GLOSTER LTD VS GLOSTER CABLES LIMITED & ORS : CASE SUMMARY

The Supreme Court held in Gloster Ltd. Vs. Gloster Cables Limited & Ors (Civil Appeal 2996 of 2024)   that the NCLT does not have jurisdiction to adjudicate on title of trademark under Section 60 (5) IBC  as it is not  “in relation to the insolvency proceedings”.

FACTS OF THE CASE

CIRP was admitted against Fort Gloster Industries Limited  (corporate Debtor) vide order dated 09.08.2018. During pendency of the application seeking approval of Resolution Plan, Gloster Cable Ltd. (GCL)  filed an application for excluding the trademark “Gloster”.

Trademark “Gloster” was registered in the name of the Corporate Debtor. Corporate Debtor had granted an exclusive, non-transferrable, long  term license to GCL to use the Trademark for an Initial period of 33 years with effect from the date of execution of the said agreement for a fee of Rs. 3,00,00,000 (Three crore only) apart from annual royalty of Rs. 2,00,000 (Two lakhs only) during the existence of the said agreement. The Corporate Debtor also created first and exclusive charge over the Trademark in favour of GCL as security against a loan of Rs. 10 crore granted by GCL to FGIL pursuant to the loan agreement dated 10th November 2006. The Corporate Debtor  had entered into Supplemental Trade Mark Agreement on 15th July 2008 with GCL wherein the Corporate Debtor  inter alia agreed to assign the Trademark in favour of GCL for an aggregate consideration of Rs, 10,00,000 (ten lakhs only) and the said assignment was to become effective without any further act or deed if the order dated 10th September, 2001 passed by BIFR declaring FGIL as sick undertaking stood vacated and / or discharged or FGIL is wound up under the provisions of the Companies Act,1956. Finally, GCL & FGIL entered into deed of assignment dated 20th September 2017 wherein the abovementioned Trade Mark “GLOSTER” has been assigned and/or transferred to and vested to GCL with effect from the end of the statutory period from 1st December 2016 under the Sick Industrial Companies (Special Provisions) Repeal Act, 2003.

Resolution Plan was approved by Hon’ble NCLT and application filed by Gloster Cable Ltd. was rejected. Appeal was preferred by GCL before NCLAT, which was allowed.

FINDINGS OF THE SUPREME COURT

The Supreme Court noted that the RP has not moved any application challenging the assignment agreement. The Supreme Court relying on Embassy Property Developments Pvt. Ltd. Vs. State of Karnatka & Ors (2020) 13 SCC 308, Gujarat Urja Vikas Nigam Vs Amit Gupta (2021) 7 SCC 209, Tata Consultancy Services Ltd. Vs. SK Wheels (p) Ltd. (2022) 2SCC583 held that the NCLT was not having jurisdiction under Section 60 (5) to entrain application filed by Gloster Cable Ltd. The issue of the title of the Trademark was not “in relation to the insolvency proceedings”, on the facts of the present case.

The Supreme Court observed that under the insolvency regime, a plan approved by the CoC and ultimately by the Adjudicating Authority is the charter by which stakeholders are governed. As rightly held in SREI Multiple Asset, the ultimate order of the NCLT recognizing the title in the trademark “Gloster” with the SRA does not reconcile with the resolution plan as approved by the CoC and later by the Adjudicating Authority. Further, any grant of further rights over and above what is recognized in the plan would amount to modification or alteration of the approved plan. It should be remembered that the plan as it exists is the one duly approved by the CoC and while adjudicating an application of GCL, no directions could be made by the NCLT conferring better rights. In a case like the present where the SRA has perceived clouds hovering over its title, it is for the SRA to resort to remedies and protect its rights. On the facts of the present case, while adjudicating an application under Section 60(5) of GCL, NCLT could not have passed the direction it ultimately passed.

The Supreme Court also disapproved the approach of the NCLT in falling back on Section 43(2)(a) and 45(2)(b) of the IBC to hold that the Assignment Deed dated 20.09.2017 would fall foul of those provisions. The Supreme Court observed that while adjudicating the application of GCL and in the process of approving the plan, they could have resorted to an enquiry under Sections 43 and 45 of the IBC.

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