Supreme Court Treatment Of Contested Trademark Ownership During Insolvency

Introduction : In a corporate insolvency resolution process (CIRP) of Gloster Industries Limited (Gloster Limited v. Gloster Cables Limited & Ors), the Supreme Court on January 22, 2026 quashed the finding of the National Company Law Tribunal (NCLT) that the trademark GLOSTER belonged to the corporate debtor. The Court clarified that the residuary jurisdiction of the NCLT under Section 60(5) of IBC is not intended to conclusively resolve a dispute between two or more rival private claimants as to ownership of the trademark, especially when the agreed resolution plan only references competing rights, and does not resolve the same.

The resolution is important for a wide range of players in distressed transactions including resolution applicants, resolution professionals, secured creditors and brand licensees. It clarifies a hazy frontier as the NCLT benches in a number of instances had started to consider contentious intellectual property as fit for summary adjudication along with approval of the resolution plan due to the commercial urgency of closing resolution processes. This article explores the following questions: why is the NCLT unable to conclusively resolve the public-law vs private-law title disputes over trademarks under Section 60(5); what obligations do the resolution applicants now have to be diligent for disputed trademarks; and concludes with a forum-selection strategy for IP disputes involving insolvent companies.

Legal Provisions

A. Section 60(5) and the Residuary Jurisdiction of the NCLT

Section 60(5)(c) of the IBC provides the jurisdiction for the NCLT to entertain or dispose of any question of priorities or any question of law or fact arising out of or in relation to the insolvency resolution or liquidation proceedings of a corporate debtor. On its face, the definition of property in section 3(27) is broad enough to capture intangible assets like a trademark property. It is important to recognize that a mere recognition of a claim over an asset, even in a resolution plan, would not without more be a judicial determination of title to the asset, as Section 30(2) requires a resolution plan to provide for the manner in which the affairs of the corporate debtor are to be conducted.

B. The Trade Marks Act, 1999

The Trade Marks Act, 1999 contains provisions on ownership and assignment of a registered trademark, assignment of a trademark with or without goodwill, rectification proceedings before the Registrar and the appropriate High Court. Such a dispute is normally one of private contractual and statutory rights arising under a specialised regime, and would be determined by a civil court, the Registrar of Trade Marks or the Intellectual Property Division of the relevant High Court and not by a tribunal with restricted jurisdiction under a particular special statute.

Legal Analysis

A. The Nexus Rule: From Embassy Property to Gloster

In Gloster, the Supreme Court's reasoning follows a string of cases which have increasingly limited the scope of Section 60(5) residuary jurisdiction. In Embassy Property Developments Pvt. Ltd. v. State of Karnataka, the Court observed that the NCLT is not an adjudicative forum for assessing and reviewing administrative action, and hence, a decision of a government body in the public law field, in this instance a mining lease, could not be brought within Section 60(5)(c). In Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta, the Court took the opposite view, ruling that the dispute under a power purchase agreement, which arose only when the corporate debtor went into insolvency, is directly connected to insolvency and hence the NCLT's jurisdiction was upheld.

Gloster uses the same test when it comes to a private law title dispute. The trademark had been registered under a deed of assignment dated 2017 which had been executed by Gloster Cables Limited, long before the corporate debtor was admitted as an insolvent debtor in 2018. The Supreme Court made it clear that this question was not a question which arose out of or in relation to the insolvency resolution process; indeed, it was a pre-existing private dispute relating to contractual title, which would have required determination whether the corporate debtor had ever gone into insolvency or not. The Court also observed that the NCLT could not consider the assignment to be preferential or undervalued under Sections 43 and 45 of the IBC without a proper avoidance application, notice and adjudication as such a declaration on the issue without adhering to the due process was "procedurally" unsustainable.

B. Why the Resolution Plan Cannot Substitute for Adjudication

Once approved, a resolution plan prescribed by the Committee of Creditors, approved by the NCLT, becomes a binding charter that regulates the stakeholders. The Court, however, was very clear on the difference between a plan that acknowledges a claim at issue and a plan that settles it. Any subsequent order of NCLT purporting to have the effects of vesting conclusive title in the successful resolution applicant is an impermissible modification of the approved plan, because the NCLT order gives rights that cannot be granted by the approved plan, the constitutionally valid governing charter of the company. In practical terms, this difference is significant, as resolution applicants often apply the plan provisions saying a disputed asset is part of the corporate debtor's assets as if they were a determination of a clean title, whereas they are actually a description of a contested asset passed down during the corporate's acquisition.

