Boundary-Conscious Insolvency: Re-Defining NCLT Jurisdiction in the Gloster Era

Muskan Jain and Qazi Ahmad Masood*

Introduction: New Battleground in Insolvency

Over the last decade, the value of modern companies has come to be realised through the intangible rights or assets they hold, such as data rights, brand equity, platform licenses, copyrights, and trademarks. A company’s value no longer depends only on physical assets like factories or land. These intangible rights are governed by distinct statutory frameworks. When these assets enter insolvency, a new legal challenge arises.

The insolvency courts, or the National Company Law Tribunal (“NCLT”), were intended to address debt resolution when a company enters the CIRP. However, due to the presence of these assets, they are now being asked to resolve all matters beyond debt resolution. They are increasingly interpreting contracts, reviewing tax issues, deciding property rights, and handling regulatory conflicts. This is where the following legal issues arise:

(1)   Can NCLT determine the ownership of assets whose very existence depends on separate statutory regimes?

(2)   Can NCLT decide everything just because insolvency is pending, or must there be limits?

The case of Gloster Ltd. v. Gloster Cables Ltd. & Ors. redraws this boundary of NCLT jurisdiction, where a dispute regarding the trademark “Gloster” was raised during CIRP under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (“IBC”). The Supreme Court defined the limits of forum boundaries and clarified the true scope of the moratorium under Section 14 of the IBC, which only preserves the status quo of assets that legally belong to the corporate debtor at the commencement of CIRP and does not create, validate, or adjudicate disputed ownership rights.

In light of the same, this article, through the case of Gloster Ltd. v. Gloster Cables Ltd. & Ors., seeks to examine the powers of the NCLT under Section 60(5), the nature of transferable assets, the insolvency nexus test and advocates for a path towards a multi-forum insolvency reality.

Section 60(5) & the Temptation of Tribunal Expansion

Before the IBC took effect in 2016, there was no unified forum, process, or timeline for addressing a failing company. Instead of one court hearing all matters, various issues went to different courts simultaneously. To prevent this fragmented litigation, the IBC was established as a central consolidating legislation. Section 60(5), which gives the NCLT authority over disputes related to insolvency, made this central jurisdiction possible. However, this centralised authority created a gravitational pull, dragging all issues into the NCLT and prolonging insolvency without resolution.

Parties have begun to interpret Section 60(5) too broadly, which states “any question of law or fact arising out of or in relation to insolvency”. They treat the NCLT as a catch-all jurisdiction, assuming the role of civil, IP, contract, tax, and other courts, going against the legislative intent. Additionally, due to NCLT being faster and more efficient, parties are increasingly treating every dispute as an insolvency issue. But efficiency should not come at the expense of institutional overreach. The NCLT is a specialised insolvency forum, not a civil court.

The parties in Gloster Ltd. knocked on the doors of the NCLT to adjudicate upon the title of the trademark during CIRP, because the issue arose in relation to insolvency. However, the trademark dispute had not come up because of insolvency, and had existed before it. Additionally, neither the NCLT nor the Appellate Authority had jurisdiction to determine title to the trademark. Accordingly, the appeal was disposed of and was expressly left open for the parties to agitate the issue of ownership and validity of assignment before the competent civil court forum, which would decide the matter independently on its merits. This case represents a judicial effort to stop this “jurisdictional overreach”.

Trademarks, Spectrum & Mining Rights: Are they Property at all?

The insolvency framework is predicated on the idea that businesses retain the autonomy to transfer the entirety of their assets. But conditional entitlements are a common feature of the contemporary economy. For instance, although mining may appear to be ownership,  it is not. Only a mine lease and permission to extract resources are granted to a company, and this is contingent upon state approval, environmental regulations, and recurring renewal. The asset is forfeited if the government cancels the lease. Creditors cannot sell the mine if the company enters into CIRP because this lease is a statutory grant.

The case of Gloster Ltd. faced a similar situation. It was observed that the right to a trademark only exists when a statute grants it and is confirmed through registration. If the registration is cancelled, the mark becomes generic, or if it is obtained through fraud, the right ceases to exist. Thus, this is not a matter which can be dealt with by the insolvency framework. If the NCLT decides on the ownership of such assets, it not only oversteps its authority but also risks ignoring regulatory frameworks, overriding government power, and violating the separation of forums.

This structural legal gap that lies at the core of contemporary insolvency disputes must be acknowledged. There is a fundamental mismatch because the insolvency laws do not take these permission-based rights into account and instead assume that all of the debtor’s assets can be consolidated and sold. Due to this gap, tribunals are forced to make decisions on intricate matters of public law, regulation, and title that are outside the purview of their institutional authority. This is a sign that insolvency law is still tailored to the outdated economy, and is not capable of supporting contemporary businesses which function through regulatory entitlements.

