Trademark Title Disputes in CIRP: Reconciling Value Maximisation With Jurisdictional Limits After Gloster

[Moksha is a student at OP Jindal Global University.]

Should an insolvent company wait for the depreciation of its business, litigating a separate trademark dispute for years, despite the Insolvency and Bankruptcy Code 2016 (IBC) mandate a time-bound resolution? The IBC prescribes a maximum period of 330 days for completion of the corporate insolvency resolution process (CIRP), to ensure timely resolution and maximisation of the value of the corporate debtor (CD). However, this process often reveals a tension between the expedient timelines of insolvency proceedings and the often-lengthy nature of traditional litigation.

To facilitate the process, the adjudicating authority is empowered to entertain or dispose of any application by or against the CD, arising out of insolvency resolution under this code. This allows the issues that are directly affecting the resolution process to be addressed efficiently within the insolvency framework. However, this jurisdiction is not unlimited. The adjudicating authority cannot take over the jurisdiction of other judicial bodies. Consequently, this raises a significant question: What if the company’s most valuable asset, trademark, is subject to an unresolved ownership dispute? The value and transferability of the asset become uncertain, thus making the approval of a commercially viable resolution plan a difficult task.

This article argues that insolvency law must respond to trademark title disputes through contractual structuring within the resolution plan.

NCLT v/s Civil Courts: Trademark Jurisdiction Conflict

In Gloster Limited, the CD, Fort Gloster Industries Limited, was undergoing CIRP. Meanwhile, the RP was pending for approval, Gloster Cable Limited filed an application under Section 60(5) seeking to exclude the rights in the trade mark ‘Gloster’, thus claiming ownership over the  trademark. While National Company Law Tribunal (NCLT) declared the trademark as an asset of CD, the National Company Law Appellate Tribunal (NCLAT) reversed the finding on title, declaring ownership vested with Gloster Cable Limited. On appeal, the Supreme Court held that trademark disputes requiring independent adjudication of title are not “in relation to the insolvency proceedings”, thereby limiting the jurisdiction of the Adjudicating Authority. In this case, the Supreme Court, placing reliance on the Embassy Property Development, observed that Section 60(5) cannot be used to take shortcut to any judicial or quasi-judicial proceedings and approach the adjudicating authority for enforcement of such a right. Further, in the case of Gujarat Urja, the court, while reiterating the principle laid down in Arcelor Mittal, held that the non obstante clause in Section 60(5) is designed to ensure that NCLT alone has jurisdiction when it comes to applications and proceedings by or against a CD covered under the IBC. However, NCLT cannot exercise jurisdiction over matters de hors the insolvency proceedings since such cases would fall outside the realm of the IBC.

The urgency and seriousness of the issue can be understood by the fact that as of 31 October 2025 in total of 8715 CIRPs have been admitted under the IBC; out of these, the code has only rescued 1322 CDs through resolution.

During the CIRP, intangible assets such as intellectual property form a valuable asset in the portfolio of a distressed business, which, when faced with uncertainty, creates serious complications. The timely decision on this issue is the key to an effective resolution plan, whereas in practice, the traditional forum of civil courts, requiring a full trial, ultimately diminishes the purpose of the framework. While the Gloster case clarifies the jurisdictional boundary, it leaves the commercial impacts of such disputes unresolved.

Contractual Solutions within CIRP Framework

While the jurisdictional clarity brought by the Gloster decision resolves only one doctrinal question, it simultaneously creates a structural vacuum. When the most valuable asset of a CD does not have a clear ownership title, how can the insolvency framework navigate the adjudicatory delay and the commercial urgency at hand? The question at hand is not whether NCLT can decide the title, but rather, it is how insolvency law can commercially respond to unresolved title without breaching jurisdictional limits? This question becomes relevant when it is a settled principle of law that the RP cannot be conditional or contingent upon future litigation outcomes.

Since the NCLT cannot decide the title on hand, civil courts cannot resolve such disputes within the CIRP time-limits, and the RP cannot be contingent, the only space for a commercially sound approach lies in contractual structuring within the RP itself. Insolvency law need not expand jurisdiction to preserve value; it can instead re-engineer how risk is priced, allocated and deferred.

This article proposes contractual mechanisms to address this gap:

Independent trademark license and rebranding

Under this mechanism, the disputed trademark is excluded from the CIRP asset pool. Simultaneously, the resolution professional shall, subject to compliance under Sections 48 and 49, Trademarks Act 1999, negotiate a time-bound license with the rival claimant, granting the resolution applicant the right to use the mark for a fixed tenure to facilitate the rebranding strategy. The detailed procedure will be as follows:

Exclusion of the trademark from the asset pool

The resolution plan explicitly excludes the disputed trademark. Thus, transferring only the "business operations, goodwill, and physical assets" of the CD. This structure commercially separate the trademark from the goodwill of the company. Ultimately severing a link between the trademark and the company's other assets.

