Supreme Court Ruling: NCLT Lacks Jurisdiction to Adjudicate Trademark Title Disputes Dehors Insolvency Process

In a significant judgment clarifying the boundaries of the National Company Law Tribunal’s (NCLT) jurisdiction, the Supreme Court of India has ruled that the NCLT cannot adjudicate complex questions regarding the title of a trademark that arise independently of the insolvency proceedings. The Apex Court held that while Section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016 (IBC) grants the NCLT jurisdiction over issues arising out of insolvency, this power does not extend to determining ownership disputes where rival claims exist dehors (outside) the Corporate Insolvency Resolution Process (CIRP).

The judgment was delivered in the case of Gloster Limited Vs Gloster Cables Limited & Ors., settling the conflict between a Successful Resolution Applicant (SRA) and a third-party claimant regarding the ownership of the "Gloster" brand.

Factual Matrix of the Dispute

The controversy centered around the ownership of the trademark "Gloster." The Corporate Debtor, Fort Gloster Industries Limited (FGIL), underwent CIRP. Gloster Limited, the Appellant, emerged as the Successful Resolution Applicant (SRA). However, a dispute arose regarding whether the trademark was an asset of the Corporate Debtor or belonged to a third party, Gloster Cables Limited (GCL).

Historical Context of the Trademark

  1. Technical Collaboration (1995): GCL entered into an agreement with FGIL to use the "Gloster" trademark for a royalty fee.
  2. Insolvency of FGIL (Pre-IBC): FGIL became a sick company and was referred to the Board for Industrial and Financial Reconstruction (BIFR) under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA).
  3. License and Loan Agreements: Over the years, GCL continued to use the mark under license. In 2006, FGIL hypothecated the trademark to GCL to secure a loan.
  4. Supplemental Agreement (2008): An agreement was executed to assign the trademark to GCL, contingent upon the vacation of BIFR restraint orders.
  5. Assignment Deed (2017): Following the repeal of SICA, a Deed of Assignment was executed on September 20, 2017, purportedly transferring the ownership of the trademark to GCL.
  6. CIRP Initiation (2018): The insolvency process for FGIL commenced on August 9, 2018.