The National Company Law Appellate Tribunal (NCLAT) has upheld the National Company Law Tribunal’s (NCLT) jurisdiction to order the defreezing of Demat accounts of companies undergoing insolvency proceedings. The NCLAT dismissed appeals by the BSE, affirming that the NCLT has the legal power under Section 60(5) of the Insolvency and Bankruptcy Code (IBC) to address such matters and issue necessary directives. Previous orders by the NCLT regarding this issue were deemed valid and within its jurisdiction.
The case involves Future Corporate Resources and Liz Traders and Agents, whose Demat accounts were frozen by the BSE for non-payment of listing fees and regulatory dues. The freeze was also due to non-compliance with listing regulations. Resolution professionals and liquidators managing these companies had approached the NCLT to defreeze the accounts, enabling the sale of shares to recover funds during insolvency proceedings.
The Mumbai bench of the NCLT had previously instructed BSE to lift the freeze in orders issued in 2024 and 2025. BSE contested these directives before the NCLAT, arguing that the NCLT lacked jurisdiction in matters governed by securities laws and SEBI regulations. However, the NCLAT rejected this argument, stating that issues concerning the defreezing of Demat accounts in such cases are directly linked to the insolvency resolution process and thus fall under the NCLT’s jurisdiction.
The NCLAT clarified that such actions are not restricted by the moratorium provisions of the IBC. It emphasized that the IBC holds supremacy over other laws during insolvency or liquidation proceedings, as per Section 238 of the Code. The tribunal highlighted that the ownership of shares in the Demat accounts was undisputed and the companies’ dues had become part of the insolvency process, validating the NCLT’s authority to handle such matters.
