The National Company Law Appellate Tribunal has upheld the National Company Law Tribunal’s authority to direct the defreezing of demat accounts of companies under insolvency resolution and liquidation. The ruling strengthens the jurisdiction of the insolvency forum under the Insolvency and Bankruptcy Code, especially where securities law issues overlap with the recovery of assets for creditors.
Core Issue
The dispute involved two companies, Future Corporate Resources and Liz Traders and Agents, whose demat accounts were frozen by the Bombay Stock Exchange for non-payment of listing-related dues, penalties and compliance charges. Resolution professionals and liquidators sought access to the shares held in these accounts so that they could be sold and the proceeds used in the insolvency process.
NCLAT’s Finding
The appellate tribunal held that the NCLT can entertain applications under Section 60(5) of the IBC and issue appropriate directions for defreezing demat accounts. It said the NCLT’s orders were passed in valid exercise of jurisdiction. The bench noted that the applications were directly connected to insolvency resolution and liquidation proceedings.
IBC Versus Securities Law
BSE had argued that the matter fell within the exclusive domain of securities laws, including the Securities Contracts (Regulation) Act and SEBI regulations. The NCLAT rejected this view and held that the IBC has overriding effect under Section 238. It stated that where there is a conflict between the insolvency code and any other law, the IBC will prevail.
Significance for Insolvency Cases
The tribunal also observed that the ownership of the shares was undisputed and that the dues leading to the freeze now formed part of insolvency claims. The ruling clarifies that asset access needed for resolution or liquidation can be examined within the IBC framework. It also reinforces the wide jurisdiction of the NCLT in matters arising out of insolvency proceedings.
Last Modified: April 29, 2026