NCLAT rejects BSE plea on demat freeze in insolvency cases

Metro India News | NEW DELHI 

The National Company Law Appellate Tribunal has dismissed appeals filed by Bombay Stock Exchange challenging orders that allowed defreezing of demat accounts of companies undergoing insolvency proceedings.

A two-member bench of the appellate tribunal upheld the powers of the National Company Law Tribunal under Section 60(5) of the Insolvency and Bankruptcy Code (IBC), stating that it has jurisdiction to entertain applications related to defreezing demat accounts during insolvency resolution and liquidation.

The case involved two firms — Future Corporate Resources and Liz Traders and Agents — whose demat accounts were frozen by BSE due to non-payment of listing fees and penalties linked to regulatory non-compliance. Resolution professionals and liquidators had approached the NCLT seeking defreezing of these accounts to enable sale of shares and recovery of funds for creditors.

The NCLT’s Mumbai bench had earlier directed BSE to lift the freeze through orders passed in July 2024 and October 2025. These directions were later challenged by BSE before the appellate tribunal.

Rejecting BSE’s arguments, the NCLAT ruled that such matters are directly linked to insolvency proceedings and fall within the jurisdiction of the NCLT. It clarified that applications for defreezing accounts are not barred under the IBC and are essential for maximising value for stakeholders.

The tribunal also emphasised that the IBC has overriding authority over other laws, including securities regulations, in case of any conflict. It noted that dues leading to the freezing of accounts would be treated as debt under the insolvency framework.

Observing no illegality in the NCLT’s orders, the appellate tribunal concluded that defreezing of demat accounts was justified as part of the insolvency resolution process and dismissed both appeals filed by BSE.