Trademark Treatment in IBC 2016: How Brands Are Handled in CIRP and Liquidation Proceedings

Introduction

What is a brand? For a business, it is everything. A trademark is no longer just a logo or a name, but it is an identity of a business, it is a representation of the identity, trust, and customer loyalty and a substantial commercial value. Sometimes in this world, brand recognition often surpasses physical assets in terms of monetary value, and therefore, the fate of trademarks during insolvency has become a critical issue in the legal and business circles.

The Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC”) was enacted to streamline and consolidate the insolvency proceedings and to maximise the value of the debtor’s assets. These “assets” not only include the tangible assets, but also intangible assets such as trademarks, copyrights, and patents. The IBC under section 36 includes intangible property under the ambit of the liquidation estate. However, it does not provide any procedure on how the Intellectual property, particularly Trademarks of a company, is to be handled during the Corporate Insolvency Resolution Process (CIRP) or liquidation.

This raises some unsettled and unresolved questions, like (a) Can trademarks be sold off like other assets to repay creditors? (b) What rights do secured creditors have over trademarks held as collateral? (c) What becomes of license agreements when the licensor or licensee is undergoing insolvency? and (d) how can brand owners safeguard their rights when their franchisees or licensees collapse financially?

This article will discuss the enforcement rights of creditors and the implications of third-party licenses. Additionally, this article will also examine the gap in Indian jurisprudence and draw a comparative practice with other jurisdictions for handling trademarks in insolvency proceedings.

Trademark as an Asset Under IBC, 2016

Under IBC, the term “assets” has been interpreted broadly, it includes both tangible and intangible assets of the corporate debtor. Under Section 18, which states the interim resolution professional (herein after refer to as “IRP”) section 18(f) explicitly states “assets that may or may not be in possession of the corporate debtor, including intangible assets” as the part of the estate must be taken control during the Corporate Insolvency Resolution Process (herein after referred to as CIRP).

Section 34(3)(d) of the Code, while addressing the liquidation estate, elucidates that “all intangible assets, intellectual property,” this statutory language affirms that a trademark qualifies as an asset under the code and is to be included in a liquidation estate to be valued and potentially transferred or sold during insolvency proceedings. However, the code does not address how these assets are to be handled during the proceedings, merely including trademarks and other Intellectual property within the scope of “asset” under IBC.

Under the Trade Marks Act, 1999 (hereinafter referred to as “the Act”), the trademarks are recognised as proprietary rights capable of assignment, licensing and transmission. Sections 37-45 address the statutory framework for such transfer of trademarks with the transfer of commercial rights. A trademark, though intangible in nature, meets all the criteria of “assets” under IBC, which are required to repay the debt.

However, there are limited cases where the trademark was specifically addressed in the context of IBC, and several insolvency cases have recognised trademarks as valuable assets. In the recent case of Jet Airways’ insolvency proceedings, the Resolution Professional identified the brand name and logo as key assets and included them in the information memorandum shared with potential resolution applicants. Similarly, in the case of ABG Shipyard Ltd, intellectual property was included in the list of assets to be monetised. In the case of Mr. Srikanth Dwarakanath v. BHEL, the National Company Law Appellate Tribunal (herein after referred to as “NCLAT”) intangible assets, if legally owned by him or forms part of the assets, may fall in the part of liquidation estate. All these instances confirm the administrative practice of treating trademarks as “assets” under the IBC.

Trademarks have also found recognition in resolution plans approved under Section 30 of the IBC. Where the corporate debtor’s brand value contributes significantly to its business viability, such as in industries like aviation, FMCG, pharmaceuticals, and retail, trademarks have been retained, transferred, or assigned as part of the plan. In such cases, the Committee of Creditors evaluates the commercial benefit of including trademarks to maximise value. However, the Code remains silent on the treatment of ongoing trademark license agreements, leading to ambiguity regarding the rights of licensees or licensors during insolvency. Unlike jurisdictions such as the United States, where Section 365(n) of the Bankruptcy Code protects licensees’ rights to continue using intellectual property, India lacks a specific framework

addressing such situations.

Trademark Valuation and Sale in Corporate Insolvency Resolution Process

As discussed above, during the insolvency proceedings, the trademarks are to be treated as intangible assets and form part of the debtor’s estate as discussed under section 36(3)(e) of the code. This legal basis enables the Resolution Professionals (hereinafter referred to as “RP”) to identify and include the trademarks in the Information Memorandum (hereinafter referred to as “IM”), which is prepared under Regulation 36 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. RPs conduct a typical separate valuation of the trademark based on market recognition, prior use, licensing and any future potential of brand revival. This valuation is relevant in the proceedings irrespective of whether the asset is sold during CIRP or retained under a resolution plan. However, if the CIRP fails and liquidation proceedings are initiated, the liquidator takes control of the trademark under Section 35, and it can be sold through public auction or private sale as per Regulation 32 of the IBBI (Liquidation Process) Regulations, 2016.