The time-bound trademark license

This is the most critical step. The resolution professional negotiates a temporary, time-bound trademark license with the rival claimant. This licence will serve as an independent contract executed in parallel to the RP, thus permitting the resolution applicant to use the trademark for a fixed time period while they can work on a rebranding strategy. This negotiation takes place during CIRP.

The resolution applicant can use the trademark for the pre-defined time period; by the end of the same, the rebranding must be completed. Lastly, the outcome of the ongoing litigation between the original parties will not affect the validity of the RP.

Critical analysis

The feasibility of the mechanism raises both doctrinal and practical considerations. Firstly, the separability of goodwill and trademark must be addressed. In Associated Electronics and Electrical Industries (Bangalore) (Private) Limited v. DCIT, the Income Tax Appellate Tribunal, on placing reliance on the Supreme Court judgment in Khambatta and Co. v. CIT, recognised a well-marked distinction between a business and the trademark; this reinforces the possibility of excluding the disputed trademark while transferring the remaining business.

Secondly, going to a civil court for interim relief would cause the very delay this mechanism is designed to avoid. The licence route works only if the rival is willing to negotiate; if the rival refuses, the resolution professional moves straight to the reverse unlocking structure, so the two are alternatives, not steps to be followed one after the other.

Finally, it may be questioned whether the licence attracts Section 14 IBC, since the CD may ultimately be found to own the trademark. It does not. The licence is granted by the rival to the resolution applicant on a without prejudice basis, so no part of the CD’s estate is divested. The CD is not a party to the licence and assumes no obligation under it, and the rival’s grant cannot, in law, bind or prejudice the CD’s competing claim, when read purposively, as the Supreme Court did in P Mohanraj v. Shah Bros. Ispat and Innoventive Industries v. ICICI Bank, Section 14’s asset- preservation objective is actually advanced by a licence that ensures continuity of the operations.

Reverse unlocking the structure

In this structure, the resolution applicant acquires the CD, including the disputed trademark (paying, for example, 1/4 of the disputed trademark price), and the resolution plan values the trademark at INR X based on an independent valuer's report. The rival claimant is given two options, which are exercisable only if they obtain a final court judgement confirming their title.

They can either (a) transfer the trademark and receive INR X from the resolution applicant; or (b) keep the trademark and do not exercise the put option (in which case the resolution applicant must stop using it).

The put option will be secured by a bank guarantee from the resolution applicant. However, if the rival claimant fails to establish the same, the resolution applicant shall pay the remaining amount to the CD. Thus, the rival claimant cannot simply disrupt the RP; they must first prove their title in the proper forum. If they prove the title, they have a guaranteed exit at a fair price and the resolution applicant also gets certainty that the trademark's maximum liability is capped.

Critical analysis

Although this structure appears commercially viable, a significant concern arises regarding whether the plan becomes impermissibly contingent. As per Section 30(2) IBC and Section 31 IBC, the plan must be definite and capable of immediate implementation. The NCLAT in the case of Anuj Gaur and Others discussed the contingency of the resolution plan and held that even if certain elements depend on future events, yet the plan remains implementable, then the plan cannot be held invalid. Further, the Supreme Court in K Sashidhar v. Indian Overseas Bank, as reiterated in SS Natural Resources Private Limited, held that the Adjudicating Authority’s discretion is limited to the extent of satisfaction that the resolution plan meets the requirements mentioned in Section 30(2), commercial consideration of the committee of creditors is outside the scope of judicial scrutiny.

Here, the plan itself is implemented immediately: creditors receive the agreed value under the plan, the applicant acquires the CD, and operations continue after the implementation. The plan does not purport to determine title ownership; the jurisdiction of civil court is intact. The contingency concerns the trademark dispute, whose financial exposure remains fixed at INR X, thereby preserving commercial certainty and the plan’s feasibility.

The put option, as a post-resolution obligation, must therefore be disclosed to and approved by the committee of creditors under Section 30(2)(b) of IBC, since it materially affects the plan’s commercial viability. The contingent INR X liability backed by a bank guarantee falls within the committee of creditors' commercial wisdom, which the Supreme Court in Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta held extend to all material commercial terms of the plan.

Conclusion

The decision in Gloster settles the question of jurisdictional boundary, excluding the intellectual property disputes from the insolvency forum. The challenge is not to expand the jurisdiction of the adjudicating authority, but to design a resolution structure that can function despite such uncertainty. A time-bound licensing and rebranding model can be adopted, wherein a negotiated time-bound licence can be used by the resolution applicant. Additionally, the reverse unlocking structure can be comparatively more suitable as it caps liability. The resolution applicant acquires the CD and disputed trademark at a partial upfront value, with total liability is capped at INR X. The rival claimant has a put option to either claim INR X or retain the mark only if they prove the title. Otherwise, the resolution applicant can pay the balance to CD. The objective is to ensure that resolution proceeds without being stalled by title disputes, while maximising enterprise value. insolvency law must adapt through structure, not by expanding jurisdiction.