2026 (1) TMI 1165 - SC - IBC

Declaration of trademark title and residuary jurisdiction under Section 60(5)(c) limited; approval of resolution plan upheld

Residuary jurisdiction under Section 60(5)(c) of the IBC does not permit an adjudicating authority to determine ownership of a trademark when the dispute ... Jurisdiction under Section 60(5)(c) - Declaration of title to a trademark - binding nature of an approved resolution plan - residuary jurisdiction u/s 60(5)(c) of the Insolvency and Bankruptcy Code, 2016 - adjudicating authority's limitation to matters arising out of or in relation to insolvency proceedings - avoidance of preferential and undervalued transactions - moratorium u/s 14(1)(b) of the Insolvency and Bankruptcy Code, 2016 - approval and binding effect of a resolution plan u/s 31 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- No doubt in our mind that in exercise of power under Section 60(5)(c) of IBC and while adjudicating the application of GCL on the facts of the present case, the Adjudicating Authority could not have declared title in the trademark “Gloster” in favour of the appellant SRA. The issue of the title of the Trademark was not “in relation to the insolvency proceedings”, on the facts of the present case. As is clear from the statement in the plan filed by the SRA and approved by the COC, after setting out the series of transactions between FGIL and GCL, all that the SRA does is to assert that the transfer is mala fide and was barred by law. It also records its belief and understanding that the trademark is the lawful property of the Corporate Debtor. It is further alleged that the agreement is between related parties, though the steps available under the IBC to have it neutralized, have not been resorted to. The RP has an explanation which has been set out hereinabove, namely, that the RP became aware of the agreements only in April 2019 by which time it was too late to subject the agreements to a forensic audit. According to the RP, the net result was that the agreements could not be forensically audited. The RP further submitted that rigorous scrutiny of documents and other exercises are involved for filing appropriate applications under Sections 43 and 45 and because of the delayed disclosure, he was prevented from doing the same. In this case, while adjudicating the application of GCL alongside the application of the Resolution Professional for approval of the plan, by a sidewind as it were, the NCLT had recorded a finding that on the peculiar facts it was not able to shut its eyes or ignore the material on record to legitimize the transaction of assignment. Thereafter, the NCLT found that the Assignment Deed dated 20.09.2017 being within the period of two years preceding the commencement of insolvency, was hit by Section 43 and being undervalued, it would be hit by Section 45(2)(b). The findings of the NCLT are perverse and in gross violation of the principles of natural justice and beyond the scope of the enquiry as far as the present case is concerned. The enquiry was primarily on the approval of the plan and on the application of GCL. The NCLAT has set aside the finding by holding that specific material was required to be pleaded if a transaction is sought to be brought under the mischief of Sections 43, 45, 46, 47 or 66. The NCLAT has recorded a further finding that it would be expected of any Resolution Professional to keep such requirements in view while making a motion to the Adjudicating Authority and, in any case, action could not have been taken without an application moved by the Resolution Professional. The finding of the NCLT that the assignment could be neutralized in the present matter by resorting to Sections 43 and 45 of the IBC is completely untenable. We make it clear that the observations made hereinabove are only for the purpose of setting aside the finding of the Adjudicating Authority holding that the trademark “Gloster” is the asset of the Corporate Debtor as recorded in para 52 of its order dated 27.09.2019. These observations would not come in the way of any other Court or authority deciding the issue of title to the trademark “Gloster”, if the parties herein litigate upon and those proceedings will be decided on their own merits uninfluenced by these observations. Thus, the appeal and cross appeal are disposed of in the above terms. Issues: Whether the Adjudicating Authority (NCLT), in adjudicating an application under Section 60(5) of the IBC filed by Gloster Cables Ltd., could on the facts of this case declare that the trademark 'Gloster' was an asset of the Corporate Debtor and hence vest title in the Successful Resolution Applicant (Gloster Limited).Analysis: The Court examined the scope of Section 60(5)(c) of the IBC (residuary jurisdiction of NCLT to hear questions of law or fact 'arising out of or in relation to' insolvency proceedings) in the light of the statutory scheme including Sections 14 and 31, and the duty of the Resolution Professional under Sections 18 and 25. Authorities were applied that limit NCLT's jurisdiction to disputes that have a real nexus with the insolvency resolution and to situations where the dispute's resolution is necessary for preserving the corporate debtor as a going concern. The approved resolution plan is binding under Section 31 and its finality cannot be subverted by conferring rights in excess of what the CoC approved. The Court emphasized that avoidance claims under Sections 43, 45, 46 and related provisions require specific pleading, rigorous forensic scrutiny and that natural justice requires that the party against whom avoidance is sought be put on notice. On the facts the approved plan itself recorded rival claims to the trademark and the Resolution Applicant did not pursue avoidance remedies; no RP application under avoidance provisions was filed and the NCLT's declaration of title amounted to altering the approved plan and exceeded the jurisdiction conferred by Section 60(5)(c).Conclusion: The Adjudicating Authority could not have declared title in the trademark 'Gloster' in favour of the Successful Resolution Applicant on the facts of this case; the NCLT's finding that the trademark was an asset of the Corporate Debtor is set aside. This outcome is in favour of the Respondent.