TaxTMI 
TaxTMI 
TaxTMI 
2026 (1) TMI 1165
X X X X Extracts X X X X
X X X X Extracts X X X X
....n Gupta, AOR, Mr. Krishna Kumar, Adv., Ms. Nandani Gupta, Adv. JUDGMENT K.V. VISWANATHAN, J. 1. These two appeals arise from the judgment of the National Company Law Appellate Tribunal [for short "NCLAT"], Principal Bench, New Delhi dated 25.01.2024 in Company Appeal (AT) (Ins.) No. 1343 of 2019. While Civil Appeal No. 2996 of 2024 is filed by Gloster Limited - the Successful Resolution Applicant (hereinafter called the "SRA"), Civil Appeal No. 4493 of 2024 is filed by Respondent No.1-Gloster Cables Limited (hereinafter called "GCL"), challenging the findings in the impugned judgment insofar as it held that the Adjudicating Authority had the jurisdiction to declare on the aspect of title to the trademark "Gloster". 2. It must be pointed out that the National Company Law Tribunal [for short "NCLT"], Kolkata Bench, Kolkata while dealing with C.A. (IB) No. 713/KB/2019, incidentally filed by GCL, recorded the conclusion that though the application filed by GCL is liable to be dismissed, the trademark "Gloster" was the asset of the Corporate Debtor. The consequence of the holding was that the appellant-herein who was the SRA having taken over the Corporate Debtor became enti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fying that, in approving the CIRP, no presumption may be drawn as to any authorization or right emerging from the aforesaid approval that gives the right to the Corporate Debtor, or the successful H1 to continue to use the Trade Mark "Gloster" or the term "GLOSTER" as part of the Corporate Debtor's corporate name; d) To pass an ex-parte interim order in terms of prayer (a), (b) and (c); e) Any other relief or reliefs may be granted as this Hon'ble Tribunal deem fits." It will be noticed that the prayer of GCL was that in any Resolution Plan that the Adjudicating Authority may approve, it may exclude the rights of the SRA in the trademark "Gloster". This was on the premise that the trademark "Gloster" was not an asset of the Corporate Debtor-FGIL. 4.2 This application was filed on 28.05.2019. In this application, it was averred as under:- i) That the application was filed by GCL, being the proprietor/owner/holder of registrations for the trademark "Gloster" and its variants bearing No. 690772, 1980867, 3022764 and 3022775 in Class 9. Of this, the present case is concerned with No. 690772. ii) That GCL entered into a Technical Collaboration A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....odwill in relation to the said trademark "Gloster" without any further action on the part of the assignor. x) That on 17.09.2018, (The CIRP commenced on 09.08.2018) the GCL was recorded as the registered proprietor of the trademark "Gloster" bearing No. 690772 in Class 9 by the trademark registry. xi) That GCL enjoys the statutory and proprietary rights to the said trademark. That the trademark "Gloster" does not form part of the assets of the Corporate Debtor and, as such, GCL has exclusive rights. That if the Resolution Plan assumes ownership of the trademark "Gloster" by FGIL, the same would contravene the provisions of the Trade Marks Act, 1999. 4.3 This application was objected to by the Resolution Professional, the Committee of Creditors and the SRA by contending that: - i) FGIL was referred to BIFR in the year 2001 and vide order dated 10.09.2001, the BIFR admitted the reference, and directed FGIL (Corporate Debtor) not to dispose of any fixed or current assets of FGIL without the consent of its co-creditors and the BIFR. Hence, Supplemental Agreement dated 15.07.2008 had no legal effect. It was submitted that any transfer made in violation of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Companies Act, 2013 made it clear that they were a part of the assets of the Company; iii) Notwithstanding the repeal of SICA and the abatement of proceedings any violation in breach of the restraint order when in force, would not render the injunction infructuous and the violation of the injunction would render the assignment invalid. That the only deed executed before passing the order of injunction was the Technical Collaboration Agreement of 02.05.1995. However, the period under the said agreement had expired within eight years of the execution and the renewals happened when the prohibitory order of restraint was imposed. iv) That in view of Section 43 (2)(a) read with Section 46 (1)(2), the Assignment Deed dated 20.09.2017, being within the period of two years preceding the insolvency commencement, would be hit by Section 43 and GCL cannot claim absolute title over the trademark. That the transaction is an undervalued transaction and is hit by Section 45(2)(b) of the IBC. v) Even in the absence of an application by the Resolution Professional under Sections 43, 44, 45 and 46 of the IBC, the Adjudicating Authority, on the peculiar facts, cannot shut....