C. The Boundary Between Insolvency Jurisdiction and Trademark Adjudication

The doctrinal line that is drawn can best be explained as institutional competence, rather than just the subject matter itself. The NCLT is a creature of a special statute, which has been set up to deal with the time-bounded resolution of a financial distress of a corporate debtor and does not have the specialised procedural apparatus of detailed pleadings, discovery, and expert evidence on the use of a trademark or goodwill that a genuine ownership contest requires. A trademark ownership dispute between two independent commercial claimants, especially if predating the insolvency, based on contracts (including technical collaboration agreements, licence agreements and deeds of assignment) that are separate from the company's financial affairs, is a type of private law dispute. The mere fact that one of the claimants is in the process of CIRP does not make it an ordinary title dispute.

Practical Implications for Resolution Applicants: Diligence for Disputed Brands

For resolution applicants, the implications of Gloster will be that they will not be able to use a resolution plan as a trademark due diligence substitute. Where the target corporate debtor's brand value is a material part of the applicant's bid, they should ensure that they verify that the trademark is registered and is currently owned by the target corporate debtor as per the records of the Registrar of Trade Marks, and that they review all the assignment, licensing and collaboration agreements entered by the corporate debtor with regard to the trademark, especially in the recent past, prior to the insolvency commencement date, and determine whether any such assignment may be a preferential, undervalued or fraudulent transaction under the IBC (Sections 43-49), and whether the resolution professional has filed or is filing an avoidance application for each such assignment, and treat any such resolution plan that merely records a rival claim, but does not eliminate it, as an unresolved contingent liability, and not a clean asset. The applicants should also check if any actions are currently pending in a civil court, Registrar of Trade Marks or a High Court IP Division before the successful applicant in respect of the mark, as these actions will continue in case of a successful application and may impact the successful applicant (even if the plan itself characterizes the asset as a mark).

Forum-Selection Strategy for IP Disputes Involving Distressed Companies

• Endorsing Section 60(5) as a solution to a trademark title conflict should not be done without filing or maintaining the underlying ownership claim in the relevant civil court or the Intellectual Property Division of the High Court, given the absence of jurisdiction in the NCLT to finally determine a trademark title conflict.

• In a resolution plan where a competing claimant has already commenced a civil action or rectification application for the mark, then make a specific statement that the civil action or rectification application is unresolved and not a settled position.

• Apply Section 60(5) only for a question that genuinely arises in the context of insolvency, like whether the moratorium under Section 14 renders it impossible for a licensor to terminate a trademark licence, as is found in Gujarat Urja.

• Where an assignment or licence is suspected to be to the detriment of the other party, ensure that the resolution professional makes a proper avoidance application pursuant to Sections 43 to 51, and not seeks an incidental declaration on an unrelated application.

• Prior to bidding, request a Freedom to Operate opinion and a title opinion for any brand that is a material part of the enterprise value; a material part of the enterprise value is a brand with some degree of unresolved assignment or a history of assignment/lacking title.

• Include contractual protections in the resolution plan, in such a manner as an indemnity or escrow arrangement, or a consideration of a price hold-back based on the outcome of any pending or reasonably anticipated trademark litigation.

• Once the plan is approved, continue to litigate or pursue an NCLT of the trademark title question separately, not as part of the NCLT approval of the plan.

Conclusion

Gloster explains that, although the IBC's resolution system may on the surface look like it could be used for final resolution of contentious intellectual property rights, the resolution itself was never intended to be used for this purpose. The causation of NCLT jurisdiction is direct and proximate nexus between the insolvency process and the dispute, rather than just on the ground that the disputed asset is on the corporate debtor's balance sheet, and the judgment aligns with the trend of the last few years. For resolution applicants, the lesson is that the brand value built as part of a resolution plan is as safe as the underlying title, and where there is a dispute over the title, there is the same dispute over the brand value.

Author: Prince Lucky Jain in case of any queries please contact/write back to us via email to content@khuranaandkhurana.com or at  Khurana & Khurana, Advocates and IP Attorney