 The Insolvency Nexus Test: Now Critical for Regulatory Assets

This decision legalises a drastic shift in the doctrine: The insolvency of a company does not necessarily lead to NCLT jurisdiction on the basis of Section 60(5). The disagreement should not only exist with insolvency, but also be caused by it. In cases where the asset is regulatory or sovereign in form rather than purely proprietary, this requirement of an insolvency nexus gains particular importance.

Consider cases such as the cancellation of telecom spectrum during CIRP, the termination of a mining lease, the revocation of a port concession, or the satellite bandwidth conflicts. Rather than transferable ownership as it is traditionally understood, both of them entail permissions based on executive or statutory distribution. These rights are enshrined in certain regulatory frameworks and are often bound to national resource management, environmental compliance, or even public interest. In these cases, insolvency is incidental, and rather than the preservation of assets or recovery of creditors, the primary focus is on regulatory legitimacy.

Gloster Ltd. implies that such disagreements ought to be referred to the relevant civil or regulatory courts instead of the insolvency courts. This is the commencement of what may be termed the maturity of the jurisprudence in the sense that the institutional competence and efficiency match each other. The goal of value maximisation under the IBC cannot override statutory regulatory regimes or permit intrusion into domains reserved for sovereign allocation and specialised adjudication.

Resolution Plans cannot Manufacture Ownership

Among the primary effects of the decision is that a resolution plan is not an instrument of perfecting title, but a financial restructuring instrument. An even more fundamental principle of structure is shown in the insistence of the Court that rights cannot be granted beyond what is recognised in the approved plan: insolvency can never expiate defective ownership. The insolvency process does not convert contested or ambiguous property interests into legally undisputable assets, although it can rearrange liabilities and redistribute control.

This is particularly evident in the case of regulatory rights such as telecom spectrum. Even in a situation where a potential bidder is otherwise unsure that the NCLT will treat as valid or regularise the spectrum rights of a telecom operator by approving its plan, the operator who is under a statutory or contractual dispute over its rights, the bidder cannot reasonably expect the NCLT to do so. This validation would be tantamount to the judicial manufacture of property, which is a role that specialised regulatory or civil jurisdiction can alone perform and is not subject to insolvency.

There would also be a negative market impact by allowing such sanitisation. In the view that tribunals would remedy title defects, bidders would always understate risk, litigation would be strategic in moving to insolvency forums, and the allocation powers of regulatory authorities would be undermined. This would ultimately undermine credit discipline and misvalue assets. The IBC is a solution to financial problems, but not for laundering property rights.

The Future: Towards a Multi-Forum Insolvency Reality

The premise that a single and specialised tribunal might, in due effect, resolve all disputes arising out of corporate distress was the original design philosophy of the IBC. The reasoning behind this vision was that the lack of unified litigation would undermine the time-bound resolution and depreciate assets. However, the practical evolution of the insolvency law has demonstrated the inherent weaknesses of such a centralisation. The anticipation of a unifying adjudicatory arena has diminished over time with insolvency actions involving more and more complex matters of property rights, sectoral licensing, environmental licenses, and other rights. In its place, a model of coordinated, domain-specific adjudication is being calibrated in which the jurisdiction is not based on the choice of the litigant but on the nature of the dispute.

Civil courts are still involved in the determination of contractual ownership and the title of property through proprietorship. The NCLT confines itself to its main responsibilities of financial restructuring and creditor solution, with sectoral regulators continuing to have control over licenses, concessions, and statutory compliance. Since institutional competence and statutory design refer to disputes to the legally right authority instead of parties making a strategic selection of forums in their favour, this allocation does not reflect inefficiency or forum shopping. The resulting framework suggests that there has been a shift in the jurisdictional concentration to principled institutional balance, which is a developing insolvency regime that treats doctrinal precision and regulatory legitimacy together with procedural efficiency.

Conclusion

Gloster Ltd. ends up being a decisive maturation of the insolvency law of India in the sense that efficiency is not allowed to overrule institutional limits. The decision overturns the position that the IBC is a universal dispute-solving institution and places it as a specialist system of financial restructuring, instead of property validation and regulatory adjudication. Through its insistence on disciplining its jurisdiction, it maintains predictability in the market, maintains its regulatory powers, and ensures that insolvency proceedings are not used as a tactical mechanism to re-litigate or strategically revive ownership disputes. The robustness of the insolvency regime over the long term, however, is not to be found in extending the reach of the NCLT, but by continuing to provide principled coordination with parallel legal institutions.

*The authors are Fourth-year B.A., LL.B. (Hons.) students at Rajiv Gandhi National University of Law, Patiala.