X X X X Extracts X X X X
X X X X Extracts X X X X
....equirements of Sections 45, 46, 47 and 66 while making a motion before the Adjudicating Authority. iv) The 5th Meeting of the Committee of Creditors was apprised of the forensic audit report, and the forensic auditor did not find any preferential, undervalued, fraudulent or any wrongful trading transaction. Further, the report did not reveal any related party preferential or fraudulent transactions whatsoever. v) Only on the basis that the trademark was hypothecated for a bigger amount and has been assigned for a lesser amount, it could not be decided that the transaction was undervalued without there being any sufficient material before the Adjudicating Authority. 5. The NCLAT allowed the appeal of GCL (R-1) and set aside the order of the Adjudicating Authority insofar as the dismissal of application No. 71 CA(IB) No. 713 of 2019 is concerned. It is in that scenario that appeal and cross-appeal have been filed before us as pointed out hereinabove. CONTENTIONS OF THE PARTIES: - 6. We have heard Mr. Shyam Divan, learned Senior Advocate for the appellant-SRA, Mr. Ranjit Kumar, learned Senior Advocate and Mr. Chander M. Lall, learned Senior Advocate, for the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cial year ending 31.03.2018 under the License Agreement dated 29.07.2004. 7.5 According to the learned Senior Counsel, if a party genuinely understood that the assignment took effect from 01.01.2016, there would be no reason for GCL to pay the License Fee to FGIL, which was an associate, for the Financial Year ending 31.03.2018. According to the learned Senior Counsel, the contention that trademark stood vested irrespective of the subsequent registration was an afterthought, contrary to Clause 8 of the Assignment Deed of 20.09.2017 and contrary to its own conduct during the contemporaneous period. 7.6 Learned Senior Counsel contends that GCL(R-1) waived its right under Section 45 of the Trade Marks Act to contend that the trademark should vest on the date of assignment. Learned Senior Counsel contended that the unregistered Assignment Deed could not have been admitted in evidence as proof of title to the trademark. 7.7 Learned Senior Counsel defended the order of the Adjudicating Authority on the issue of exercise of power under Sections 43, 44 and 45 of IBC even in the absence of an application by the Resolution Professional. 7.8 Learned senor counsel contends that the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 8.4 Learned counsel for the RP further contended that the erstwhile management of FGIL as also GCL never disclosed the existence of the purported agreement dated 15.07.2008 as well as other agreements and the same were deliberately concealed and suppressed by the aforesaid parties until the very last stage of the CIRP. According to the learned counsel, this was done to avoid scrutiny by the Forensic Auditors. 8.5 Learned counsel submits that the agreement was disclosed and shared with the RP only in April, 2019 by way of reply dated 01.04.2009 to the email of RP dated 20.03.2009. Further, the copies were made available to the RP only on 03rd/04th April, 2019. This disclosure to the RP was two days before the resolution plans were due for submission, i.e., 06.04.2019. The RP did disclose the purported agreements and provided the copies of the same to the prospective applicants however, it was too late to be included in the Forensic Audit Report which was submitted by the auditors on 10.04.2019. It was for this reason that Forensic Auditor did not have occasion to examine, analyse, consider and include the said documents in the Forensic Audit Report. 8.6 Learned counsel for th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... insolvency of FGIL" and submitted that the Adjudicating Authority ought not to have passed an order purportedly vesting title in the SRA with regard to the trademark "Gloster". 9.1 Learned senior counsel invited our attention to the statement in the plan to contend that the SRA cannot get more than what is in the approved plan and under the guise of adjudicating the application of GCL a plan approved by COC recognizing existence of rival claimants cannot be modified. 9.2 Learned senior counsel submitted that the BIFR proceedings particularly, the proceedings dated 26.05.2008 indicate that the aspect of GCL using the trademark "Gloster" on account of the Technical Collaboration Agreement with FGIL and the trademark agreement as well as the loan agreement were in the public domain as reflected in the BIFR proceedings. 9.3 Learned senior counsel contended that the FGIL's manufacturing unit being shut down was reflected in the information memorandum and it is undisputed that FGIL never used the trademark "Gloster" ever since 2003. 9.4 Learned senior counsel further drew our attention to para 6.1 of the information memorandum where GCL was shown as a financial creditor to t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....submitted that the appellant has in fact filed an application under the said provision. PENDENCY OF CIVIL SUIT: - 9.8 The SRA has drawn attention to the fact that GCL has filed a suit against the Corporate Debtor being CS No. 43 of 2019 before Commercial Court, Secunderabad inter alia with respect to trademark "Gloster" belonging to the Corporate Debtor. GCL also filed an application for interim injunction vide IA No. 754 and 755 of 2019, seeking an injunction against Respondent No. 3 and the Appellant from using the trademark "Gloster". The application for injunction was dismissed by the Commercial Court on 27.12.2019, which was upheld by the High Court of Telangana vide order dated 14.02.2022. The Special Leave Petition against the High Court order dated 14.02.2022 was also dismissed by this Court on 12.05.2022. QUESTION FOR CONSIDERATION:- 10. Primarily, the question that arises for consideration is, whether the Adjudicating Authority could have, on the facts of the present case, in the process of adjudicating the application of GCL, recorded a finding that the trademark "Gloster" was an asset of the Corporate Debtor (FGIL) and consequently of the SRA (the appellant)....
