NCLAT Affirms NCLT's Authority on Demat Accounts, Rejects BSE Appeal
Synopsis
The NCLAT has upheld the powers of the NCLT, asserting its jurisdiction over the defreezing of Demat accounts in insolvency cases, a crucial ruling that affects companies like Future Corporate Resources and Liz Traders.
Key Takeaways
NCLAT dismissed BSE's appeals .
NCLT has jurisdiction over Demat accounts .
Defreezing essential for insolvency recovery.
IBC provisions prevail over securities laws.
Ownership of shares in dispute resolved.
New Delhi, March 29 (NationPress) The National Company Law Appellate Tribunal (NCLAT) has rejected the appeals made by the BSE, affirming that insolvency courts possess the authority to mandate the defreezing of Demat accounts associated with companies in the midst of insolvency proceedings.
A two-member panel of the appellate tribunal stated that the National Company Law Tribunal (NCLT) has explicit jurisdiction under Section 60(5) of the Insolvency and Bankruptcy Code (IBC) to address such issues and issue appropriate directives.
The tribunal noted that previous decisions issued by the NCLT were legitimate and within its legal framework.
This case involves two entities, Future Corporate Resources and Liz Traders and Agents, whose Demat accounts were frozen by the BSE due to unpaid listing fees and other regulatory obligations.
Additionally, these accounts were frozen due to non-compliance with regulations, including those set forth in listing guidelines.
Resolution professionals and liquidators representing these firms approached the NCLT, requesting the defreezing of accounts to facilitate the sale of shares held in them, aiming to recover funds during the insolvency process.
Previously, the Mumbai bench of the NCLT had instructed the BSE to lift the freeze in separate rulings made in 2024 and 2025.
The BSE contested these directives before the NCLAT, contending that the NCLT lacked jurisdiction in issues governed by securities laws and regulations established by the Securities and Exchange Board of India (SEBI). However, the appellate tribunal dismissed this assertion.
The NCLAT emphasized that matters regarding the defreezing of Demat accounts are intrinsically linked to the insolvency resolution process and thus fall under the NCLT's jurisdiction.
Moreover, it clarified that such actions are not restricted by the moratorium provisions of the IBC.
Significantly, the tribunal pointed out that the IBC has prioritizing authority over other laws in the event of any conflict.
Citing Section 238 of the Code, it affirmed that IBC provisions take precedence over other legal frameworks, including securities laws, during insolvency or liquidation proceedings.
The tribunal also indicated that the ownership of shares within the Demat accounts was undisputed, and the debts owed by the companies had become integral to the insolvency process. Thus, the NCLT was entirely justified in addressing these issues.
Point of View
The recent NCLAT ruling reinforces the legal framework surrounding insolvency proceedings in India, highlighting the NCLT's pivotal role in managing the defreezing of Demat accounts. This decision ensures that the insolvency resolution process is streamlined and effective, ultimately benefiting stakeholders involved.
NationPress
6 Aug 2026
Frequently Asked Questions
What authority does NCLT have regarding Demat accounts?
The NCLT has the authority to order the defreezing of Demat accounts of companies undergoing insolvency proceedings under Section 60(5) of the Insolvency and Bankruptcy Code.
What led to the freezing of the Demat accounts?
The Demat accounts were frozen by BSE due to non-payment of listing fees and other regulatory dues, as well as non-compliance with listing regulations.
What is the significance of the NCLAT's ruling?
The NCLAT's ruling confirms that issues related to the defreezing of Demat accounts are under the jurisdiction of the NCLT, thereby ensuring the insolvency resolution process is not hindered.
How does the IBC relate to securities laws?
The IBC has overriding powers over other laws, including securities laws, in cases of conflict during insolvency or liquidation proceedings, as clarified by the NCLAT.
Which companies were involved in this case?
The case involved Future Corporate Resources and Liz Traders and Agents, whose Demat accounts were frozen by the BSE.