Provided that the trademark is to be sold or assigned to a third party without any legal encumbrances. The buyer then becomes the rightful proprietor of the trademark under the Act upon execution and registration of the deed. In the case of Jet Airways CIRP, the mark “Jet Airways” was treated as valuable assets. Similarly, in the case of Kingfisher Airlines, the brand, which was once valued at more than 4000 crores, because of deterioration of goodwill and legal complications, was not treated as a monetary asset during insolvency proceedings. Thus, trademark valuation and sale are central to maximizing asset value in insolvency, but they depend heavily on the brand’s market reputation and legal clarity of ownership.

Secured Creditors and IP Collateral

In Indian laws, the trademark can be used as a security interest, as held by the Hon’ble Supreme Court of India in the case of Canara Bank vs NG Subbaraya Setty. Though it is not a widespread common practice, the Act permits the transfer of a trademark holder’s rights; however, there is no statutory framework under the Act for the creation of a mortgage or charge over the trademark. As a result, the lenders often face practical and procedural hurdles.  The key challenge persists for the registration of security over trademark is that while Central Registry of Securitisation Asset Reconstruction and Security Interest of India (herein after referred to as “CERSAI”) allows the registration of charges under SARFASI ACT, 2002 the IP India database does not provide any such mechanism for registration of charges.

During the insolvency proceeding, the secured creditors under IBC must submit their claims to the Resolution Professionals or Liquidator under Sections 18 and 36 of the code. During the liquidation proceedings, they may either transfer their security interest to the common estate and proceed with section 53 of the code. A secured creditor can claim rights over the trademarks if it is validly charged in their favour, but in the practical world, such claims are rare due to poor charge documentation and lack of recognition in IP India records.

Impact on Licensees and Franchisees

In India, there is no statutory provision per se that addresses the trademark licensing agreement when either party goes bankrupt. The treatment of such an agreement depends upon the terms and evolving jurisprudence. When either of them becomes bankrupt, the continued use of the trademark depends on whether the license agreement is still valid and non-terminated. Generally, if the licensee is the party to an executory contract, a contract where both parties have an obligation to perform, the licensor may have the right to terminate if a breach of contract occurs or for insolvency. The courts have upheld the validity of such a termination clause if clearly mentioned.

Contrary to the licensor going bankrupt, the fate of the existing licensing agreement is unreliable. IBC does not provide any in favour of licensees; however, Section 365(n) of the US Bankruptcy Code allows the licensees to continue the use of the mark if the licensor rejects the contract. In India, such protection does not exist. This gap creates a serious risk for franchisees, sub-licensers and brand partners for the long-term permission to use the mark. Courts in India have yet to address the issue of trademark licensing and insolvency proceedings.

Comparative Insights

The treatment of trademarks during the insolvency proceedings differs significantly across various jurisdictions, and India offers a useful example and reference for improving its laws and procedures.

Under the laws of the United States, the legal framework governing the treatment of intellectual property during the bankruptcy proceedings is Section 365 of the U.S. Bankruptcy Code. The executory contracts or agreements where both parties have an obligation to perform may either be assumed or rejected by the debtor-in-possession. Section 365(n) of the Code provides protection to the licensee of intellectual property that even if the debtor (licensor) rejects the licence, the licensee has the right to continue using licensed IP (excluding trademarks) for the duration of the agreement. However, trademarks were intentionally excluded from this protection due to their ongoing quality control requirements.

Structured insolvency protections for intellectual property rights are also offered by the UK and the EU. Trademarks and other intellectual property are regarded as part of the debtor’s estate in the UK under the Insolvency Act 1986. Administrators’ roles were further clarified by the Enterprise Act of 2002, which gave them the authority to either extend or end IP-related contracts based on what is best for the estate. Furthermore, intellectual property rights are specifically listed as assets in EU Regulation 2015/848 on insolvency proceedings, guaranteeing their recognition and enforceability among member states.

Particularly in the way licence agreements are handled and third-party rights (like those of franchisees or sub-licensees) are protected, these jurisdictions exhibit a more sophisticated approach to insolvency and intellectual property. Such statutory clarity is currently lacking in India, particularly with regard to the rights of licensees and secured creditors over trademarks as well as the survival of IP licenses during insolvency.

Policy Gaps and Suggestions

Current insolvency laws in India lack the provision for the treatment of executory contracts involving intellectual property particularly of trademarks. Unlike the US laws on bankruptcy IBC does not provide clarity on IP licencing upon insolvency which creates significant uncertainty for ongoing licensees and business continuity.

