The National Company Law Appellate Tribunal (NCLAT) has dismissed appeals filed by the BSE, ruling that insolvency courts have the authority to order the defreezing of Demat accounts of companies undergoing insolvency proceedings.

In its order, a two-member bench of the appellate tribunal said the National Company Law Tribunal (NCLT) has clear jurisdiction under Section 60(5) of the Insolvency and Bankruptcy Code (IBC) to hear such matters and pass necessary directions.

It added that the earlier orders passed by the NCLT were valid and within its legal powers.

The case relates to two companies, Future Corporate Resources and Liz Traders and Agents, whose Demat accounts were frozen by BSE due to non-payment of listing fees and other regulatory dues.

The accounts were also frozen for non-compliance with rules, including those under listing regulations.

Resolution professionals and liquidators handling these companies had approached the NCLT, seeking defreezing of the accounts so that shares held in them could be sold to recover money during the insolvency process.

The Mumbai bench of the NCLT had earlier directed BSE to lift the freeze in separate orders passed in 2024 and 2025.

BSE challenged these directions before the NCLAT, arguing that the NCLT did not have jurisdiction in matters governed by securities laws and regulations framed by the Securities and Exchange Board of India (SEBI). However, the appellate tribunal rejected this argument.

The NCLAT said that issues to defreezing of Demat accounts in such cases are directly connected to the insolvency resolution process and therefore fall under the jurisdiction of the NCLT.

It also clarified that such actions are not barred under the moratorium provisions of the IBC.

Importantly, the tribunal highlighted that the IBC has overriding powers over other laws in case of any conflict.

Referring to Section 238 of the Code, it said that provisions of the IBC will prevail over other legal frameworks, including securities laws, during insolvency or liquidation proceedings.

The tribunal also noted that the ownership of shares in the Demat accounts was not disputed and that the dues owed by the companies had become part of the insolvency process. Therefore, the NCLT was well within its rights to deal with such matters.