Trademarks as assets in insolvency: Valuation, jurisdiction and realisation under IBC

A trademark does not stop being a business asset the moment its owner becomes insolvent — if anything, it becomes one of the few assets still capable of holding its value. How it is valued, licensed, transferred or fought over during CIRP and liquidation turns on statutory mechanics that are frequently misread by resolution professionals, secured creditors and trademark owners alike.

Trademarks owned by a corporate debtor are assets under the Insolvency and Bankruptcy Code, 2016, and can be valued, sold, licensed or bundled into a resolution plan — but only through the correct statutory route.

The moratorium under Section 14 of the IBC (in simple terms, a freeze on lawsuits, recoveries and asset transfers while insolvency proceedings are on) also reaches trademark rights, since it prohibits the corporate debtor from transferring, encumbering, alienating or disposing of any asset or beneficial interest.

A resolution professional's duty to preserve asset value applies squarely to trademarks, which lose commercial worth quickly if use lapses during the resolution timeline.

Under the IBC, a corporate debtor's assets are not confined to plant, receivables and cash. Registered trademarks, pending applications and the goodwill attached to them fall within the debtor's estate and must be accounted for by the RP in the information memorandum. In the Jet Airways case, the resolution applicant identified the debtor's brand name and logo as an asset and included them in the information memorandum.

This has a practical consequence: the RP is not merely an administrator of tangible assets. Where trademarks form a meaningful part of enterprise value — as they often do for FMCG, hospitality, pharmaceutical and consumer-facing businesses — their proper identification, valuation and disclosure can materially affect the resolution plans ultimately submitted and approved.

“A brand's insolvency value is rarely its book value. Where the mark still carries market recognition, it is frequently the single asset a resolution applicant is bidding for.”

Where the debtor is undergoing CIRP, the CoC, guided by the RP and any registered valuers, decides whether trademarks are retained as part of a going-concern sale, carved out separately, or otherwise dealt with in the plan. A resolution applicant continuing the business as a going concern will typically require the trademarks to be transferred or licensed as part of the plan (i.e., sold with the running business, not as a standalone brand); once approved by the Adjudicating Authority, the plan binds the corporate debtor and its stakeholders in respect of that transfer.

Section 14 imposes a moratorium on proceedings against the corporate debtor, and on actions affecting its assets, once CIRP commences. Trademark licences are not automatically exempt: a licensor seeking to terminate a licence to an insolvent licensee, or a licensee seeking to walk away from royalty obligations, cannot assume ordinary termination rights survive the moratorium untouched.

During CIRP, the RP typically assesses whether a licence adds value and should be preserved or is a liability to be addressed in the resolution plan — a fact-specific assessment turning on commercial substance, not label.

If the debtor proceeds to liquidation, Section 33 empowers the Liquidator (the professional appointed by the NCLT to wind up the company once resolution has failed) to sell the debtor’s assets, including trademarks, for distribution under Section 53. Trademarks may be sold individually, as a bundled portfolio, or with the business as a going concern, depending on what maximises recovery [Regulation 32, IBBI (Liquidation Process) Regulations, 2016].

A transfer of ownership on liquidation is not complete on paper alone: under the Trade Marks Act, 1999, an assignment must be recorded with the Registrar of Trade Marks for the assignee's title to bind third parties. Treating the sale deed as the end of the process, rather than the start of the recordal formalities, frequently creates avoidable title gaps.

One of the least appreciated aspects of trademark treatment in insolvency is jurisdictional. Section 60(5) vests the NCLT with jurisdiction to entertain or dispose of any application or proceeding by or against the corporate debtor, and any question of law or fact arising out of or in relation to the insolvency proceedings.

Where a dispute over ownership, validity or entitlement to use a trademark surfaces during CIRP — say, a rival claimant alleging the mark was never validly assigned, or a co-promoter disputing title — the question is which forum decides it: the NCLT, the Registrar of Trade Marks or its statutory appellate route, or a civil court.

