TaxTMI 
TaxTMI 
When Trademark Ownership Controversies Fall Outside Insolvency Adjudication: Application of the 'Nexus with Insolvency' Requirement under Section 60(5)(c)
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....n applicant under an approved resolution plan. The adjudicating authority, while dealing with an application moved by the trademark claimant under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, made findings on title and also treated certain transactions as avoidable (preferential/undervalued) despite the absence of a dedicated avoidance application. In appeal, the appellate tribunal set aside the adjudicating authority's conclusions on title and avoidable transactions, while also opining on the nature/effect of a contingent assignment arrangement. The Court held that, on the facts, the adjudicating authority could not have declared title to the trademark in favour of the successful resolution applicant while exercising j....
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....he mark, (ii) a subsequent trademark licence arrangement providing usage rights and a first right to purchase, (iii) a loan transaction where a charge was created over the trademark, (iv) a supplemental trademark agreement providing for assignment contingent upon discharge/vacation of a restraint order, (v) a later deed of assignment recording an absolute assignment, and (vi) recording of the claimant as registered proprietor by the trademark registry. The claimant also contended that treating the trademark as the corporate debtor's asset would contravene the Trade Marks Act, 1999. The resolution professional, the committee of creditors, and the successful resolution applicant opposed the application. Their objections included that a r....
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....application moved by the resolution professional. It also made an observation that the title vested with the claimant under the supplemental agreement subject to the contingency. Both sides approached the Court: the successful resolution applicant challenged the appellate tribunal's interference with the adjudicating authority's conclusion on the trademark being an asset of the corporate debtor; the trademark claimant challenged the appellate tribunal's jurisdictional conclusion insofar as it upheld jurisdiction of the adjudicating authority to pronounce on title. Issue Involved Whether, on the facts, the adjudicating authority could, while exercising jurisdiction under Section 60(5)(c) of the Insolvency and Bankruptcy Code, ....
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.... the successful resolution applicant's position as a "belief/understanding" while recognising rival claims, the adjudicating authority could not, through disposal of a third party application under Section 60(5), confer better rights than those reflected in the plan or effectively modify/alter the plan. The Court also disapproved the adjudicating authority's approach of treating the assignment as hit by Section 43 and Section 45 (including Section 45(2)(b)) without an avoidance application and without adequate pleadings and notice. Such findings were characterised as perverse, in gross violation of principles of natural justice, and beyond the scope of the enquiry while deciding the trademark claimant's Section 60(5) applicatio....
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.... private transactions, alleged restraint orders, assignment mechanics under trademark law, and competing factual narratives--issues which did not become "in relation to insolvency" merely because the corporate debtor was in CIRP and the trademark was mentioned in the plan. 3. Sanctity and finality of the approved resolution plan under Section 31(1). Once approved, the plan binds stakeholders. The Court treated the plan as the operative charter. Where the plan itself recorded rival claims and did not assert an undisputed title position, the adjudicating authority could not, while approving that very plan, grant a declaration that effectively improved the successful resolution applicant's title position. Any such conferment of additional....
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.... under Section 14(1)(b) with subsequent steps, and allegations of mala fides and concealment. These matters were held to be beyond what could appropriately be decided within Section 60(5) proceedings in the fact matrix presented. Practical Relevance 1. Resolution plan drafting: treat disputed assets with precision. Where an asset (including intellectual property) is subject to rival claims, recording it in the plan as a matter of "belief/understanding" and acknowledging competing positions can later constrain any attempt to obtain a title declaration within CIRP. Practitioners should ensure that the plan's treatment of disputed assets aligns with available procedural remedies under the Code. 2. Avoidance actions: procedure is substan....