The Trademark That Insolvency Couldn't Buy: What Gloster Does to the IBC's ‘Clean Slate’ Doctrine

Introduction : In a judgment delivered on 22 January 2026, in the case of Gloster Limited v. Gloster Cables Limited & Ors., a bench of Justices J.B. Pardiwala and K.V. Viswanathan allowed cross-appeals against an order of the NCLT. The ground was lack of jurisdiction to decide the disputes under Section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016. The most interesting point of this decision is the fact that even a judicial acknowledgement of the "clean slate" concept which is integral to a resolution plan envisaged under the IBC would be impossible when the issue pertains to an intangible property.

It is the facts that make the decision valuable. Fort Gloster Industries Limited (FGIL) had undergone the Corporate Insolvency Resolution Process (CIRP) whereupon Gloster Limited was declared as the Successful Resolution Applicant (SRA). However, the trademark "GLOSTER" which is the very name of the business of the debtor was also owned by a different company, Gloster Cables Limited (GCL), due to a Technical Collaboration Agreement entered into in the year 1995, a Supplemental Trademark Agreement of 2008 and a Deed of Assignment dated 20 September 2017.

An application was filed by GCL under Section 60(5) of the IBC requesting the NCLT to rule that the trademark be excluded from FGIL’s asset pool prior to its plan being approved. The plan was approved by the NCLT, Bench at Kolkata, on 27 September 2019 and while rejecting the application, they went a little further to find that the trademark indeed belonged to FGIL as a preferential or undervalued transaction under Sections 43 and 45 of the IBC despite never having a single avoidance application filed by any resolution professional for that purpose. NCLAT agreed with the NCLT that Section 60(5)(c) vested such jurisdiction but ruled against the finding on merits, favouring GCL. More than six years after approval of the plan, both parties still disputed ownership of the brand name of the product in court.

The Nexus Test 

Section 60(5)(c) of the IBC is the residuary jurisdiction clause, under which the Adjudicating Authority is empowered to adjudicate “any question of law or fact arising out of or in relation to” the insolvency resolution or liquidation of a corporate debtor. It has always been a clause subject to fear of overreach, for a sufficiently liberal interpretation would mean that the NCLT would be a place where the resolution professional could raise any matter that is found to be inconvenient. 

This was already curbed to some extent by the Supreme Court in two prior cases, which are completed by Gloster into a three-part doctrine:

• Embassy Property Developments Ltd. vs. Raman Kumar (2019): The NCLT is barred from using Section 60(5) of the IBC to interfere with the statutory or administrative discretion that another authority enjoys; an example would be a decision taken by a state government about a mining lease renewal.

• Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta (2021): This judgment took this concept to its logical conclusion, and developed a ‘nexus’ test for determining whether a matter is fit for resolution in the NCLT; the dispute must necessarily arise out of the CIRP.

In the context of intellectual property, Gloster (2026) uses that nexus test for the very first time at this level and concludes that trademark ownership, which is a contract-related assignment dispute and took place many years ago before the onset of the CIRP, is not an insolvency dispute just because the trademark falls on the books of the debtor in the process of insolvency. Neither the pronouncement made by the NCLT nor the pronouncement made by the NCLAT was considered by the Court to be wrong, but that it was outside their jurisdiction to pronounce such opinions regarding title. With regard to procedure, another important point raised by the Court, but which has not been much appreciated, is the NCLT's finding regarding the preferential nature/undervaluation of the 2017 transaction which, under Sections 43 to 46 of the IBC, would require the use of a certain procedural channel i.e. avoidance application which was not followed in this case. There is no way that an avoidance conclusion can be drawn by using the backdoor process available under Section 60(5). If one wants to rescind a transaction as preferential, one must plead for it as such.

Why This Is Not Really a Trademark Case

Most of the discussion around Gloster has been confined to the "jurisdiction of IBC." But this does not do justice to the case. The really interesting question which this case throws up but which the Court was not required to decide since it was not asked is what is going to happen to the resolution plan in light of the fact that the asset purportedly transferred under it has not acquired clear title in six years’ time. 

This is where the Gloster case violates the great doctrinal innovation of the IBC, i.e. the "clean slate" doctrine of Essar Steel v. Satish Kumar Gupta (2019) and its progeny, which provides that upon approval of the resolution plan, all non-plan claims are wiped out and the winning applicant of the resolution process is given an asset that is clean of any contingent liabilities, thus giving it a new beginning to enable the bidder to make a truly rational bid.  

