2 months ago
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The National Company Law Appellate Tribunal (NCLAT) has dismissed the appeals filed by BSE, wherever the starring bourse challenged the powerfulness of the NCLT to defreeze the Demat accounts of businesses undergoing insolvency solution and liquidation process.
"...the impugned orders person been passed successful valid workout of specified jurisdiction," the NCLAT said portion mounting speech the 2 petitions filed by BSE.
BSE had contended that the NCLT does not person immoderate jurisdiction nether Section 60 (5) of the IBC Code to adjudicate connected the issues, which are wrong the Securities Law Framework and Sebi Circulars.
The issues pertain to 2 companies — Future Corporate Resources and Liz Traders and Agents — wherever their Demat accounts were frozen by BSE owed to default committed by them successful paying the yearly listing fee, among others, arsenic non-compliance with LODR Regulations and unpaid dues from fines levied for specified non-compliance.
The Resolution Professionals/liquidators of some the Corporate Debtors (companies facing CIRP) approached the NCLT aft BSE refused to defreeze the Demat accounts of these companies, arsenic they intended to merchantability the shares held successful those accounts and to retrieve wealth from the proceeds of specified sale.
The Mumbai-bench of the NCLT, passing 2 abstracted orders connected the 2 specified applications moved by the respective RP, had connected October 31, 2025, and July 31, 2024, directed BSE to vacate the freeze.
These orders were subsequently challenged by BSE earlier the appellate tribunal NCLAT by filing 2 appeals, which were besides dismissed.
Passing a communal bid implicit the 2 petitions, the NCLAT said these applications to defreeze these Demat accounts were moved by the RP and Liquidator for the payment of the debt-ridden companies, which enactment is not barred nether Section 14 of the IBC.
"The destiny of these appeals was babelike connected the contented arsenic to whether NCLT was having jurisdiction nether Section 60 of the IBC to walk impugned orders, we bash not find it applicable to sermon this facet of the substance astatine length, arsenic we person already held that NCLT was having jurisdiction nether conception 60 (5) of the Code to entertain specified applications and the impugned orders person been passed successful valid workout of specified jurisdiction," the NCLAT said.
The appellate tribunal further said the ownership of the companies regarding the shares held successful those Demat accounts has not been disputed.
"... the defreezing of these Demat accounts of the CD was a question arising retired of and successful narration to the Insolvency Resolution of the aforesaid CD’s and frankincense NCLT/Adjudicating Authority was having jurisdiction to walk impugned orders by assuming jurisdiction arsenic provided nether Section 60 (5) of the Code and we bash not find immoderate illegality successful workout of specified jurisdiction by the NCLT," said a bench, comprising members - Justice Mohd Faiz Alam Khan and Naresh Salecha.
The NCLAT said accounts were frozen connected relationship of dues from those companies, which person go indebtedness owed to their finality nether the insolvency process.
In that case, the NCLT would person jurisdiction to woody with those dues (debt) nether the IBC framework, arsenic they are connected to the insolvency of those companies, said the appellate tribunal.
Over BSE's contention of the NCLT not having immoderate jurisdiction successful presumption of the SCRA, SEBI Act, LODR Regulations, the appellate tribunal said IBC has an overriding powerfulness implicit different laws, if determination is immoderate struggle during the insolvency oregon liquidation process.
"Section 238 of the Code wherein a circumstantial proviso has been made that successful lawsuit of immoderate struggle with the IBC with immoderate different law, the provisions of the IBC would beryllium having overriding effect and notwithstanding thing contained successful immoderate different instrumentality for the clip being enforce the NCLT shall person jurisdiction to entertain oregon dispose of immoderate question of information oregon instrumentality arising retired of oregon successful narration to the Insolvency Resolution oregon Liquidation Proceedings of the Corporate Debtor oregon Corporate Person nether this Code," the NCLAT said successful its 75-page-long order.
