The National Company Law Appellate Tribunal (NCLAT) on 29 March 2026 dismissed appeals filed by the Bombay Stock Exchange (BSE), holding that the NCLT has clear jurisdiction under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 to order the defreezing of demat accounts of companies undergoing insolvency proceedings. The ruling establishes that regulatory restrictions imposed by stock exchanges cannot obstruct the insolvency resolution process.
Background
The disputes arose from two companies — Future Corporate Resources and Liz Traders and Agents — whose demat accounts had been frozen by BSE due to non-payment of listing fees and other regulatory dues. During insolvency proceedings before the NCLT, the resolution professionals for these companies sought directions to defreeze the accounts, arguing that the freeze impeded the insolvency resolution process by preventing asset monetisation. The NCLT granted the defreezing orders, prompting BSE to file appeals before the NCLAT.
BSE contended that demat account matters fell under the regulatory domain of the Securities and Exchange Board of India (SEBI) and were governed by securities laws, placing them outside the NCLT's jurisdiction. The exchange argued that the NCLT could not override regulatory actions taken under SEBI's framework.
Key Holdings
The NCLAT rejected BSE's jurisdictional challenge on multiple grounds:
Section 60(5) IBC — wide jurisdiction: The Tribunal held that the NCLT's jurisdiction under Section 60(5) of the IBC extends to any question of law or fact arising out of or in relation to the insolvency resolution process, even where the matter overlaps with securities laws. Defreezing of demat accounts is directly connected to the resolution process and falls squarely within this jurisdiction.
Section 238 IBC — overriding effect: The NCLAT invoked Section 238 of the IBC, which provides that the Code shall have effect notwithstanding anything inconsistent in any other law. Where regulatory restrictions under securities laws conflict with the insolvency resolution process, the IBC prevails.
Moratorium provisions not a bar: The Tribunal clarified that actions taken to facilitate the resolution process, including defreezing of accounts frozen for regulatory dues, are not barred under the moratorium provisions of the IBC but are in fact consistent with the moratorium's purpose of preserving the corporate debtor's assets.
Validity of NCLT orders: The NCLAT found that the earlier NCLT orders directing defreezing were valid and within the Tribunal's legal powers.
Implications for Practitioners
This order strengthens the NCLT's position as the adjudicatory authority of first resort during insolvency proceedings, even where the dispute touches upon the jurisdiction of sectoral regulators. Resolution professionals dealing with listed entities should note that regulatory freezes on demat accounts — whether for listing fee defaults, trading suspensions, or other compliance failures — can now be challenged before the NCLT with strong appellate backing.
For stock exchanges and SEBI, the practical consequence is that regulatory enforcement actions against companies in CIRP may be subordinated to the insolvency process. This creates an incentive for exchanges to pursue regulatory dues through the claims process under the IBC rather than through account freezes.
Insolvency practitioners should proactively identify all frozen or restricted accounts at the commencement of CIRP and seek NCLT directions early in the process.