Why NCLAT has dismissed BSE's appeals over demat accounts
What's the story
The National Company Law Appellate Tribunal (NCLAT) has dismissed appeals filed by the Bombay Stock Exchange (BSE). The leading stock exchange had challenged the authority of the National Company Law Tribunal (NCLT) to defreeze dematerialized accounts of companies undergoing insolvency resolution and liquidation process. A two-member bench of NCLAT held that NCLT has jurisdiction under Section 60(5) of the Insolvency & Bankruptcy Code (IBC) to entertain applications for defreezing such accounts during insolvency.
Jurisdiction debate
BSE argued NCLT lacks IBC jurisdiction
BSE argued that NCLT lacks jurisdiction under Section 60(5) of the IBC to adjudicate issues within the Securities Law Framework and SEBI Circulars. The dispute involved two companies: Future Corporate Resources and Liz Traders & Agents, whose demat accounts were frozen by BSE due to defaults in paying annual listing fees among other reasons. However, both companies' liquidators approached NCLT after BSE refused to unfreeze their accounts for selling shares held therein and recovering money from proceeds of such sale.
Tribunal decisions
NCLT directed BSE to vacate freeze
On October 31, 2025, and July 31, 2024, the Mumbai-bench of NCLT directed BSE to vacate the freeze on these accounts. These orders were challenged by BSE before the appellate tribunal NCLAT through two appeals. However, NCLAT dismissed them both with a common order stating that the applications to defreeze these demat accounts were moved by liquidator for the benefit of debt-ridden firms, an action not barred under Section 14 of IBC.
Overriding effect
NCLAT confirmed jurisdiction under Section 60(5) of IBC
The NCLAT clarified that the ownership of shares held in these demat accounts by companies has not been disputed. It emphasized that defreezing these accounts was a question arising out of and in relation to insolvency resolution, thus giving NCLT/Adjudicating Authority jurisdiction under Section 60(5) of IBC to pass impugned orders. The tribunal also noted that dues from these companies have become debt due to their finality under the insolvency process.