NCLAT quashed BSE’s appeal to defreeze demat accounts of insolvent entities

The NCLAT has upheld an NCLT order to defreeze the demat accounts of entities undergoing insolvency, ruling that the Insolvency and Bankruptcy Code (IBC) prevails over SEBI's securities law.

Written by Manu Kaushik

March 29, 2026 19:31 IST

NCLAT Rules IBC Overrides Securities Law: BSE Appeals Quashed in Demat Account Freeze Dispute

The national company law appellate tribunal (NCLAT) has quashed appeals by the Bombay Stock Exchange (BSE) against National Company Law Tribunal’s (NCLT’s) order to defreeze the demat accounts of two entities undergoing insolvency and liquidation processes. In its appeals, BSE argued that the NCLT doesn’t have jurisdiction under Section 60 (5) of the Insolvency and Bankruptcy Code (IBC) to deal with the issues pertaining to the securities law.

However, the appellate tribunal noted that the NCLT was well within its jurisdiction to entertain the applications filed by the resolution professional and liquidators of the two firms Future Corporate Resources (FCRL) and Liz Traders and Agents. NCLAT said that the applications moved by the liquidator and RP are for the benefit of the debt-ridden companies, which is allowed under Section 14 of the IBC.

“…the impugned orders have been passed in valid exercise of such jurisdiction,” the NCLAT order said.

IBC Priority

BSE challenged the NCLT order stating that its move to freeze the demat accounts of two entities is directly related to the Securities Law Framework and SEBI circulars because these entities committed default by not paying their annual listing fee, which is a non-compliance as per SEBI’s listing obligations and disclosure requirements (LODR) regulations, and an additional default for not paying dues from fines levied for such non-compliance.

In November 2025, NCLT had directed the BSE and Central Depository Services (CDSL) to lift the debit freeze on the demat account of FCRL, a Future Group entity led by Kishore Biyani. NCLT ordered in favour of interim RP who argued that freezing of demat was preventing him from taking control of the company’s assets during the ongoing insolvency proceedings.

Legal Precedence

Experts said that a subsequent legislation that has overriding clause will normally prevail over previous legislation in the event of a contest. “On this ground alone, the IBC would prevail vis-a-vis securities law. Add to this the factor of natural justice and balance of convenience lies in favour of the common creditor’s recourse to the assets of a defaulting company as against the SEBI’s demand for listing fees and penalties,” said Udayan Mukerji, senior partner at Bonum Lex.

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This article was first uploaded on March twenty-nine, twenty twenty-six, at thirty-one minutes past seven in the evening.