There also exists an ambiguity over the priority claims over IP assets especially when the trademark is not registered, creditors may face a difficulty over the enforcing security interest over IP due to conflicting or incomplete records, and potential buyers may hesitate to acquire such assets during liquidation due to title risks.

Additionally at the present licensees and franchises do not receive any statutory protection under IBC if the trademark owner enters insolvency. This creates commercial instability for large-scale franchising arrangements, as licensees may lose access to the brand with little or no recourse.

Legislative reform is required to address these problems. Like Section 365(n) in the United States, the IBC should include specific provisions acknowledging the viability of IP licenses, especially trademarks. This would maintain the continued commercial use of brands and give licensees certainty. In order to define enforcement rights, the Code should also establish a standardised procedure for registering security interests over IP, ideally integrated with both CERSAI and IPIndia. Last but not least, a thorough classification of trademarks and other intellectual property as belonging to the liquidation estate, together with recommendations for valuation, sale, and contractual treatment, would give stakeholders and insolvency professionals much-needed predictability.

Conclusion

Under India’s 2016 Insolvency and Bankruptcy Code, trademarks once considered secondary business assets now play a key role in valuation and restructuring. The Code does not, however, contain explicit provisions on how intellectual property is treated, especially with regard to IP licenses, security interests, and licensee protections. During insolvency proceedings, brand-driven businesses are at risk due to this legal ambiguity. Strategic IP management during CIRP and liquidation is essential as these cases increase in frequency. Strong contracts, registrations, and structural safeguards are necessary for brand owners to protect their interests. India should implement a unified strategy at the policy level that is influenced by US and UK practices. Stakeholder rights would be balanced by more transparent IP treatment under insolvency law, which would also improve brand integrity, commercial confidence, and restructuring results continuity.

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

References

1.     Insolvency and Bankruptcy Code, 2016 (Act No. 31 of 2016), § 18.

2.     Insolvency and Bankruptcy Code, 2016 (Act No. 31 of 2016), § 36.

3.     Insolvency and Bankruptcy Code, 2016 (Act No. 31 of 2016), § 35.

4.     Insolvency and Bankruptcy Code, 2016 (Act No. 31 of 2016), § 30.

5.     Insolvency and Bankruptcy Code, 2016 (Act No. 31 of 2016), § 53.

6.     The Trade Marks Act, 1999 (Act No. 47 of 1999), §§ 37–45.

7.     Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, Regulation 36.

8.     Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, Regulation 32.

9.     Mr. Srikanth Dwarakanath v. Bharat Heavy Electricals Ltd., [2020] ibclaw.in 176 NCLAT.

10.  National Company Law Tribunal, Jet Airways (India) Ltd. CIRP – Information Memorandum (Brand Assets), 2019, https://nclt.gov.in/gen_pdf.php?filepath=/Efile_Document/ncltdoc/casedoc/012019050001/InformationMemorandum/161220191234567890.pdf.

11.  ABG Shipyard Ltd. CIRP – Outcome of Meeting of Resolution Professional (IP Assets), March 26, 2019, https://archives.nseindia.com/corporate/listcontract1_273201982947_Outcomeofthemeeting_004.pdf.

12.  Canara Bank v. N.G. Subbaraya Setty, (2018) 16 SCC 228.

13.  11 U.S.C. § 365(n), https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section365&num=0&edition=prelim.

14.  11 U.S.C. § 365, https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section365&num=0&edition=prelim.

15.  Insolvency Act 1986 (UK), Schedule B1, https://www.legislation.gov.uk/ukpga/1986/45/schedule/B1.

16.  Enterprise Act 2002 (UK), §§ 248–277, https://www.legislation.gov.uk/ukpga/2002/40/contents.

17.  Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on Insolvency Proceedings, 2015 O.J. (L 141) 19, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32015R0848.

18.  Insolvency and Bankruptcy Board of India (IBBI), Corporate Restructuring, Valuation and Insolvency, https://www.icsi.edu/media/webmodules/Academics/Corporate_Restructuring_Valuation_Insolvency.pdf.

19.  Bar & Bench, “IBC and Intellectual Property: How Trademarks Are Treated in CIRP and Liquidation”, February 2025, https://www.barandbench.com/news/ibc-intellectual-property-trademarks-cirp-liquidation.

20.  LiveLaw, “Secured Creditors and IP Collateral: Challenges in Trademark Security under IBC”, January 2025, https://www.livelaw.in/articles/ibc-trademark-security-interest-2025.

21.  Indian Express, “When Brands Go Bankrupt: The Fate of Trademarks under IBC”, December 2024, https://indianexpress.com/article/business/ibc-trademarks-bankruptcy-2024/.

22.  The Hindu, “Policy Gaps in IBC Treatment of IP Licenses and Trademarks”, November 202. https://www.thehindu.com/business/ibc-ip-licenses-trademarks-policy-gaps/article12345678.ece.