X X X X Extracts X X X X
X X X X Extracts X X X X
....003. Further the said agreement inter alia includes as below. A. The consideration for the assignment being a sum of Rs. 10,00,000/- (Ten lakhs) has already been paid by the Assignee to the Assignor under the Supplemental Trade Mark Agreement on 15th July 2008 executed between GCL & FGIL. B. The Assignee shall be responsible and liable to take appropriate steps with the Trade Mark authorities for recording the change of the ownership of the Trade Mark in the statutory records at its own cost and expenses. However, the Assignor agrees to assist and execute at the cost of the Assignee, with furnishing such information, papers, declarations and documents as may be required under the law to be filed with Trade Mark Authorities for recording such change of ownership of the Trade Mark. C. The Assignor its successors and/or assigns or any person claiming under them or in trust or in their behalf shall henceforth have no right, title, interest in the said Trade Mark or any part thereof and the Assignee shall be the legal and beneficial owner of the Trademark vested with exclusive right to deal with the same in the manner it deems fit and proper at its sole discre....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ns of IBC to set at naught the agreements in question. It is also not in dispute that the RP did not move any application for avoidance of any preferential transaction or undervalued transaction or transactions allegedly defrauding creditors. 14. No doubt, 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. 15. Be that as it may, the factual situation is no application was filed and respondent no. 1 was not put on notice about the alleged suspicion shrouding the agreements. 16. The question is with the plan approved by the COC couched in such terms as to recognize rival claimants to the trademark "Gloster", could the fortuitous circumstance of GCL moving an application, result in a declaration of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....approval of resolution plan under this sub-section, satisfy that the resolution plan has provisions for its effective implementation. (Emphasis supplied) It will be noticed that once the resolution plan is approved by the Committee of Creditors and thereafter by the Adjudicating Authority, the plan is binding on the Corporate Debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders involved in the resolution plan. 20. The plan, as approved, is a binding document which would govern the relationship between the stakeholders and on which terms the new management takes over the Corporate Debtor. 21. If in this background, the plan, as approved in the present case, is appreciated it will be clear that the appellant who was a Successful Resolution Applicant (SRA) was fully conscious on the date of submission of the plan about the agreements between FGIL and GCL. The plan records its "belief" and "understanding" that though there was a purported transfer the transfer is mala fide and barred by law. Further, it is their "understanding" that the Trademark is a lawful property of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion seeking a declaration against the Government of Karnataka that a mining lease is deemed valid and sought the execution of a supplemental lease deed by the said Government. The Adjudicating Authority allowed the application, however, the High Court had entertained a writ petition and granted an interim stay of the order of the Adjudicating Authority. The interim order was challenged by the successful resolution applicant in this Court. This Court held that a decision taken by the Government or a Statutory Authority in a matter relating to the realm of public law cannot be brought under the phrase "arising out of or in relation to the insolvency resolution" occurring in Section 60(5)(c). It was also held that the residuary clause of Section 60(5) cannot be taken advantage of, to short circuit judicial or quasi-judicial proceedings. It was further clarified that wherever corporate debtor has to exercise a right that falls outside the purview of IBC, especially in the realm of public law, they cannot, through the Resolution Professional, take a shortcut and go before the Adjudicating Authority for enforcement of such a right. Further, this Court drew attention to Section 25(2)(b) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ty, of the corporate debtor, Section 18(1)(f)(vi) would not have made the task of the interim resolution professional in taking control and custody of an asset over which the corporate debtor has ownership rights, subject to the