NCLT Cannot Decide IP Title Disputes Unless Linked To CIRP: Supreme Court

New Delhi, Jan 24 (KNN) The Supreme Court has held that the National Company Law Tribunal (NCLT), under Section 60(5) of the Insolvency and Bankruptcy Code (IBC), cannot decide disputed intellectual property claims unless they are directly and closely linked to the corporate insolvency resolution process (CIRP).

A Bench of Justices JB Pardiwala and KV Viswanathan reiterated that under Section 60(5)(c), the NCLT’s jurisdiction is limited to disputes directly linked to insolvency, citing Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta (2021) and warning against overstepping into matters outside the IBC’s scope.

Background of the Case
The dispute arose during FGIL’s CIRP, with Gloster Limited as the successful resolution applicant. Gloster Cables (GCL) sought NCLT intervention under Section 60(5) to exclude the ‘Gloster’ trademark from FGIL’s assets, claiming it had been assigned to them in 2017. The NCLT rejected GCL’s plea but noted the trademark vested with the SRA. The NCLAT partly allowed GCL’s appeal, but both parties filed cross appeals to the Supreme Court.

Supreme Court’s Findings
The Supreme Court overturned the NCLAT, ruling that the NCLT erred in deciding the trademark dispute, as it was not directly linked to the CIRP. The Court stated the NCLT could not declare title to the ‘Gloster’ trademark in favor of the resolution applicant under Section 60(5)(c).

The Bench observed that the resolution plan had recognised GCL’s claim, and held that the NCLT’s order granting title to the SRA contradicted the plan approved by the Committee of Creditors and the adjudicating authority.

The Court clarified that extending rights beyond an approved resolution plan would effectively alter it, which the IBC forbids. It noted that the SRA must seek appropriate remedies to protect its title, and the NCLT could not issue such directions under Section 60(5).

Impact on MSMEs

The Supreme Court ruling restricts the NCLT from deciding IP disputes unrelated to insolvency, affecting MSMEs in corporate restructurings and startups holding intellectual property. MSMEs must now approach civil courts to enforce IP rights unless directly linked to a CIRP, providing legal clarity but potentially increasing the time and cost to protect trademarks, patents, and other IP assets.

(KNN Bureau)