National Company Law Appellate Tribunal Upholds NCLT Authority in Insolvency Cases, Dismisses BSE Appeals

National Company Law Appellate Tribunal (NCLAT) Upholds NCLT's Authority to Defreeze Demat Accounts

The NCLAT has dismissed appeals filed by the Bombay Stock Exchange (BSE), upholding the National Company Law Tribunal's (NCLT) authority to order the defreezing of demat accounts of companies undergoing insolvency resolution and liquidation.

The NCLAT bench, comprising Justice Mohd Faiz Alam Khan and Naresh Salecha, ruled that the NCLT is empowered under Section 60(5) of the Insolvency and Bankruptcy Code (IBC) to entertain applications seeking defreezing of demat accounts and to pass appropriate directions in such matters. The tribunal held that the orders passed by the NCLT were within its jurisdiction.

The dispute relates to two companies, Future Corporate Resources and Liz Traders and Agents, whose demat accounts were frozen by the BSE due to non-payment of annual listing fees, penalties, and other dues arising from non-compliance with Listing Obligations and Disclosure Requirements (LODR) regulations. Resolution professionals and liquidators of the two corporate debtors had approached the NCLT after the BSE declined to lift the freeze, stating their intent to sell shares held in the demat accounts to recover funds for the insolvency process.

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The Mumbai bench of the NCLT had directed the BSE to unfreeze the accounts through separate orders dated July 31, 2024, and October 31, 2025. Challenging these directions, the BSE moved the NCLAT, which has now upheld the NCLT's orders.

The NCLAT noted that the applications were filed by resolution professionals and liquidators in the interest of insolvency proceedings and were not barred under Section 14 of the IBC. It further observed that the ownership of the shares in question was undisputed. The tribunal also noted that the accounts had been frozen due to dues which now form part of the insolvency claims, and such issues can be adjudicated within the IBC framework.

The NCLAT held that the IBC has overriding effect under Section 238. It said that in case of conflict with any other law, the provisions of the insolvency code would prevail. The tribunal further stated that in case of overlapping jurisdictional issues between the IBC and securities regulations, insolvency proceedings take precedence.

Key Figures and Dates:

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• July 31, 2024: NCLT orders the BSE to unfreeze the demat accounts of Future Corporate Resources.
• October 31, 2025: NCLT orders the BSE to unfreeze the demat accounts of Liz Traders and Agents.
• Section 60(5): NCLT's power to entertain applications seeking defreezing of demat accounts.
• Section 14: IBC provision regarding barred applications.
• Section 238: IBC provision regarding overriding effect.