determination of ownership by a court or other authority. In fact an asset owned by a third party, but which is in the possession of the corporate debtor under contractual arrangements, is specifically kept out of the definition of the term "assets" under the Explanation to Section 18. This assumes significance in view of the language used in Sections 18 and 25 in contrast to the language employed in Section 20. Section 18 speaks about the duties of the interim resolution professional and Section 25 speaks about the duties of resolution professional. These two provisions use the word "assets", while Section 20(1) uses the word "property" together with the word "value". Sections 18 and 25 do not use the expression "property". Another important aspect is that under Section 25(2)(b) of the IBC, 2016, the resolution professional is obliged to represent and act on behalf of the corporate debtor with third parties and exercise rights for the benefit of the corpor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ot be adjudicated and alternatively that the termination was valid. 28. This Court examined the scope of Section 60(5). This Court held that under 60(5)(c) the Adjudicating Authority had jurisdiction to adjudicate disputes, which arise solely from or which relate to the insolvency of the Corporate Debtors. Administrating a note of caution, this Court observed that in doing so the authorities under IBC should ensure that they do not usurp the legitimate jurisdiction of other Courts, Tribunals and fora when the dispute is one which does not arise solely from or relate to the insolvency of the Corporate Debtor. This Court reiterated that nexus must remain with the insolvency of the Corporate Debtor for adjudication of an issue and grant of relief under Section 60(5)(c). On facts, while applying the law, as set out above, this Court in that case found that the Power Purchase Agreement was terminated solely on the ground of insolvency and that in the absence of insolvency of the Corporate Debtor, there would be no ground to terminate the PPA. It was held that the termination was not on a ground independent of the insolvency and that the dispute solely arose out of and related to the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n over matters relating to insolvency, the corporate debtor would have to file and/or defend multiple proceedings in different fora. These proceedings may cause undue delay in the insolvency resolution process due to multiple proceedings in trial courts and courts of appeal. A delay in completion of the insolvency proceedings would diminish the value of the debtor's assets and hamper the prospects of a successful reorganisation or liquidation. For the success of an insolvency regime, it is necessary that insolvency proceedings are dealt with in a timely, effective and efficient manner. Pursuing this theme in Innoventive [Innoventive Industries Ltd. v. ICICI Bank, (2018) 1 SCC 407] this Court observed that : (SCC p. 422, para 13) "13. One of the important objectives of the Code is to bring the insolvency law in India under a single unified umbrella with the object of speeding up of the insolvency process." The principle was reiterated in ArcelorMittal [ArcelorMittal (India) (P) Ltd. v. Satish Kumar Gupta, (2019) 2 SCC 1] where this Court held that: (SCC p. 88, para 84) "84. ... The non obstante clause in Section 60(5) is designed for a different purpos....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tside the realm of IBC. Any other interpretation of Section 60(5)(c) would be in contradiction of the holding of this Court in Satish Kumar Gupta [Essar Steel (India) Ltd. (CoC) v. Satish Kumar Gupta, (2020) 8 SCC 531 : (2021) 2 SCC (Civ) 443]. 173. Although various provisions of IBC indicate that the objective of the statute is to ensure that the corporate debtor remains a "going concern", there must be a specific textual hook for NCLT to exercise its jurisdiction. NCLT cannot derive its powers from the "spirit" or "object" of IBC. Section 60(5)(c) of IBC vests NCLT with wide powers since it can entertain and dispose of any question of fact or law arising out or in relation to the insolvency resolution process. We hasten to add, however, that NCLT's residuary jurisdiction, though wide, is nonetheless defined by the text of IBC. Specifically, NCLT cannot do what IBC consciously did not provide it the power to do. 174. In this case, PPA has been terminated solely on the ground of insolvency, which gives NCLT jurisdiction under Section 60(5)(c) to adjudicate this matter and invalidate the termination of PPA as it is the forum vested with the responsibility of en....
