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Section 60(5) is not a substitute for civil adjudication.
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Avoidance powers require strict procedural compliance.