However, intellectual property resists such thinking, not for reasons of lack of competency of a certain forum but because of an inherent characteristic having nothing to do with the skill or otherwise of a certain tribunal. "Trademark's characterization as the 'property of the debtor'" is not a statement that will necessarily flow out of an accounting entry or an asset memorandum by the resolution professional. It will be more like a legal determination which has to be made based on chains of assignment, licences and sometimes even registry battles and all this can only happen through civil litigation (or through Trade Marks Registry/IPAB successions). This cannot be done within the time frame of the IBC. The whole structure of the Code, the 330 days' outer time frame, the moratorium and the largely unreviewable commercial decision-making of the CoC has been crafted for unsecured tangible claims. 

The consequence is a risk that needs to be quantified explicitly for resolution applicants along with their diligence teams, conditional intangible assets. The bid winner may get the asset through CIRP, have their plan approved, make the payment and even start running the acquired business, without the core intangible asset in question being finally decided upon by a court over which IBC has no authority to expedite matters. “Clean Slate” will apply only for those financial and operational creditors who fall within the scope of the plan, and not for the prior contested IP title.

What This Means in Practice 

For resolution professionals and bidders, three practical consequences follow directly from the reasoning in Gloster, even though the judgment does not spell them out as instructions: 

1. Due diligence of IP assets has to take place prior to the resolution plan, not after. Once the plan is passed, if there is a dispute regarding trademark, patent, or copyright claim, the resolution applicant cannot seek NCLT intervention to sort things out. If there is such a dispute, it needs to be resolved via regular civil or IP courts, without moratorium protection. The prospective buyers need to do registry searches, assignment chain checks, and licensing agreement reviews as a mandatory pre-bid process for any target where the brand has a major value component for the enterprise, which is true for most FMCG, pharmaceutical, textile, and manufacturing targets.

2. The resolution plans should specifically address disputed IP rights, rather than absorb them in silence. The best approach would not involve NCLT adjudicating ownership of such rights (as was made impossible by Gloster), but structuring the plan in such a way as to allow a carve-out of disputed IP and placing it in some escrow-like mechanism – an indemnity, price holdback or conditional license back pending resolution of the ownership question outside the process. It turns an indefinite legal risk into a contractual risk, which the Committee of Creditors is well-equipped to negotiate, even though the NCLT is not well placed to adjudicate.

3. The resolution professionals should employ the avoidance provisions as a pleading remedy, not as an incidental finding. The procedural admonishment of the Court that the preferential transaction determination could not be incorporated into an order under Section 60(5) in the absence of a Section 43-46 application serves as a general warning to RPs, not limited to trademark cases. Every transaction the RP seeks to avoid as preferential, undervalued, or fraudulent needs to be pleaded as such, with the notice and response provided to the counterparty for that precise claim.

The Larger Issue remains unsolved

The Gloster case will probably be cited, in the future, as the decision in which the Amit Gupta nexus test was applied to IP cases. This is correct but incomplete. The real legacy of this case lies in its diagnosis, namely that this case identifies the disconnect between a statutory scheme geared toward speed and finality, and an intellectual property scheme geared toward evidence-based rigour and slow-motion title certainty. The IBC cannot build upon finality on a process over which it does not have jurisdiction, no matter how cleverly it attempts to draft its Section 60(5). 

Given an environment that has spent nearly a decade extolling the swift pace of Indian insolvency proceedings, a reality check in the form of Gloster serves as an important reminder that not all assets can be resolved at the pace that the Code would like them to be, and ignoring that fact only shifts the conflict and the liability to the buyer of the business.

Author: Shaona Kundu 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

References

1. Gloster Limited v. Gloster Cables Limited & Ors., 2026 INSC 81 (Civil Appeal Nos. 2996 of 2024 and 4493 of 2024), decided 22 January 2026

2. Embassy Property Developments Pvt. Ltd. v. State of Karnataka & Ors., (2020) 13 SCC 308.

3. Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta & Ors., (2021) 7 SCC 209.

4. Essar Steel India Ltd. v. Satish Kumar Gupta & Ors., (2020) 8 SCC 531.

5. The Insolvency and Bankruptcy Code, 2016, ss. 43-46, 60(5).