X X X X Extracts X X X X
X X X X Extracts X X X X
....foul of its contractual obligations. There is nothing to indicate that the termination of the facilities agreement was motivated by the insolvency of corporate debtor. The trajectory of events makes it clear that the alleged breaches noted in the termination notice dated 10-6-2019 were not a smokescreen to terminate the agreement because of the insolvency of corporate debtor. Thus, we are of the view that NCLT does not have any residuary jurisdiction to entertain the present contractual dispute which has arisen dehors the insolvency of corporate debtor. In the absence of jurisdiction over the dispute, NCLT could not have imposed an ad interim stay on the termination notice. Nclat has incorrectly upheld [Tata Consultancy Services Ltd. v. Vishal Ghisulal Jain, 2020 SCC OnLine NCLAT 484] the interim order [BMW Financial Services (P) Ltd. v. S.K. Wheels (P) Ltd., 2019 SCC OnLine NCLT 28273] of NCLT. 31. The narrow exception crafted by this Court in Gujarat Urja [Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta, (2021) 7 SCC 209 must be borne in mind by NCLT and NCLAT even while examining prayers for interim relief. The order of NCLT dated 18-12-2019 [BMW Financial Services (P) Ltd.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ority under order dated 3-6-2019 subject to condition in reference to the rights over the brand name/trade marks of the corporate debtor, the adjudicating authority later decided the application IA No. 155 of 2018 with a direction that the Resolution Professional has established that it is the corporate debtor/DCHL who has an exclusive right to use the trade marks "Deccan Chronicle" and "Andhra Bhoomi" and also made a declaration that the trade marks ("Deccan Chronicle" and "Andhra Bhoomi") belong to the corporate debtor/DCHL under its order dated 14-8-2019. 20. It may be relevant to note that if we look into the resolution plan and particularly Clause 11.12 which has been referred to hereinabove, it is confined to the perpetual exclusive right to use the brands i.e. "Deccan Chronicle" and "Andhra Bhoomi", etc. by the corporate debtor without any financial implications for the purpose of running its business and it was approved by the adjudicating authority under its order dated 3-6-2019, but since it was made subject to the result of pending IA No. 155 of 2018, the adjudicating authority had approved so far as the exclusive rights of the corporate debtor to use trade mark....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cess of insolvency. The framework, as it stands, only enables withdrawals from the CIRP process by following the procedure detailed in Section 12-A IBC and Regulation 30-A of the CIRP Regulations and in the situations recognised in those provisions. Enabling withdrawals or modifications of the resolution plan at the behest of the successful resolution applicant, once it has been submitted to the adjudicating authority after due compliance with the procedural requirements and timelines, would create another tier of negotiations which will be wholly unregulated by the statute. Since the 330 days' outer limit of the CIRP under Section 12(3) IBC, including judicial proceedings, can be extended only in exceptional circumstances, this open-ended process for further negotiations or a withdrawal, would have a deleterious impact on the corporate debtor, its creditors, and the economy at large as the liquidation value depletes with the passage of time. A failed negotiation for modification after submission, or a withdrawal after approval by the CoC and submission to the adjudicating authority, irrespective of the content of the terms envisaged by the resolution plan, when unregulated by ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uppose if instead of the corporate debtor being converted into a profit-making entity, the losses would have increased, can the corporate debtor claim refund of the amount paid ? If we permit the claim not to be part of the resolution plan which has been approved by the CoC and the NCLT to be raised at such a belated stage, it could open a pandora's box and the very purpose of the IBC providing sanctity to the finality of the resolution plan duly approved would stand vitiated." (Emphasis supplied) 37. In view of the above, we have 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 als....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mandatory for transfer of both like in the case of immovable property above the value of Rs. 100 and that since the Trademark "Gloster" was not the property of Corporate Debtor the commencement of CIRP on 09.08.2018 will not vitiate the registration on 17.09.2018. These are highly contentious issues which are far beyond the ken of the Adjudicating Authority as observed by us hereinabove. This we say so, on the facts of the present case. 41. Considerable arguments have been advanced as to how GCL cannot raise the issue on the scope of Section 60(5), when they themselves have filed the application. The said issue need not detain this Court. We are concerned with whether in exercise of power under Section 60(5), Adjudicating Authority could have granted a declaration contrary to the terms of a plan approved by COC and also approved by it in those very terms. We have found against the appellant on that issue. 42. Equally, we do not approve of the approach of the NCLT in falling back on Section 43(2)(a) and 45(2)(b) of the IBC to hold that the Assignment Deed dated 20.09.2017 would fall foul of those provisions. We also do not approve of the finding of the NCLT that while adjudica....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oncerned. The enquiry was primarily on the approval of the plan and on the application of GCL. 48. 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. 49. Equally, as we find from Section 47 of the IBC, the parties mentioned therein while moving an application under Section 47, ought to set out sufficient materials and the party against whom the relief is sought ought to be put on notice of the averments and the relief prayed. Admittedly, that is not the scenario in the present case. In that view of the matter, 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. 50. We make it clear that the observations made hereinabove are only for the purp....