The Adjudicating Authority has read Section 60(5) broadly, extending it to disputes sufficiently connected to the insolvency proceedings even where they touch on questions ordinarily litigated as IP disputes. A trademark ownership dispute arising during CIRP may therefore need to be raised before the NCLT rather than the Registrar or a civil court — with real consequences for timelines and interim relief. As this jurisdictional question continues to be tested, forum selection remains a threshold question requiring current, case-specific advice.

“The question is rarely whether a trademark dispute is valid — it is which forum is entitled to decide it once insolvency proceedings are underway.”

Maintaining validity through the process

A registered trademark that falls into non-use risks a rectification or removal action under the Trade Marks Act, independent of the insolvency timeline. Where CIRP or liquidation causes an extended pause in use, RPs, Liquidators and any resolution applicant relying on the mark should factor continued or resumed use into their planning early.

Secured creditors and trademark collateral

Where a trademark is charged or hypothecated as security, the secured creditor's rights interact with the Section 53 priority waterfall on liquidation and the RP's or CoC's authority during CIRP. Secured creditors should ensure their interest is properly perfected and recorded with the Registrar, including where an assignment or charge affects title.

Coordinating cross-border trademark portfolios

Where the debtor holds trademarks outside India, the Indian insolvency proceeding does not by itself extend the RP's or Liquidator's authority over those foreign registrations; realisation typically requires parallel, coordinated action in each relevant jurisdiction.

A recurring, under-appreciated risk is that a valid trademark can be lost not through a third-party dispute but simply through inaction during liquidation. Renewal is a positive, deadline-driven act, and once a company is in liquidation there is often no one whose job it is to track that deadline.

The liquidator steps into the shoes of the company's board and becomes legally responsible for its affairs, including its trademarks — but is simultaneously taking custody of assets, settling claims and meeting tight timelines, so renewal deadlines can slip through the cracks. A mark can lapse or be treated as abandoned, exposing it to removal, rectification, or a rival's fresh application.

Where this happens, the remedy typically does not lie with the Registrar acting on its own. Because the NCLT is already seized of the liquidation, an interested party — the Liquidator, a resolution applicant, or a buyer of the debtor's business and brand — can approach it for appropriate directions to the Registrar, such as accepting a belated renewal despite the statutory window having closed. Even the issuance of notice in such proceedings can prompt the Registry to reopen a closed window administratively. Reaching that stage still takes time, so treating renewal compliance as an active, monitored obligation throughout liquidation remains the safer course.

Trademarks are estate assets: Registered trademarks, pending applications and goodwill form part of the debtor's estate and must be identified, valued and disclosed by the RP in the information memorandum.

The moratorium bites on trademarks too: Section 14 freezes transfer and encumbrance of the debtor's assets, extending to trademark rights and licences, not just financial arrangements.

Treatment depends on the plan: The CoC decides whether trademarks are sold with the business, carved out, or otherwise addressed in the resolution plan; licences are assessed on commercial substance, not label.

Liquidation sales need recordal to bite: The liquidator can sell trademarks individually, as a portfolio, or with the business, but the assignment must be recorded with the Registrar to bind third parties.

The NCLT's reach is wide: Section 60(5) gives the NCLT jurisdiction over questions connected to the insolvency; ownership disputes arising during CIRP may need to go before it rather than the Registrar or a civil court.

Abandonment is a real, avoidable risk: Renewal deadlines can slip through the cracks during liquidation. If a mark lapses, an interested party can approach the NCLT — already seized of the proceedings — for appropriate directions to the Registrar.

Secured creditors must perfect their interest: A trademark charged as collateral should be properly perfected and recorded with the Registrar to be effective against the priority waterfall on liquidation.

Cross-border portfolios need parallel action: Indian insolvency proceedings do not, by themselves, extend authority over the debtor's foreign trademark registrations; realisation abroad needs coordinated, parallel steps.

About the authors: Vikrant Rana is the Managing Partner of S. S. Rana & Co. Nihit Nagpal is an Associate Partner at the Firm.

Disclaimer: The opinions expressed in this article are those of the author(s). The opinions presented do not necessarily reflect the views of Bar & Bench.

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