Can the NCLT Exercise Residuary Jurisdiction Under Section 60(5)(c) IBC to Determine Title to a Trademark Contrary to an Approved Resolution Plan?

Summary

Practical Impact

What’s New / What Lawyers Should Note

• Affirms that Section 60(5)(c) IBC cannot be used to resolve private title disputes or third-party IP claims beyond insolvency-related issues.
• Confirms that an approved resolution plan under Section 31(1) is sacrosanct and cannot be supplemented or modified through Section 60 proceedings.
• Clarifies that avoidance of undervalued or preferential transactions under Sections 43 and 45 requires a Resolution Professional’s application with specific pleadings and notice.
• Holds that a creditor’s collateral Section 60 petition in a CIRP cannot trigger an avoidance inquiry without RP invocation.
• Reiterates that title disputes must be litigated in appropriate fora if they fall outside the insolvency scheme; insolvency tribunals cannot usurp public-law or private-law jurisdiction.

Summary of Legal Reasoning

1. The approved resolution plan, as binding under Section 31(1) IBC, recorded rival claims and the SRA’s belief that the trademark assignment might be “mala fide” and barred by law.
2. Section 60(5)(c) confers jurisdiction only over questions “arising out of or in relation to” insolvency resolution; private title claims unconnected to insolvency fall outside.
3. Prior Supreme Court precedents (Embassy, Gujarat Urja, Tata Consultancy) confirmed NCLT cannot adjudicate public-law or third-party property disputes under IBC.
4. A Section 60 petition cannot alter or expand an approved plan’s terms; any direction granting title beyond the plan’s scope amounts to impermissible modification (SREI, Ebix).
5. Sections 43 and 45 avoidance require an RP-filed application with detailed allegations; absent this, summary Section 60 hearings cannot annul assignments.
6. Natural-justice principles demand clear pleading and notice when setting aside transactions; informal petitions by creditors cannot substitute statutory avoidance proceedings.

Arguments by the Parties

Petitioner (Successful Resolution Applicant)

• GCL, having invoked NCLT’s jurisdiction, is estopped from challenging it now.
• Post-moratorium registration of the trademark violated Section 14(1)(b) IBC.
• GCL’s own pleadings on assignment dates are inconsistent with its conduct (license-fee payments).
• Assignment became effective only upon recorded registration (Clause 8); unregistered deeds cannot prove title under Section 45 of the Trade Marks Act.
• NCLT was entitled to examine Sections 43/45 to prevent abuse of insolvency proceedings.

Resolution Professional

• FGIL never disclosed the 2008 and 2017 trademark agreements until too late for forensic audit.
• Audited balance sheets and the information memorandum treated the trademark as FGIL’s asset.
• Concealment of agreements prevented rigorous Section 43/45 avoidance scrutiny.
• Adjudicating Authority rightly examined transactions in April 2019, despite no RP application.

Respondent (GCL, Trademark Owner)

• The Section 60 petition sought only exclusion of trademark rights from the approved plan, not a title verdict.
• Title disputes lie outside Section 60(5)(c)’s insolvency-related ambit and cannot be determined in insolvency proceedings.
• The 2008 Agreement was contingent on BIFR restraint vacatur; ownership vested upon abatement and subsequent assignment deed.
• Trademark assignments operate forthwith under the Trade Marks Act; registration merely records title.
• On CIRP commencement, the trademark was not a corporate debtor asset; moratorium did not affect GCL’s pre-existing title.

Factual Background

Fort Gloster Industries Limited was admitted into CIRP on 09 August 2018. Gloster Cables Ltd., owner of a registered trademark, filed under Section 60(5)(c) IBC to exclude the mark from the debtor’s assets. The RP submitted a resolution plan, approved by the CoC, recording rival title claims and alleging the assignment was barred. NCLT dismissed GCL’s petition, held the mark as an asset, and approved the plan; NCLAT reversed on jurisdiction and title grounds. Both parties appealed.

Statutory Analysis

• Section 31(1) IBC: Approved resolution plans are binding on the corporate debtor, creditors and stakeholders.
• Section 60(5)(c) IBC: NCLT may decide questions “arising out of or in relation to” insolvency resolution, subject to limits.
• Section 14(1)(b) IBC: Moratorium prohibits transfer of corporate-debtor assets post-CIRP commencement.
• Sections 43 & 45 IBC: Provide for avoidance of preferential and undervalued transactions; require RP application and specific pleadings.
• Sections 18 & 25 IBC: Impose duties on the Resolution Professional to preserve assets and act in judicial or quasi-judicial matters.
• Section 47 IBC: Allows creditors or members to challenge undervalued transactions with detailed grounds.
• Trade Marks Act, Section 45: An assignment of a trademark operates immediately; registration is not the sole vesting event.

Dissenting / Concurring Opinion Summary

No separate dissenting or concurring opinions were recorded.

Alert Indicators

• ✔ Precedent Followed – Reaffirms limits on Section 60(5)(c) jurisdiction in Embassy Property and Gujarat Urja.
• 🔄 Conflicting Decisions – Conflicts between NCLT’s expansive title order and NCLAT’s reversal resolved in favor of jurisdictional limits.